Sitting of 5 December 1968

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  EDUCATION AND SCIENCE

    Association Football (Report)
    Mr. Arthur Davidsonasked the Secretary of State for Education and Science if he has considered the Chester Report on Association Football; and if he will make a statement.
    Mr. Kenneth Lewisasked the Secretary of State for Education and Science whether, arising out of the Report on Association Football, he has now had discussions with the Football League Management Committee or other interested football authorities, with a view to action on this Report; and what conclusion he has reached.
    The Under-Secretary of State for Education and Science (Mr. Denis Howell): As I made clear when the Chester Report was published, its wide-ranging recommendations will need the most careful consideration by all concerned. This will inevitably take time. The first discussions that I have held have been with the Football Association of Wales, as a result of which a joint working party has been established with the Sports Council to consider the future developments and financial structure of Welsh soccer against the background of the Chester Report.
    Mr. Davidson: Would not my hon. Friend agree that violence on the field is a contributory factor in causing violence off the field? Does he not agree that there is an urgent need for a disciplinary committee to be set up under an independent chairman as recommended by the Chester Committee so that clubs themselves could be disciplined along with players for
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    breaches on the field which can only damage the good name of football?
    Mr. Howell: That specific matter is a question for the Football Association and one which I shall pursue with the Association when I meet it. There is an independent Committee sitting under the chairmanship of Sir John Lang on the whole question of hooliganism. It hopes to report and to make recommendations early in the New Year.
    Mr. Lewis: Is the hon. Gentleman aware that violence off the field in connection with supporters' clubs is something he ought to concern himself with? Has he proposals in that direction? As he will doubtless understand, there is a rule that when a team is bottom of the league and doing badly the manager resigns. Does he not think it time that he persuaded his colleagues, since the country is getting into that position, that they should resign?
    Mr. Howell: It is encouraging to think that the hon. Member does not want people to resign in such circumstances. It is wrong to think that football supporters' clubs are responsible for this violence. I think it is the other way round, for they have a very good influence. The question of violence is one which Sir John Lang and his Committee are looking into.

    Athletics (Report)
    Mr. Arthur Davidsonasked the Secretary of State for Education and Science whether he has now considered the Byers Report on Athletics; and what representations he has had about it.
    Mr. Denis Howell: The report of the Byers Committee was made to the Amateur Athletic Association and the British Amateur Athletic Board which commissioned the inquiry and it is for the athletics bodies to consider its recommendations. I have had one meeting with representatives of all the bodies concerned and I am looking forward to meeting them again once they have formulated their views.
    Mr. Davidson: Is my hon. Friend aware that there is a feeling among top athletes that the administrative set-up under which they have to perform is out of date and that they are prevented from achieving their full potential? They feel

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    that the set-up is so out-dated that they are penalised when they perform in world events.
    Mr. Speaker: Order. There are a lot of Questions on the Order Paper.
    Mr. Howell: I cannot answer for the A.A.A., but there is a growing appreciation on all sides by athletes and authorities that we need a much greater professionalism in our administration, and we want to bring this about.
    Mr. Charles R. Morris: What reply has the hon. Gentleman given to the British Amateur Athletic Board's proposals for a national coaching scheme?
    Mr. Howell: I have not yet had such formal proposals put before me, but I hope to meet the bodies concerned very soon when their views are formulated.

    Reading Research (National Centre)
    Mr. Barnesasked the Secretary of State for Education and Science if he will take steps to set up a national centre for reading research.
    The Secretary of State for Education and Science (Mr. Edward Short): No, Sir. I do not think this is necessary.
    Mr. Barnes: Would my right hon. Friend agree that the recent publication, "Crisis in the Classroom", underlines the need for improving standards of literacy in primary schools? Is it not the case that at the moment many technical advances in the teaching of reading are not passed on because there is no body to do this job?
    Mr. Short: I do not think the publication to which my hon. Friend has referred gives a balanced picture. There have been four-yearly surveys of reading ability since 1948. These show steadily rising standards. In addition, a great deal of research is being done on the I.T.A. Some of it was instituted by the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) and, since then, the Schools Council has instituted more.
    Mr. Longden: Does not all this recent research reveal that because trainee teachers in colleges of education are not being taught how to teach a child to read, the standard of literacy in our
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    schools is abysmally low and getting lower?
    Mr. Short: The hon. Gentleman could not be more wrong about anything than he is about that. The quality of teaching in the primary and infant schools has improved out of all recognition over the last two decades.

    Local Authority Expenditure
    Mrs. Renée Shortasked the Secretary of State for Education and Science what proportion of the 3 per cent. increase in local authority expenditure in 1969–70 he estimates will be spent on education.
    Mr. Edward Short: Nearly two-thirds, giving an estimated increase in educational expenditure of 34 per cent. over 1968–69.
    Mrs. Short: While thanking my right hon. Friend for that reply, may I tell him that we on these benches always want to see him winning the competition with the Minister of Defence in this matter? Is he aware that we hope that he can give the House an assurance that there will be no saving or economising on numbers of teachers employed?
    Mr. Short: I can give my hon. Friend the assurance for which she asks. The expenditure on education next year will exceed defence expenditure for the first time in our history. On her other point, I have not cut down by a single one on the number of teachers the local authorities have told me they wish to employ next year.
    Sir E. Boyle: We are to debate this matter on Monday, but can the right hon. Gentleman say how he can be sure of the 3¾ per cent. figure in view of the responsibility given to local authorities under the rate support grant procedure?
    Mr. Short: I cannot be sure of it. What I am really saying is that in computing the rate support grant figure we have agreed with the local authorities on the apportionment of a 3·7 per cent. increase for education.
    Mrs. Renée Shortasked the Secretary of State for Education and Science if he will now state in what area of education expenditure the recent savings

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    of £4 million on school meals will he spent.
    Mr. Edward Short: These savings, and others made in the course of the normal processes of managing the expenditure programmes, have increased the resources available for the carrying out of our policy generally. It is impossible to relate a particular saving to a particular new development.
    Mrs. Short: Is my right hon. Friend aware that he was reported in the Press recently as saying that this money would be used to provide 2,000 nursery classes under the social needs programme, which, of course, would cost something like £16 million at costs estimated by the Department? I am sure that he would want to correct that. Is he also aware that many of us on these benches want to see that money used for the purposes he indicated?
    Mr. Short: One cannot hypothecate bits of expenditure and say that a certain sum of money will be used for a certain purpose. The urban programme, in which nursery schools will play a very big part, will cost about £25 million over the next four years. In addition, the recent rate support grant negotiations, as the White Paper showed, mean that about £55 million more will be spent on education next year.
    Mr. Peel: Does the right hon. Gentleman not think that it would be better to use some of this money to bring in educational systems of which democratically elected majorities approve, rather than compel them by withholding funds to bring in educational systems of which neither they nor the majority of their electors approve?
    Mr. Short: I am afraid that the hon. Gentleman is behind the times. What is now compelling the reactionary local authorities is public opinion.

    Transport Museum
    Mr. Macdonaldasked the Secretary of State for Education and Science what will be the cost of removing to York the Transport Museum now at Clapham; what will be the net effect on public funds of disposing of the existing premises at York and Clapham and acquiring new premises at York; and what estimate he
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    has made of the net annual cost to public funds of running the combined Museum at York.
    The Minister of State, Department of Education and Science (Miss Jennie Lee): The estimated cost of moving the selected items to the new Museum is about £100,000. It is expected that capital costs of providing the new Museum at York, including the £100,000 already mentioned, will be met from the proceeds of the sale of the existing museums at Clapham and York. The net annual running cost of the new Museum at York is estimated at about £34,000, compared with a corresponding estimated cost of approximately £50,000 for maintaining the existing museums at Clapham and York.
    Mr. Macdonald: As the financial savings to be gained from destroying the museums at Clapham and York and building a smaller one at York are so small, are we forced back on the reason advanced by the Minister earlier this year for the move—in spite of the fact that York is a more difficult place to get at—namely, that it is easier for the exhibits to be accommodated? Is this not an extraordinary reason for the move in view of the very small financial saving? Will she please think again?
    Miss Lee: I can assure my hon. Friend that a good deal of thought has been given to this matter. Clapham is unsuitable, even the Clapham authorities admit this. It is rigid inside, it is immobile. There was a belief that St. Pancras and other buildings in London were available, but that was not so. After a great deal of consideration it was thought that, since the Railways Board is decanting this into our Ministry, to have one really first class museum would be in the best interests of people generally. It is also in keeping with Government policy in having some points of excellence outside of London.
    Mr. Alexander W. Lyon: Is my right hon. Friend aware that the citizens of the finest city in the country——
    Hon. Members: Oh.
    Mr. Lyon: —are grateful that she is standing firm against these onslaughts from the back benchers? Is she aware that the British Railway Museum at York was the only one which made a profit, which is some indication of its attraction

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    as a tourist centre? We hope in York that this combined museum will greatly stimulate the city's tourist trade.
    Mr. Channon: Does the right hon. Lady not agree that one of the important things is that this great collection should not be broken up? Is she absolutely convinced that the site chosen at York is sufficiently large to keep the bulk of this collection together?
    Miss Lee: I am informed that some items are not first-class and that there will be certain selected items moved from London to York. There is the possibility of mobility and expansion in York which does not exist on any site which could possibly be made available elsewhere.

    Parliamentary and Municipal Democracy
    Mr. Frank Allaunasked the Secretary of State for Education and Science if, in preparation for the granting of votes at 18, he will seek powers to provide for the teaching in secondary schools of a greater awareness of Parliamentary and municipal democracy and an understanding of its working.
    The Minister of State, Department of Education and Science (Miss Alice Bacon): Local education and school authorities are responsible for the school curriculum and I would not be justified in seeking special powers in respect of a particular area of study. Many schools already devote a good deal of time to the study of local and central government and further developments in this area are to be expected. Good teaching—of any subject—which imparts the ability to weigh evidence and arrive at sound conclusions is the best safeguard of democracy.
    Mr. Allaun: While appreciating that, may I ask my right hon. Friend if she will take steps to encourage the rapid extension and development of the teaching of civics on a strictly non-party basis?
    Miss Bacon: I am fully in agreement with my hon. Friend in wanting to see more of this introduced in schools. A great deal is already being done. We shall be pleased to do anything we can to encourage more. My hon. Friend would agree that special powers for this would be the wrong way to tackle it.
    Mrs. Ewing: Has the Minister any information about what proportion of children have the opportunity of choosing this subject? Is she aware that in Scottish schools, where the subject is available, it is one of the most popular subjects? Could she therefore recommend that more senior schools offer this subject?
    Miss Bacon: I could not say how many pupils study this subject. In most schools it is one which senior pupils take. I am interested in what the hon. Lady says about Scotland.

    300 GeV Nuclear Accelerator
    Mr. Fortescueasked the Secretary of State for Education and Science what representations he has received requesting the Government to reconsider their policy with regard to the 300 GeV nuclear accelerator planned by C.E.R.N.; and what reply he has sent.
    The Minister of State, Department of Education and Science (Mrs. Shirley Williams): Apart from the Parliamentary representations with which the hon. Gentleman is familiar, I have received representations form the hon. Member for Eastleigh (Mr. David Price), the Secretary of the Association of Scientific, Technical and Managerial Staffs and a number of individual nuclear physicists. In addition, the Chairman of the C.S.P., while not asking the Government to reconsider their decision, did express his deep regret that the Government had found it necessary to decide against participation. The views expressed and my replies are covered by the discussions on the 300 GeV accelerator in the Consolidated Fund Bill debate on 24th July.—[Vol. 769, c. 808–30.]
    Mr. Fortescue: While thanking the Minister for that reply, may I ask whether she has given further consideration to the recommendation of the Nuclear Physics Board, that not only should we participate in this project, but that our participation could be paid for by reducing expenditure on existing obsolescent accelerators.
    Mrs. Williams: We have given some consideration to the matter. As the hon. Gentleman will be aware the Nuclear Physics Board bases its proposals on the assumption that the site would he in Britain and there are strong indications that the site would not be in this country.
    Mr. Dalyell: Apart from the justified requirements of particle physics, would it not help us in Bonn to be slightly more flexible?
    Mrs. Williams: May I make it quite clear that the C.E.R.N. Convention which is being drawn up makes it possible for countries to participate at a later stage if the situation should change. It would therefore be possible for this country still to enter the project.

    School Meals
    Mr. Onslowasked the Secretary of State for Education and Science what reports he has received on the effect on the school meals service of the withdrawal of teacher supervision, at meal times; and if he will make a statement.
    Mr. Edward Short: Through the Inspectorate I have been kept in close touch with the situation. In general, the new arrangements are working satisfactorily, although pockets of difficulty exist in some areas.
    Mr. Onslow: Is the right hon. Gentleman aware that there is difficulty in at least one school in my constituency where the school meals service is threatened with breakdown, as it is proving impossible to recruit supervisory staff and an intolerable burden is being put on the headmaster? What advice or comfort has the Secretary of State to offer those concerned?
    Mr. Short: I realise that there are difficulties in three schools in the hon. Gentleman's constituency, particularly at the Winston Churchill School. I greatly regret these difficulties. They are for the teachers and local authority to work out between them, and they can call on their national associations for help.
    What I regret very much is the situation in which the head teacher is left to bear the whole burden. This was never envisaged by the working party, and it could only be based on some kind of misunderstanding about the professional duty of teachers to support the head teacher.
    Mr. Marks: Does my right hon. Friend realise that the ladies who work in school kitchens and those who supervise children at mealtimes and afterwards have very low rates of pay and have
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    hours which fluctuate weekly? As a result of the alteration of school hours after B.S.T. was introduced, some of them had a reduction in their hours on the Monday morning when they were due to work. Will my right hon. Friend ask local authorities to bring some stability into the hours of work of these people?
    Mr. Short: I am sure that local authorities are looking at the question of hours. The difficulty arises in areas where there is no surplus, areas such as that of my hon. Friend. I have responsibility for many things, but I am not responsible for the rates of pay.
    Mr. Ridleyasked the Secretary of State for Education and Science what estimate he has made of the total cost, including the administrative costs of local education authorities, of his decision to institute and then repeal free school meals for families of over three children.
    Mr. Edward Short: Information on which to base an estimate is not available.
    Mr. Ridley: is the right hon. Gentleman aware that the brining of this scheme into operation in April caused confusion, extravagance and waste and that taking it out again in November is official bungling on a scale unprecedented even for the present Government?
    Mr. Short: It has been none of these things. We are taking it away from those who can afford to pay for it—and I take it that the hon. Gentleman agrees with that—so that we can use the resources to better advantage.

    Medical Students
    Dr. David Kerrasked the Secretary of State for Education and Science what representations he has received concerning the level of further education awards payable to medical students; and what reply he has given.
    Mrs. Shirley Williams: I have received representations from some hon. Members and from about 25 medical students. I have explained that any further review of student grants must depend on the economic situation.
    Dr. Kerr: Does not my hon. Friend agree that the financial situation of medical students in relation to that of

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    other students is in grave need of review, and will she accept from me, as one who has been through the mill, that one of the factors involved in ensuring a proper spread of recruitment of students to the medical school is essentially the availability of funds? Will she look into the problem sympathetically?
    Mrs. Williams: My hon. Friend will be pleased to know that we have already done so. Medical students have a 48-week term in most cases, and most university students have a 30-week term. The extra attendance allowance to medical students was increased by the whole of the Brown Panel's recommendation whereas the increase in grant for most university students went up by half the Brown recommendation. Also, the evidence which we have shows that medical students do not spend the whole of their additional grant for books, equipment and special clothing on these things.

    Comprehensive Schools
    Dr. David Kerrasked the Secretary of State for Education and Science whether he will issue a circular to local education authorities concerning the recruitment of children of differing abilities into comprehensive schools.
    Mr. Edward Short: This is a matter for local education authorities and governors of schools to consider in the light of their varying circumstances, including the need for the effective organisation and development of the schools in their areas and also the wishes of the parents.
    Dr. Kerr: That is a disappointing reply. Does not my right hon. Friend realise that it is possible to sabotage comprehensive programmes—which is what is suspected is being done in the Inner London Education Authority's area—by restricting the recruitment of children of higher ability to comprehensive schools in order to encourage their recruitment to slowly deteriorating grammar schools? Will my right hon. Friend give proper guidance on this matter?
    Mr. Short: No, Sir; my hon. Friend ought to look at the London scheme a little more objectively. It has come in for some criticism, but on the whole, given the existence of a number of good grammar schools, it works out reasonably fairly. The education authority modified
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    the original distribution of the higher ability group, but the new arrangement this year has worked reasonably well, and I understand that the authority, in consultation with teachers, has decided to continue it.
    Sir E. Boyle: I do not accept the implications of the hon. Gentleman's supplementary question and I welcome greatly the answer which the right hon. Gentleman gave, but does not this question of the need to ensure a balanced intake into comprehensive schools show the tremendous difficulty of legislating to end all forms of selection?
    Mr. Short: We wish to see the end of selection, which I believe to be one of the biggest remaining social injustices in this country.

    Public Schools Commission
    Mr. Martenasked the Secretary of State for Education and Science when he intends to make a statement on the First Report of the Public Schools Commission.
    Mr. Edward Short: The Government are still considering the Report and I cannot yet give a firm date for a statement, although I hope this will be possible early in 1969.
    Mr. Marten: Why is it taking the right hon. Gentleman so long to make up his mind, when the Labour Party conference made up its mind quite firmly in October and rejected the Report? In the light of the new Labour Party rule, is the Minister to appear before his party committee?
    Mr. Short: It is taking time because it is a long and complicated Report with 50 recommendations. The Commission spent a great deal of time on it, and the least I can do is to pay close attention to its recommendations and consult a great many people about them.
    Mr. Boyd-Carpenterasked the Secretary of State for Education and Science if he will now disband the Commission on the Public Schools.
    Mr. Edward Short: No, Sir.
    Mr. Boyd-Carpenter: In view of the fairly general derision with which the majority Report was received, including that expressed by the Minister of State at

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    the Labour Party conference, would it not be better to spend the money now being spent on this Commission on more directly useful educational purposes?
    Mr. Short: No, Sir. The second part is particularly important because it deals with the direct grant schools; these are one of the great impediments in the way of secondary reorganisation throughout the country, and it is most important that the problem should be looked at in depth.

    Secondary Education
    Mr. Boyd-Carpenterasked the Secretary of State for Education and Science whether it is his intention in his forthcoming legislation to seek powers to override the policies of local education authorities in respect of selection at ages other that 11 years.
    Mr. Edward Short: I cannot at present add to my recent statement that the next major Education Bill will provide that secondary education is to be nonselective.
    Mr. Boyd-Carpenter: Does that answer mean that the right hon. Gentleman rejects not only selection at 11 but selection at any age?
    Mr. Short: What I reject is the division of children at the age of 11, determining the rest of their educational careers and, therefore, the rest of their careers.
    Mr. Christopher Price: Does my right hon. Friend recall that in a recent Answer he said that he hoped we should be able to legislate in this Parliament on comprehensive legislation, and does he realise that many of us on this side are waiting anxiously for that hope to be turned into reality very soon?
    Mr. Short: I am well aware of that. It is not only the opinion in the House but, as I said in reply to an earlier Question, there is now a great upsurge of public opinion on this matter in the country.
    Sir E. Boyle: The original Question relates to selection after 11. Will the right hon. Gentleman confirm that it would not be his idea to interfere with schemes involving selection at 13, as in Kent (Thamesside), Doncaster and Middlesbrough, which are widely
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    accepted by public opinion locally as providing a flexible means of doing away with the old-fashioned strict bipartite system of selection at 11?
    Mr. Short: We look at each case carefully on its merits. I could not give a general answer on that today. We must be careful to ensure that we do not in the end have the same result as we have now.

    North Devon (Secondary Education)
    Mr. Peter Millsasked the Secretary of State for Education and Science (1) if he will make a statement on his decision on the plans for sixth form education reorganisation in North Devon;
    (2) if, before reaching a decision on the North Devon reorganisation proposals for secondary education, he will give consideration to the effects of the proposals on various grammar schools in North Devon, particularly Bideford, Edgehill, Stella Maris Schools.
    Miss Bacon: I have received no formal proposals for amendment of the plan approved in principle in 1966, but I know that the local education authority is reviewing the position.
    Mr. Mills: There is serious and justified concern in the area at the removal of sixth-form education from the grammar schools and the effects which this may have. Will the right hon. Lady take into account the wishes of the people in the area and consult them thoroughly before any decision is made?
    Miss Bacon: Yes, Sir; in coming to a decision I shall take all opinion into consideration. I am sure that the hon. Gentleman understands that it is impossible for me to comment in detail on a plan which I have not yet received.
    Mr. Thorpe: I share the views expressed by the hon. Member for Torrington (Mr. Peter Mills). Is the right hon. Lady aware that the reorganisation of sixth-form education is a matter which stirs up great controversy, and will she agree that when any scheme comes to her it is right that the governors, the teachers and the parents should all have had full opportunity to make their opinions known to the education authorities, and that it would be the view of her

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    Department that this should have been done?
    Miss Bacon: Yes, of course. I always want the full range of opinion to be taken into consideration, and we shall consider all that opinion before the decision is taken. But we have not yet received any formal request from Devon.
    Mr. Mills: On a point of order, Mr. Speaker. What protection have I, as a back-bencher, on the fact that Question 17 has nothing to do with Question 16? Can I have an answer to Question 17?
    Mr. Speaker: Order. The hon. Gentleman has no protection whatever. The Minister has power to answer or not.

    Insecticides
    Mr. Dalyellasked the Secretary of State for Education and Science what research he is doing on the development of selective insecticides.
    Mrs. Shirley Williams: Rothamsted Experimental Station, which is largely supported by public funds through the Agricultural Research Council, has discovered and is developing a series of synthetic insecticides, some of which are highly selective.
    Mr. Dalyell: When shall we know the result of the discussions of my right hon. Friend the Secretary of State for Defence on the use of the work at Porton and Nancekuke in this connection?
    Mrs. Williams: My hon. Friend is very good at asking unexpected supplementary questions. I can only say that that is a matter for my right hon. Friend the Secretary of State for Defence and not for my Department.

    Amateur Sports Players (Insurance)
    Mr. Carter-Jonesasked the Secretary of State for Education and Science (1) if he will consider seeking powers to establish a national scheme for providing adequate insurance cover for amateur players in all sports; and if he will make a statement;
    (2) if he will hold discussions with representatives of each amateur sport in this country with a view to devising appropriate insurance schemes to cover the
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    risk of injury, disablement or death to players involved in each sport; and if he will make a statement.
    Mr. Denis Howell: Insurance cover for amateur players is essentially a matter for the governing bodies of sport and the individuals concerned. The Central Council of Physical Recreation has recently drawn the attention of governing bodies to the value of having a comprehensive insurance scheme and is always ready to advise them on the introduction of a Scheme suited to their particular sport.
    Mr. Carter-Jones: My hon. Friend and I have something in common. He referees in soccer, and I referee in rugby. Does he agree that consideration should be given to the provision of adequate cover in each sport, and to easy administration to enable voluntary workers in each sport to cover every player in the sport? Is he aware that a large number of injuries go unrecorded, and that therefore sports players are at a disadvantage compared with workmen under the Industrial Injuries Act?
    Mr. Howell: I am aware of most of those considerations. My hon. Friend will be glad to know that since he put down the Question there has been a conference of 58 governing bodies in sport, and because the Question was put down I asked the Director of the Sports Council to draw their attention to the subject and to its importance.
    Sir H. Harrison: Does the Minister agree that the normal insurance market at Lloyd's and the tariff companies is perfectly adequate to deal with such insurance?
    Mr. Howell: There are very good insurance schemes available to sports clubs. I shall be glad and anxious to make them well known to those bodies which do not yet use them.

    University of the Air
    Mr. Gwilym Robertsasked the Secretary of State for Education and Science what progress had been made with the University of the Air in designing courses, planning broadcasting time on radio and television and obtaining the necessary facilities at colleges and libraries; and if he will make a statement.
    Miss Jennie Lee: Agreement in principle has been reached between the B.B.C. and the Open University Planning Committee on arrangements for television and radio programmes up to 1975. Senior academic staff have been appointed who will plan the courses in partnership with the B.B.C. It is expected that from next spring regional directors of the university will be appointed, who will organise the provision of study facilities in their region.
    Mr. Roberts: Will my right hon. Friend ensure that an adequate proportion of the courses is orientated towards science and technology? Will any arrangements be made to obtain facilities in scientific laboratories, for computer usage and things of that type, which are essential to such courses?
    Miss Lee: The distinction and qualifications of the Vice-Chancellor-elect and of the Planning Committee should reassure my hon. Friend that scientific and technical interests will be fully guarded. There is a certain controversy about how much laboratory space is necessary on some scientific courses, but a combined operation is being carried out by many authorities, covering many universities, and provision will be made for laboratory as well as non-laboratory study.
    Mr. Gwilym Robertsasked the Secretary of State for Education and Science when he now expects classes of the University of the Air to commence; how many students it is estimated will enrol in the first year; and what steps are to be taken to obtain these students.
    Miss Jennie Lee: Enrolment of students will begin in 1970 and courses are expected to start in January, 1971. It is not feasible to estimate the numbers now, but the university will provide an advisory and information service to potential students through its regional offices.
    Mr. Roberts: Does my right hon. Friend accept that one of the great difficulties in universities and advanced colleges at present is a lack of pure career places in courses, and that it is essential, if the university is to succeed in obtaining and keeping sufficient students, that the courses should be vocational? Will she consider having a careers advisory service coupled with the new university?
    Miss Lee: There is a great deal of old-fashioned and out-moded thought on what is vocational and what is non-vocational. I hope that a university geared to the future will be able to cope with this kind of problem adequately. My hon. Friend will find that great care is being taken to establish a students' advisory service, which will either advise them to seek their higher education through full-time courses or some form of sandwich block-release courses at existing universities or technical colleges or advise them to take a preparatory course if they are not yet ready for the degree work of the Open University. In other words, the question is very fully covered.
    Mr. J. E. B. Hill: What researches are being done not only into the probable enrolment but into the probable rate of drop-out?
    Miss Lee: This is one of those cases where one does not know what will happen until it begins to happen [HON. MEMBERS: "Oh."] Hon. Members opposite know that that is a straightforward statement of fact, and that in making provision for a course of this kind it is realised that there will, of course, be drop-outs. The advisory service will tell students who are not ready for this standard of education where they can improve their basic education. We are satisfied that the scheme is not only essential but very much overdue. I hope that those who have any doubts abut it will appreciate that the riots in Paris and Rome and the little local troubles show that we now have a problem of numbers which we must meet. I do not know any other way that we can meet it.

    School-Leaving Age
    Mr. Sheldonasked the Secretary of State for Education and Science it he will make a statement about the process of raising the school-leaving age in 1972–73.
    Mr. Edward Short: As I informed the House on 1st November, I hope to make an announcement before long on the special building programme allocation for raising the school-leaving age.
    Mr. Sheldon: Will my right hon. Friend confirm that there will be no hindrance to the commitment to raise the school-leaving age in 1972–73 either

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    by the building programme or by the supply of teachers?
    Mr. Short: When I make my statement on the building programme, which will be a generous programme, I shall also make a statement about other related matters concerned with raising the school-leaving age.
    Mr. Lane: In view of the current uneasiness in the teaching profession, may I press the Minister further? What further steps does he contemplate to keep up the level of teacher recruitment between now and the 1970s?
    Mr. Short: I take it that the hon. Gentleman has seen the figures for intake to colleges of education. I am also publishing in the next few days some projections into the future, which I hope will give him all the information he requires
    Sir E. Boyle: Is the Minister aware that it is not the intake that bothers us but the cutting down, as announced by some authorities, of the take-up of part-time teachers? When does he hope to make a statement on this subject? We feel that it is very urgent that one should be made.
    Mr. Short: I think that the right hon. Gentleman means on teacher supply, and not the raising of the school-leaving age. The number of part-time teachers this year is 1,000 up on last year in full-time equivalents, so there has been no overall cutting down but considerable building up. As I said just now, I shall be publishing before Christmas projections of teacher supply and demand stretching well into the future.

    The Arts (Expenditure)
    Mr. Joplingasked the Secretary of State for Education and Science if he will take steps to ensure that the North of England gets a larger share of public expenditure on the arts.
    Miss Jennie Lee: The Northern Arts Association will be receiving £85,000 this year, nearly six times as much as any other English arts association. The Arts Council's direct expenditure in the Northern Region in 1967–68 was £155,822, and this excluded expenditure on national and touring companies, other national organisations, and on administration.
    Mr. Jopling: Does the right hon. Lady realise that these figures show that the North gets a raw deal? Why is it that money is poured by the Arts Council into London and the South-East and into Scotland and Wales in particular, whose culture and artistic needs merit no more attention than those of other parts of England, such as the North?
    Miss Lee: I am delighted to hear the note of indignation in the hon Gentleman's voice and I hope that he will do everything possible to stir up interest in serious art in the North. For historical reasons, other parts of the country have great theatres, great orchestras and great museums to be maintained. I am sorry that these do not exist as we would like them to exist in the North, and I hope that the hon Gentleman will encourage local interest in them. I assure him that, wherever local interest is shown, the Arts Council is only too willing to come to the rescue and encourage it.
    Mr. George Jeger: Is my right hon. Friend aware that, unless the Arts Council acts with a sense of urgency, there will shortly be a shortage of live theatres in the North, since a major circuit is proposing to sell its theatres? With the best will in the world, the Arts Council will not be able to spend more in the North unless it steps in now with aid to local authorities in buying the theatres concerned.
    Miss Lee: A careful study is being made by the Arts Council of our theatre, including commercial as well as repertory theatres. The simple answer is that the arts now receive twice as much as they did before. This additional money has stimulated a great deal of additional interest, for which I am most grateful, and I hope that right hon. and hon. Members on both sides will continue to agitate for higher priority for the arts.

    Private Schools (Milk)
    Mr. Ridleyasked the Secretary of State for Education and Science what guidance he has given to local education authorities about providing free school milk to children in private schools.
    Mr. Denis Howell: None, Sir.
    Mr. Ridley: If there is to be a division whereby those who are in private

    1827
    schools do not get free milk while those in the State schools do, would it not be preferable if it were based on the wealth of the parents rather than on the school which the child attends?
    Mr. Howell: The discretion offered is exactly the same as that which has operated under the Act since 1944. I find it odd that, at a time when hon. Members opposite are continually asking for cuts in public expenditure, they should request us to spend public money on people who have opted out of the State system of education.
    Mr. English: Will my hon. Friend state the amount, which I believe has been ascertained, of subsidies to public schools at present?
    Mr. Howell: I cannot do so without notice.

    Institutions of Further Education (Staff)
    Mr. Christopher Priceasked the Secretary of State for Education and Science if he will now introduce legislation to give him that degree of overall control over the appointment and dismissal of staff in institutions of further education which he already has over such action in the schools.
    Mr. Edward Short: This is one of the matters which I intend to review in due course in connection with my proposed Education Bill. Among other things, there are relevant recommendations in the report of the Royal Commission on Trade Unions and Employers' Associations.

    Religious Education
    Mr. Christopher Priceasked the Secretary of State for Education and Science what steps the Schools Council is taking to improve the religious studies curriculum in the schools.
    Miss Bacon: A committee of the Council keeps religious education under review. The Council is mounting a project in primary schools and is considering the possibility of another in the secondary field. Several current projects also have a bearing on religious education.
    Mr. Price: Is my right hon. Friend aware that many of the people engaged
    1828
    in these projects on religious education are coming increasingly to the conclusion that the compulsory requirement for religious education and the agreed syllabus that goes with it is, at the moment, the biggest single obstacle to getting the sort of genuine syllabus for moral education that the Secretary of State has so often said he is so keen on?
    Miss Bacon: If my hon. Friend is right in that assumption, this will be apparent when we receive the results of these projects.
    Mr. van Straubenzee: Does the right hon. Lady appreciate that the views expressed by the hon. Member for Birmingham, Perry Barr (Mr. Christopher Price) are shared by quite a large number of those who have a very deep interest in this subject? But does she not feel that those who are at work on it, notably the Bishop of Durham's Committee, should be listened to before she makes any major changes?
    Miss Bacon: Yes, Sir. Before making any major changes—if, indeed, changes are necessary—we shall listen to all views, including those mentioned by the hon. Gentleman.

  AGRICULTURAL, HORTICULTURAL AND FORESTRY TRAINING BOARD (MINISTERIAL RESPONSIBILITY)
  Mr. John Wellsasked the Prime Minister whether he will transfer responsibility for the Agricultural, Horticultural and Forestry Training Board from the Secretary of State for Employment and Productivity to the Minister of Agriculture, Fisheries and Food.
  The Prime Minister (Mr. Harold Wilson): No, Sir.
  Mr. Wells: Will the Prime Minister reconsider that Answer since the entire farming community——
  Hon. Members: Where's your apple?
  Mr. Speaker: Order. Two wrongs do not make a right.
  Mr. Wells: Since the farming community is opposed to the arrangement, and since the Industrial Training Act is

  1829
  an unsuitable umbrella for farming education schemes, will the right hon. Gentleman reconsider and transfer the Board to the responsibility of the Minister of Agriculture, who is responsible for the industry?
  The Prime Minister: The matter has been discussed before. The hon. Gentleman himself had an answer about it some months ago. He will also know that, under our predecessors, it was decided, quite rightly, by the right hon. Member for Grantham (Mr. Godber) that the Board should be under the general control of the Department responsible for training and not under the separate industrial sponsoring Department.

  RHODESIA
  Sir Knox Cunninghamasked the Prime Minister if he will make a statement on the progress towards agreement with Mi. Ian Smith about the independence of Rhodesia.
  Mr. William Hamiltonasked the Prime Minister what plans he has for further meetings with representatives of the illegal régime in Rhodesia.
  The Prime Minister: I have nothing to add to the reply which I gave on Tuesday to a Question by the hon. Member for Worcestershire, South (Sir G. Nabarro).—[Vol. 774, c. 432.]
  Sir Knox Cunningham: Does the Prime Minister intend to leave any further approach to Mr. Smith? If so, what is he going to say to the Commonwealth Prime Ministers in January? May it not look like the Prime Minister sulking in his tent?
  The Prime Minister: The hon. and learned Member will recognise that we have left the "Fearless" terms on the table for acceptance in Rhodesia. It is for Rhodesia to give an answer to what we have done. I think that most right hon. and hon. Members felt that what we had offered went at least as far as we should. Indeed, some thought that we should have gone less far. No one took the view that the cause of the breakdown lay on the side of Her Majesty's Government. The hon. and learned Member will, however, also realise that I have other things to turn my attention
  1830
  to, including affairs somewhat nearer home.
  Mr. Hamilton: Can my right hon. Friend give an assurance that Her Majesty's Government have made no new proposals beyond those offered by the Minister without Portfolio recently to the illegal régime? Does my right hon. Friend think that the recent manifestations of new political alignments in Rhodesia underline and emphasise the effectiveness, and increasing effectiveness, of the sanctions policy?
  The Prime Minister: The terms offered to Rhodesia were as set out in the "Fearless" document with the further proposals announced by my right hon. Friend the Minister without Portfolio when he returned from Salisbury. There has been no contact since his return and no changes have been made. Nor do we intend to make any changes in these proposals. As I have said, the matter is now for the Rhodesians. I have noted the constitutional and political developments in Rhodesia. These must be regarded as an internal matter.
  Sir G. Nabarro: Does the Prime Minister recall that, on Tuesday, he sent me a Written Answer, as the Question was not reached orally, and referred to these proposals "lying on the table"? Is it his intention to allow them to lie on the table indefinitely, or at what point of time does he propose to withdraw the proposals and substitute more imaginative and forthcoming proposals?
  The Prime Minister: Of course I recall that Answer which has just been immortalised by my reference to it in my original Answer. We have left this proposal lying on the table. It is an offer to Rhodesia and it is for Rhodesia to accept or reject it. So far it has indicated an intention to reject it, but there is certainly no obligation on Great Britain to go beyond these proposals, which have been available to Mr. Smith since long before U.D.I.
  Mr. Philip Noel-Baker: Has the Prime Minister been able to learn the views not only of the African chiefs who are in detention, but of ex-Prime Ministers like Mr. Edgar Whitehead, Mr. Garfield Todd and Sir Roy Welensky who have some understanding of how a multiracial

  1831
  society should be run and who could take over from Mr. Smith when sanctions have proved the final failure of his policy and of his egregious régime?
  The Prime Minister: By a slip, my right hon. Friend referred to chiefs in detention, but, of course, it is African national leaders who are in detention. The chiefs are certainly not in detention. As for the views of the distinguished leaders of European opinion, including the former Prime Ministers mentioned, my right hon. Friend the Minister without Portfolio made it his business when he was in Salisbury to talk to any leader of any section of opinion who had views to express, and he got the views of at least two previous Prime Ministers. Mr. Garfield Todd was in Britain at the time and made his views known publicly.
  Sir Knox Cunningham: On a point of order. Owing to the unsatisfactory nature of those replies, I beg to give notice that I shall raise the matter on the Adjournment.

  ADMINISTRATIVE POLICIES
  Mr. Onslowasked the Prime Minister what recent steps he has taken to improve public understanding of the policies of his administration.
  The Prime Minister: Placing before the public the facts of the situation the country has faced since 1964, and earlier, and drawing to the nation's attention the systematic misrepresentation and falsification of the Administration's policies by leading members of Her Majesty's Opposition.
  Mr. Onslow: Will the Prime Minister be frank with the House and recognise that these steps have not worked any better than the policies themselves? Will he not now admit that on every major issue of domestic policy—housing, unemployment, the cost of living, the level of Government expenditure—the Government have utterly lost the confidence of the majority of people?
  The Prime Minister: No, Sir. I do not accept the judgment of the hon. Gentleman in these matters. He might set an example to his own Front Bench by not misrepresenting the facts on all of these issues.
  Earl of Dalkeith: Can the Prime Minister give a straight answer—[HON. MEMBERS: "No."]—which everyone wants to know to the simple question of whether the accelerating plunge in our national fortunes, as testified by the latest of many savage squeezes, is happening by mistake or on purpose?
  The Prime Minister: I would be very happy to try to answer that question if I understood it properly. Perhaps the hon. Gentleman will make clear what he was saying. Was he referring to the recent economic measures and is he asking whether they were taken by mistake or on purpose? Was that the question? If not, perhaps he will explain what he had in mind.
  Mr. John Fraser: Will my right hon. Friend recognise that most of the demands made by ordinary people to ordinary Members of Parliament are for an increase in public expenditure and that one of the things most resented is cuts in public expenditure? Will he consider getting local authorities to convey with their rate demands some of the relationship between what is taken from people in taxation and the benefits which they get from public expenditure?
  The Prime Minister: It has been our invariable experience that every cut we have made and every restraint which we have applied to public expenditure almost without exception has been the subject of party capital by right hon. Gentlemen opposite. This was true of the announcement which we made last January. Local authority expenditure certainly needs to be contained, despite the unprecedented help which we have given to local authorities by rate relief. which has never been done before. I believe that there will be an opportunity for the House to debate rate support grants and all related questions in the very near future.
  I am sorry that, as my hon. Friend the Member for Norwood (Mr. John Fraser) was called, I was not able to answer the question of the noble Lord, and I hope that he will have a chance to make clear what he meant, because I should like to answer.
  Sir W. Bromley-Davenport: Is there not today a better understanding of the

  1833
  right hon. Gentleman's political double-crossing combined with political somersaults gradually dawning on all sections of the community irrespective of race, colour, or creed, and is this not evidenced by the report this morning of a public opinion poll?
  The Prime Minister: The hon. and gallant Gentleman is at last beginning to prove, despite my doubts last week, that he can read. He is obviously a little slow with his newspapers, because the account o which he refers was published yesterday. I did not notice the same interest by the hon. and gallant Gentleman in public opinion polls when the lead of the Conservative Party in another eminent poll fell from 22 per cent. to 3·9 per cent. a couple of months ago.

  COMMONWEALTH TERRITORIES (SEA AND AIR RATES)
  Mr, Gordon Campbellasked the Prime Minister if he will have consultations with Commonwealth Prime Ministers on arrangements to safeguard sea and air routes between Commonwealth Territories after 1971, including those needed for reinforcing and supplying British Forces in Hong Kong and elsewhere.
  The Prime Minister: We have continuing discussions with our Commonwealth partners on these matters.
  Mr. Campbell: In view of the Soviet Union's naval expansion into seas which they clearly hope to dominate, is it not vital that steps be taken to reduce the possibilities of serious threats to communications at some future time of crisis or of prolonged tension?
  The Prime Minister: The hon. Gentleman will be aware how fully we have debated these issues in successive defence debates. The Soviet submarine threat in the Mediterranean, for example, has been the subject of much concern, but the hon. Gentleman will know that our concentrating our forces in N.A.T.O. will help N.A.T.O. to deal with the problem. But he must know that, except by totally inordinate cost far beyond the capacity of this country, it would be impossible for Britain to take on the problem which he has mentioned.
  Mr. Maudling: Will the Prime Minister explain in the light of the decision to withdraw all our forces from east of Suez what contribution this country can make to the safety of sea routes east of Suez on which so much of our oil, grain and metal depend?
  The Prime Minister: The right hon. Gentleman has already been answered by my right hon. Friend the Secretary of State for Defence in terms of the role of the Navy and of the Air Force in the new situation which will appertain after 1971. When the right hon. Gentleman refers to complete withdrawal, implying, no doubt, that he would have partially withdrawn, he must recognise the facts given by my right hon. Friend—that to keep even a small contingent there would mean a continuous escalation of costs, because of the need to defend the supplies and the stockpiles for them and then to have further facilities for defending those who are defending the stockpiles.
  Mr. Maudling: I asked the Prime Minister what contribution this country could make after 1971, on his plans, to the defence of these routes. Will he answer that question?
  The Prime Minister: I have told the right hon. Gentleman that it has been answered many times by my right hon. Friend. As the right hon. Gentleman well knows, for a long time we have been fully stretched by trying to take on commitments which our resources will not fulfil. That was the position when the right hon. Gentleman was Chancellor of the Exchequer and was trying to cut this expenditure still further, which we have done for him.

  PATRONAGE
  Mr. William Hamiltonasked the Prime Minister if he will set up an independent committee of inquiry into the question of the exercise of patronage by Ministers with instructions to make proposals for its curtailment.
  The Prime Minister: No, Sir.
  Mr. HamiltonDoes my right hon. Friend realise that Answers to recent Questions of mine have revealed that the statutory patronage available to seven Ministers has increased numerically from

  1835
  The Prime Minister: My hon. Friend will be aware of the Answer which I gave to him. As for statutory appointments at 10, Downing Street, he will recognise that of the 14 increase from 1958, seven were additional judges and one was the Parliamentary Commissioner. I hope that my hon. Friend would not feel that that was excessive. If he studies the others in detail, I think that he will find that they all relate to appointments approved by the House and, I should have thought, in the main fairly unanimously approved by the House.
  Sir C. Osborne: Will the Prime Minister tell the House whether the increase in patronage demand comes mostly politically or otherwise?
  The Prime Minister: If the hon. Gentleman means demand for individual appointments rather than a philosophical desire that there should be more patronage, I am not aware of a very strong demand. The hon. Gentleman will recognise that as a result of a decision taken in 1965, the old political patronage system which we inherited has been abolished.
  Mr. Arthur Lewis: Will the Prime Minister reconsider this, and consider the advisability of having an independent chairman such as my hon. Friend the Member for Fife, West (Mr. William Hamilton)?
  The Prime Minister: That is rather hypothetical because I do not think—I apologise for this throat—I do not think an inquiry is needed. If one were to be set up I would consider all possible applications for the job.
  Mrs. Ewing: Is the Prime Minister aware that jobbery and privilege have always been very severely condemned in Scotland, and that any increase in them can only add to the unpopularity of the Government? Would the Prime Minister not agree that if he wants to keep a few Labour seats in Scotland at the next election he should made sure that the jobs on public boards are filled by persons with detailed knowledge of the subjects
  1836
  of which they will be in charge instead of giving out appointments as political rewards, as they so often are?
  The Prime Minister: I am charmed by the hon. Lady's new-found interest in the holding of Labour seats in Scotland and I certainly take note of what she has said in this respect, but as I understand her own policy, the policy of separatism, it would mean that the very large number of distinguished Scots who come from north of the Border to fill many of these posts would be kept in Scotland, doubtless to the greater benefit of Scotland, but there would then be more jobs for the English and Welsh south of the Border.
  Mrs. Ewing: On a point of order. In view of the unsatisfactory nature of that reply by the Prime Minister I give notice that I shall raise the matter again.

NIGERIA (EARLY DAY MOTIONS)
Mr. Frank Allaun: On a point of order, Mr. Speaker. May I draw your attention to an unfortunate mistake in today's Notice Paper. All of us are greatly indebted to the remarkable efficiency of the printers, but on this occasion they have slipped up, no doubt due to certain nocturnal activities in the House. [HON. MEMBERS: "What?"] They have correctly printed that 155 hon. Members have signed a Motion asking that the House should have a debate before Christmas on the Nigerian war, but they have added those names to an adjoining, longer, and more far-reaching Motion on the same subject.
[That this House, appalled by the mounting starvation and killing in Biafra, urges Her Majesty's Government to press both sides for an immediate cease-fire, and to seek agreement with the three other Governments still permitting the supply of arms to the combatants for a joint ban as proof of its readiness to stop British arms supplies forthwith; and to help organise a massive international operation to provide food and medical supplies.]
Only 131 Members have signed the latter, and, therefore, I am asking, without unduly taking up the time of the House, that an explanation should be made so that the hon. Members who, by

1837
accident—I assure you, it was not on my part; it was clearly explained to the Table—know what the correct position is.
Mr. Speaker: In the history of the House it is not unknown that hon. Member's names have appeared to Motions with great embarrassment to both sides of the House. I saw the proof that went out to the printer yesterday. One of the difficulties is the extraordinary state in which signed Motions appear before the Table. The error will be corrected. and the hon. Member's honour, and that of his colleagues, will be satisfied, as will be that of the hon. Members whose names are taken off his Motion.

BUSINESS OF THE HOUSE
Mr. Heath: May I ask the Leader of the House whether he will state the business of the House for next week?
The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): Yes, Sir. The business for next week will be as follows:
MONDAY, 9TH DECEMBER—Motions on the Rate Support Grant Order, and on the Special Roads (Classes of Traffic) Orders.
TUESDAY, 10TH DECEMBER and WEDNESDAY, 11TH DECEMBER—Completion of the Committee stage of the Representation of the People Bill.
THURSDAY, 12TH DECEMBER—Supply [5th Allotted Day]:
Debate on Foreign Affairs, on a Motion for the Adjournment of the House.
Motion on the National Insurance (Reserve) Fund.
FRIDAY, 13TH DECEMBER—Private Members' Bills.
MONDAY, 16TH DECEMBER—Motions on the Army Act, 1955 and the Air Force Act, 1955 (Continuation) Orders.
It may be convenient if I announce that, subject to progress of business, it is hoped to rise for the Christmas Adjournment on Friday, 20th December, and to reassemble on Monday, 20th January, 1969.
Mr. Heath: Can the right hon. Gentleman confirm that the statement by the Secretary of State for Foreign and Commonwealth Affairs about the Falkland Islands will be made at the latest on Wednesday, so that it can be considered before the foreign affairs debate on Thursday?
Perhaps the right hon. Gentleman would also indicate to his right hon. Friend when he returns that hon Members on this side will want to raise the question of the recent Soviet Note and the possible reply to it, and, of course, the situation in Nigeria and Biafra.
With reference to the business on Monday week, 16th December, would the right hon. Gentleman note that we hope that the Motions relating to the Army and Air Force Acts will be taken formally so that we could then have a debate dealing with the reserves?
Mr. Peart: On the latter point, I think that what the right hon. Gentleman says is quite sensible. I will arrange for it to be done.
I understand the wish for a statement before the debate and note what the right hon. Gentleman said about Nigeria and the Soviet Note. I will certainly convey his views to my right hon. Friend——
Mr. Heath: When?
Mr. Peart: I hope that he will be here in time and will make this arrangement.
Mr. Hugh Jenkins: Is my right hon. Friend aware that it would be a public scandal if regulations permitting the large-scale employment of children were allowed to come into effect without being debated in this House? Is he aware that Monday week is the last possible date for that, and if he cannot find time for the debate next week will he find time for it on Monday, 16th December?
Mr. Peart: I am, of course, aware of my hon. Friends' views on this, as a constituent. I know that he has been in touch with my right hon. Friend on the possibility of a debate, and I hope that something satisfactory may ensue.
Mr. Edward M. Taylor: Will the Leader of the House arrange a debate next week, or as soon as possible, about the consequences of British Standard

1839
Time on the safety of schoolchildren? Is he aware that in Glasgow three accidents occurred this morning and that there is very real concern and that we want to discuss this as soon as possible?
Mr. Pearl: I understand that there is another proposal about this by another hon. Member. I cannot find time next week to debate this issue. My right hon. Friend has stated his views on this matter. It will be carefully watched.
Mr. William Hamilton: Has my right hon. Friend's attention been drawn to the First Special Report from the Estimates Committee, indicating that, because of the reduction in the total numbers, we have had to reduce our number of Sub-Committees to four and, therefore, cannot adequately examine all the Estimates in front of us? Can he give the House an early opportunity to discuss this and related matters of control of the Executive by the Legislature.
Mr. Peart: It is right that the Executive should he checked. Indeed, in our Parliamentary system we do this. I think that my hon. Friend is being rather pessimistic when he talks about the reduction in the number of Sub-Committees.
Mr. Hugh Fraser: I am sure that the whole House will be grateful to my right hon. Friend the Leader of the Opposition for giving up a day for a foreign affairs debate, but, whatever the muddle about the signatures to a Motion on Nigeria, 160 hon. Member have signed a Motion asking for a debate on Nigeria before Christmas. It would be totally unacceptable to those Members if the debate on Nigeria were shoved into a general tour d'horizon of foreign Affairs. We hope that the Government can give us a full day, and before Christmas.
Mr. Pearl: I thought that my reply to the hon. Member's right hon. Friend was sensible and realistic. He will have this opportunity to make his contribution. I am aware of, and understand, the strong feeling of the right hon. Gentleman and of the many other hon. Members who have signed the Motion. There will he an opportunity; it will not be shoved under the carpet.
Mr. Philip Noel-Baker: If the Leader of the House cannot find another full
1840
day for a debate on Nigeria, will he at least give us an assurance that on Thursday next, instead of having a review of the whole world, which usually gives no satisfaction to anybody, we will debate Nigeria alone, where there is a war to be brought to an end?
Mr. Peart: I cannot give that assurance to my right hon. Friend. I understand his passionate view on this, but there are other hon. Members on both sides of the House who have feelings about other matters. There is no reason why he should not make his point if he catches your eye, Mr. Speaker. I would have thought that the decision to have this Supply day for foreign affairs would be acceptable.
Mr. Longden: Does not the right hon. Gentleman think that it is a most extraordinary thing that after all these months we have never yet debated Nigeria in the House? Is he suggesting that we should do so in the foreign affairs debate on a day supplied by the Opposition?
Mr. Peart: The hon. Member will remember that I played an important part in helping to arrange a debate on this matter because I felt that it was right that Nigeria should be discussed, and that was done. I am merely suggesting that there will be an opportunity on the day I have mentioned. The Opposition are quite right to choose this matter, since they may wish to raise many points and not just Nigeria.
Mr. Michael Foot: Has the Leader of the House paid proper attention to the statement made a few minutes ago by the Prime Minister that he had problems to deal with nearer home, when he was clearly referring to events in Northern Ireland? Will my right hon. Friend say whether that statement represents the policy of Her Majesty's Government? Will he give an assurance that there will be a debate before Christmas to discuss events' in Northern Ireland, where we believe that steps must be taken to protect the liberties of the people?
Mr. Peart: I am well aware of the views of many of my hon. Friends and other hon. Members about the importance of civic rights, where we have great responsibility. The business of next week must remain as I have announced it, but

1841
I will consider sympathetically my hon. Friend's request for a debate on Northern Ireland.
Mr. David Howell: is it fair to condemn the question which was raised by the hon. Member for Fife, West (Mr. William Hamilton) on the Estimates Committee as a matter of pessimism? Is it not a fact that, for reasons which appear to be related to the shortage of staff, and for other unclear reasons, the Estimates Committee has been cut down, therefore reducing control over the expenditure of the Government? Will the Leader of the House look again at this matter, which is of considerable importance?
Mr. Peart: I am aware of this. I merely suggested to my hon. Friend that he should not be too pessimistic. I hope that the hon. Member is not pessimistic. Other matters affecting Specialist Committees are also important to the House. We have to strike the right balance. I hope that the hon. Member will find this reasonable.
Mr. Rose: Will my right hon. Friend bear in mind that the matter of Northern Ireland is no longer merely a question of civil rights; it is a question of the complete breakdown of law and order following the seizure by violence last week of Armagh? Will my right hon. Friend bear this in mind as a matter of extreme urgency?
Mr. Peart: I am aware of that. I know this area very well; in fact, my constituency is probably the nearest of any.
Mr. Kenneth Lewis: If the Leader of the House wishes to strengthen the back benchers against the Executive, as he has on more than one occasion suggested, will he talk to his colleague about the present serious situation in Question Time, where Ministers, including the Prime Minister, do not answer Questions, and very often transfer Questions which they do not want to answer.
Mr. Peart: I always look at hon. Members' individual complaints. I have today written to an hon. Member on this matter. It is right that the ordinary Member of Parliament should have all the facilities that are offered by our Parliamentary system to check Ministers,
1842
Departments and the Executive. I believe fundamentally in that right, even though I was once a Minister on the executive side of the Government. I will do all I can. If the hon. Member will write to me, I will carefully look into any matters that he wishes to raise.
Mr. Frank Allaun: Is my right hon. Friend aware that, by the time we resume at the end of January, several million people in Nigeria and Biafra may be dead? We have a specific responsibility in this area. We cannot accept the burying of this matter in a general "Cook's tour" of the world. Will he therefore seriously reconsider this matter?
Mr. Peart: I always try to help my hon. Friend. I know that he is very much interested in international matters. and especially in Nigeria, but I hope that he will not exaggerate——
Mr. Allaun: I am not.
Mr. Peart: There is a real problem. I believe that there will be opportunities in the time which I have allotted.
Mrs. Ewing: Will the Leader of the House say whether an informative statement about the Commission on the Constitution and its composition will be made before the Recess?
Mr. Peart: I will examine this, but perhaps the hon. Lady will have a word with me privately.
Mrs. Short: Has the attention of my right hon. Friend been directed to a scurrilous Motion, No. 69 on the Order Paper, which I regard as puerile, contemptible—
[That this House congratulates the right hon. Member for Wolverhampton, South-West upon his conversion of the hon. Member for Wolverhampton, North-East, on the subject of immigration policy.]
Mr. Speaker: Order. The hon. Lady is not entitled to discuss the merits of the Motion. She may ask for it to be debated.
Mrs. Short: I am coming to that, Mr. Speaker, but I have to tell my right hon. Friend which it is. Will my right hon. Friend provide an opportunity next week to debate the Motion?
Mr. C. Pannell: On a point of order. I wish to draw attention to the Motion which has been mentioned. Now and again over the years hon. Members on both sides of the House appear to use the Order Paper for attacks upon their fellow hon. Members which do no good to the generality of the feeling that runs across the House. It is an exploitation of the Order Paper which should be condemned, and, I think, from the Chair.
Mr. Speaker: Order. I take note of what the right hon. Gentleman says. It is not without truth, but it is not a new feature of the Order Paper. Control of the kind of Motion set down on the Order Paper is in the hands of hon. Members.
Mr. Peart: If I may reply to my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renêe Short), I have great sympathy with her. I would always like to see my hon. Friend in private—[Laughter.] If I may be permitted, Mr. Speaker, to reply without being facetious, may I say that I believe that my hon. Friend represents her constituency with great distinction and tries to represent the views of the community. I resent attacks on her personal integrity. I believe that she is a distinguished hon. Member of the House.
Mr. Ian Lloyd: Will the Leader of the House give an early opportunity before Christmas to debate the Sixth Report of the Services Committee, since it touches on a number of points which are fundamental to the efficiency and work of this building and this Chamber?
Mr. Pearl: This is an important matter. I will look into it.
Mr. John Fraser: Will the Leader of the House find time for legislation on amendments to Section 39 of the Leasehold Reform Act, 1967? Such legislation is unlikely to be contentious, would have the support of both sides of the House, and would probably pass through the House very quickly.
Mr. Peart: I know that this is important, but I cannot find time for legislation within the next few days.
Mr. Carr: Will the Leader of the House ask his right hon. Friend the First Secretary to make a statement without fail next week about what action
1844
she proposes to take to ensure within the building industry compliance with the incomes policy?
Mr. Peart: Yes, I will do so.
Mr. Alexander W. Lyon: Will my right hon. Friend reconsider the question of having a debate upon the establishment of new Select Committees before they are announced by the Government? It is surely right that the House should have participation in this matter at least, since the House itself should decide which kind of Committees are desirable and what their membership ought to be.
Mr. Peart: I hope that my hon. Friend remembers that he took part in a debate on a Friday afternoon in which I put forward my views. I believe that the Government must make decisions. As soon as possible, I will make an announcement.
Mr. Gordon Campbell: Will the Leader of the House arrange for the Minister of Public Building and Works to make a statement in the near future to correct the impression which he gave at Question Time on Tuesday that no representations have been made by the building industry to his Ministry against the retention of British Standard Time during the winter?
Mr. Peart: All our colleagues recognise that my right hon. Friend would in no way deliberately mislead opinion on this matter. I will look at the matter carefully. Perhaps I could write to the hon. Gentleman about it.
Mr. Lawson: Will the Leader of the House bear in mind that whatever private engagements he may have with the hon. Lady the Member for Hamilton (Mrs. Ewing) many of his hon. Friends and, I am sure, many hon. Members opposite are also anxious to know about the setting up of the Commission on the Constitution and that we wish to hear that information publicly and not have it privately announced?
Mr. Peart: I did not intend to convey to the hon. Lady the Member for Hamilton (Mrs. Ewing) anything which would be against the traditions of the House. I would obviously discuss with the usual channels any major statement on this issue. That, I think, is the right procedure.
Mr. Fisher: While I do not at all share the view of my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) on Nigeria, may I nevertheless ask whether the right hon. Gentleman does not agree that this is a subject worth debating per se and that the worst possible type of debate is a very confused, very wide-ranging, foreign affairs debate, which is totally unsatisfactory to all of us because it is so unspecific and so inconclusive?
Mr. Peart: I cannot add to what I have said. The hon. Member has a point of view on Nigeria which may be different from that of his right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser). The situation in Nigeria is important. If hon. Members feel that they should raise it because of the urgency which they see in it, there is no reason why they should not do so.
Mr. Arthur Davidson: May I put to my right hon. Friend the question which I put to him last week, when he said that he would consider finding time for a debate on monopolies and mergers, a subject in which many hon. Members on both sides of the House are very interested?
Mr. Peart: I am looking into that matter.
Mr. Chichester-Clark: While treating with scorn the misinformation supplied by the hon. Member for Manchester, Blackley (Mr. Rose) on another subject, may I ask the right hon. Gentleman whether he would consider getting the Minister of Public Building and Works to make a statement in the House next week on misleading replies given in the House on Tuesday, concerning which the building industry has written to him?
Mr. Peart: I will look at this matter and will have a word with my right hon. Friend. I will get in touch over this matter in the normal way.
Mr. Hector Hughes: Reverting to the debate on foreign affairs next week, and in connection with the plea of my right hon. Friend, the Member for Derby, South (Mr. Philip Noel-Baker), may I ask the Leader of the House to bear in mind that the war in Nigeria is different from other wars in that it is within the British Commonwealth of Nations and, therefore, should be discussed in the
1846
House? Will he make arrangements for that to be done?
Mr. Pearl: I am well aware of the point which my hon. and learned Friend made. He obviously feels very passionately about it. If he catches your eye during the debate next week, Mr. Speaker, no doubt he will have an opportunity to speak.
Mr. Ronald Bell: Will the Leader of the House give Government time next week for the Second Reading of the British Standard Time Act (Repeal) Bill, in view of the general anxiety about this subject and the desire in all parts of the House that there should be a debate about it?
Mr. Peart: I am well aware of this problem, particularly in the North of England. I represent a Northern constituency. But I cannot go beyond what I said earlier.
Sir Knox Cunningham: Having regard to the coming debate on Northern Ireland, will the Leader of the House bear in mind that the very dangerous situation which has arisen there has been largely encouraged by mischief-makers who have gone over there, and that they may have blood on their hands?
Mr. Speaker: Order. The hon. Member may only ask for time to debate or for no time not to debate.
Mr. Peart: I hope that the hon. and learned Member will restrain himself. A measure of hysteria on a matter of this kind is not becoming.
Sir Knox Cunningham: On a point of order. When I find a dangerous situation in which people may lose their lives, I have a right to say so to the Leader of the House.
Mr. Speaker: Order. That is a point, but not a point of order.
Mr. James Johnson: On a point of order. Am I in order, Mr. Speaker, in asking whether you can confirm that at the end of business questions the Leader of the House is leaving the Chamber to address the World Assembly of Parliamentarians in Geneva? In that event, may we wish him well?
Mr. Speaker: That is certainly not a point for business questions.

BILL PRESENTED
  NATIONAL INSURANCE, & C.
  Bill to postpone the coming into force of the provision made by section 3(1) of the National Insurance Act 1966 with respect to the entitlement of suspended workers to unemployment benefit; and to make further provision with respect to periods of limitation governing the payment of benefit under the enactments relating to social security, presented by Mr. Richard Crossman; supported by the Chancellor of the Exchequer, Mr. Wm. Ross, Mr. George Thomas, Mr. John Diamond, Mr. Stephen Swingler, Mr. David Ennals, Mr. Julian Snow, Mr. Roy Hattersley, and Mr. Norman Pentland; read the First time; to be read a Second time Tomorrow and to be printed. [Bill 53.]

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

ORDERS OF THE DAY SUPPLY
[4TH ALLOTTED DAY],—considered.
ORDERS OF THE DAY SUPPLY

  COMMITTEE OF PUBLIC ACCOUNTS (REPORTS)
  3.57 p.m.
  Mr. John Boyd-Carpenter: I beg to move,
  That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last Session of Parliament and of the Treasury Minute dated 4th November, 1968 on those Reports (Command Paper No. 3818).
  I understand that the views of the Government on this debate will be given towards its end by the Chief Secretary, whom I should like to take the opportunity of congratulating on his, in my view very belated, promotion to the Cabinet. As the Chief Secretary is the Minister charged with what some of us know to be the peculiarly difficult job of dealing with public expenditure, it may be appropriate if I begin by indicating what it seems to me at any rate is the relationship between the work of the Public Accounts Committee and the great problems of public expenditure.
  The House has often heard the quotation from Sir Winston Churchill, "Expenditure is the result of policy". Of course, the Public Accounts Committee is not concerned with policy. It is concerned with the adequacy of systems of financial control and with the avoidance of waste and inefficiency in the public service, and it conducts what is sometimes described as a kind of efficiency audit. It is not concerned with the major questions of policy which determine the major increases or decreases in expenditure.
  Nevertheless, as the Reports before the House show, during the course of our investigations this year we have dealt with a number of items some of which involved by any standards very substantial figures of public expenditure. There are two items involving sums in excess of £30 million and one, as the Chief Secretary knows, in which the sum involved is certainly in excess of £100 million. Therefore, although our efforts have sometimes

  1849
  been described in Gladstone's phrase, as "the pursuit of candle ends", they are sometimes substantial candle ends.
  The effectiveness of the Committee's work is largely dependent on two things. The first is that it operates, as my colleagues will agree, completely and wholly on non-party and non-partisan lines. The second is that it has the inestimable advantage, unique among the Select Committees of the House, of being served by a complete Department, the Exchequer and Audit Department.
  I pay my tribute to the staff of that Department, who, throughout the year, with great devotion to duty, are engaged in detailed and close investigation inside and outside the Departments of State. I acknowledge publicly that we have the very greatest advantage in having in the Comptroller and Auditor General one of the most distinguished public servants of the generation.
  I want to make this point, too, because it has some relevance to what was passing in the House a few minutes ago. I suggest from our experience on the Public Accounts Committee that it is very largely a waste of time for anybody to set up numbers of Select Committees unless adequate staffs are provided for them. Our experience on the Public Accounts Committee is that we could not hope to tackle the mass of material which has to be investigated, if Government expenditure Is to be surveyed in this way, unless we were served throughout the year by an effective Department of State. What I have just said has a good deal of relevance to the point made a few minutes ago in a question to the Leader of the House by my hon. Friend the Member for Guildford (Mr. David Howell).
  Since the Report in question was submitted, the former Clerk of the Committee, Dr. Eric Taylor, has been transferred to other duties. I know that I express the views of all my colleagues when I say how grateful we are to him for his devoted services over a number of years. Equally, I am sure that I carry my colleagues with me in welcoming his very able successor, Mr. C. J. Boulton.
  I must acknowledge, too, the help of the Treasury. I am glad that the Chief Secretary is here. The Committee works very closely with the Treasury. We had
  1850
  the advantage of a Treasury officer of accounts attending the Committee in the person of Mr. A. J. Platt, who, until last summer, when he left the public service, did a great deal of work with the Committee, for the Committee, and for the country, in that capacity. He has a most able successor in Mr. Phelps. I want, through the Chief Secretary, to express our gratitude to the Treasury.
  There are about 30 items dealt with in our Report. I should be convicted of repetition which would be intensely tedious, not only for the House, but even for myself, if I were to attempt to deal with all of them. The Motion relates in form to our First, Second, and Third Reports. The Second Report is largely a formality dealing with the exercise of the powers of virement. I am glad to say that it is my understanding that this wholly obsolete procedure is on the way out.
  The First Report deals with matters of slightly more substance in respect of excess Votes. There is, indeed, quite an important issue which I hope that the Chief Secretary has studied, as to estimates of purchasing by the Army Department in the United States and the Department's conduct of these. I shall not weary the House with this.
  I go straight to the Third Report, from which I shall simply select a number of items to which I would invite the attention of the House and on which I seek the reply of the Chief Secretary, conscious of the fact that I must inevitably leave a good many very important topics unmentioned, though no doubt they will be mentioned in the debate.
  The Report itself is, I think, in sheer bulk, when taken with the evidence attached, the largest for a number of years. My colleagues and I asked in all 5,119 questions in pursuit of our inquiries. The Stationery Office, with its very nice capacity for putting a price on everything, sells the volume at the rather interesting figure of £3 16s.
  Turning to the first of the topics, I will go straight to what was in many ways, as I think all members of my Committee will agree, the most difficult of them all. This is the matter dealt with at the beginning of our Report, of the losses to the Inland Revenue arising from false

  1851
  claims in respect of Income Tax allowances for dependants, mainly for children, by certain categories of immigrants to this country.
  The history of the matter, as appears from our Report, is briefly this. In 1966, the Inland Revenue instituted a test check in 20 tax districts about such claims from immigrants from India and Pakistan. A sample investigation, which proved very laborious and difficult, was undertaken, which disclosed that out of a total of 638 such claims for Income Tax allowances for dependants, 332 had either to be disallowed or put on to further investigation, possibly with a view to prosecution. This is a percentage of 52.
  The conclusions to be drawn from a sample even of this magnitude must obviously be tentative, but the Inland Revenue, in its evidence to us, put forward as a tenative conclusion based upon this sample that, applying this proportion to the total of immigrants from the two countries concerned, the money in issue amounted to an annual loss to the Revenue of between £5 million and £7 million a year and that up to 1967 it had been proceeding at that rate for four years. In other words, coming only to 1967, we are talking of a sum between £20 million and £28 million.
  Equally serious, as I am sure that the House will agree in a matter of this sort, is the possible effect of a state of affairs like this on relations between the immigrants and the indigenous inhabitants of this country, because the House knows that nothing is more sensitive than these questions of taxation and any possibility of a feeling that the burden of taxation is not being fairly shared between different sections.
  Therefore, both because of the size of the sum involved, or possibly involved, on the Revenue's tenative conclusion, and because of the broader social and political aspect, the Committee gave as careful study as it could to this very difficult and delicate issue. The social and political aspects appear to have been very well recognised by that great statesman, Field Marshal Ayub Khan, who happened to be in this country shortly after our Report was published and who, in his characteristically robust way, addressed a very strong appeal to his fellow countrymen on the subject.
  1852
  The evidence relates to immigrants from India and Pakistan, not to other immigrants. The reason is quite easy to see. In the West Indies, for example, the former British administration left behind an extremely efficient system of registration of births, deaths and marriages. Such systems do not exist, at any rate with the same measure of efficiency, or—I am sorry to say—integrity—in the Asian Commonwealth, largely because of the fact, as the House will appreciate, that the numbers involved are immeasurably greater and the administrative problems, therefore, plainly enormously more complex. The problem is, therefore, one related to those countries.
  I do not think that I can do better than indicate this difficulty by asking the House to allow me to read paragraph 3 of our Report:
  "The Department" —
  that is, the Inland Revenue—
  "informed Your Committee that the verifications, either through the High Commissioners or direct, of the documentary evidence had had disquieting results. There were false certificates; genuine certificates falsely attested; affidavits which, while properly attested, included details which appeared to relate to other children; and genuine certificates, prepared by the appropriate officials, which proved to be inaccurate. One of the difficulties was the primitive nature of the registration system, the right to give birth certificates being widely diffused down to minor village officials".
  In evidence before us the Inland Revenue made it clear that, on the basis of the present law, it was not able to tackle this problem in the immediate future, or perhaps for many years, without an expenditure of manpower and effort which would have been wholly disproportionate.
  The Committee, therefore, although we were divided—I think that this is the only point on which we were divided—as to the precise form of action which we should recommend to the Government, was unanimous in the view that the Government should give urgent consideration to the matter, for the reasons which I have stated. I hope that the right hon. Gentleman will, in the light of our view, have something to say on the point. The division of opinion was between those members of the Committee who felt that the responsibility should be placed firmly on the Government, without our recommending any specific action, and those—a minority of members—who took the

  1853
  view that, possibly, a remedy lay, and should be considered by the Government, in a withdrawal of dependants' allowances in respect of children not domiciled in this country. This would, in fact, follow what has for many years been the rule in respect of family allowances.
  As Chairman, I took no part in the making of that decision since, mercifully, the only vote which I have is a casting vote and that was not called for. But I thought it fair to both points of view to put the matter before the House. As the Committee was unanimous in asking the Government to give urgent consideration to the matter, I hope that this will be done. I appreciate that, as taxation matters are involved, a precise answer from the Chief Secretary would, I suppose, indicate that he was not himself. However, I hope that he will give some indication of the Government's view on this important issue.
  As usual, the Committee had to deal with a number of matters related to defence expenditure. Perhaps the most conspicuous was one not mentioned in the Comptroller and Auditor General's Report, but picked up from the Navy Accounts by members of the Committee, namely, the question of the aircraft carrier "Ark Royal". It appeared in evidence that this famous ship was undergoing a refit at Devonport at an estimated final cost of £30 million—a figure considerably larger than her original cost—and that, on conclusion of this refit, in 1970, she was to be given an operational life of two years and then be phased out. The Committee draws attention to this matter in its Report and also, in fairness, to the evidence given on behalf of the Ministry of Defence that a great deal of this expenditure was involved in the overhead costs of the dockyard.
  This brings me to another aspect of the matter to which the Committee referred in a previous Report. Last year, the Committee drew attention to the fact that frigates were being built in the Royal dockyards at a cost of roughly £1 million each in excess of the cost of frigates put out to contract. Then, as on this occasion, evidence was given to the desirability of providing sufficient work for the Royal Dockyards. The House and the Government must face the fact that the modest sized navy of today hardly needs as many Royal dockyards as were
  1854
  required to service the massive fleet with which we entered the war in 1939.
  In those days, as the House recalls, there were about 15 capital ships, 50 or 60 cruisers, and comparable numbers of smaller craft—a totally different scale of naval effort that that which, for better or worse, is provided today. There is at least a question—it is particularly appropriate for the Chief Secretary to the Treasury—whether, in these circumstances, the same number of dockyards is required.
  The next matter on the defence side, though of infinitely less significance in financial terms, conveys an element of warning. It arises from an issue which aroused a certain amount of rather derisory publicity at the time of publication of our Report. I refer to Army boots. This is an example of what can happen if there is any let-up in strict financial supervision of ordering by a Government department.
  The facts are simple. A few years ago, the Army Department evolved a form of Army boot which, on all the evidence, is infinitely superior to that with which some hon. Members were painfully acquainted some years ago. However, despite the proposal to introduce it, the old type continued to be ordered, with the unhappy consequence that, although in 1965–66 issue of the new boot had been made to all Regular units, there were nearly 1 million pairs of the old boot in stock, and, to make matters worse, the stocks were badly balanced in the sense that there were far too many small boots and far too few large.
  We had serious evidence to the effect that the soldier's foot has grown over the years, and evidence, also that the Army Department had not observed this fairly gradual medical phenomenon, with the result that by merely ordering again on the basis of previous orders it had amassed a stock which was not only far too big, but was badly balanced. Indeed, had the use of the old boot been continued, it would have been necessary to order in the larger sizes a considerable number more even though there were 1 million in stock.
  That is a good example, though the sums involved are not large, of failure by a Government Department to follow changing circumstances and to secure

  1855
  that those ordering supplies on behalf of the Department are aware of such changes. To put it in the context of a literary allusion, there was published not long ago a book called, "At the Feet of the Young Men", but, somewhat unfortunately, the Army Department had not realised that they were getting bigger.
  I turn now to another defence matter. There are paragraphs in the Report dealing with the sale of land at Woolwich Arsenal to the Greater London Council. No one disputes the merits of the decision, which will give, I believe, considerable relief to housing problems in London. Nevertheless, in view of the magnitude of the sale, the business seems to have been conducted in an extraordinarily amateurish fashion. Anyone who sold his own back garden by the same methods as those adopted by the Ministry of Defence to sell land valued even some years ago at £6½ million would be subject to considerable criticism on grounds of negligence.
  All those who have read our Report will know that even in a transaction of this magnitude there was no firm written agreement undertaking that the land would be taken at any particular time or be paid for at any particular time. As a result of changing developments, including restrictions on building, the Greater London Council required less land, and, less early, than had been expected. The Army Department had no firm contractual rights to enforce. As a result, the Exchequer lost the interest on a substantial sum of money for some years and suffered further loss on a sale of land years after it had been contemplated and at a price, no doubt, appropriate years ago although, obviously, with rising prices, less adequate now.
  I hope that the right hon. Gentleman will be able to tell us that, in dealing with public assets of that kind, the Treasury has secured that the same rather cheerful but distinctly amateur approach will not be adopted again.
  The matter goes even further. At a time when there was no certainty that the G.L.C. could be compelled to take up the land, the Ministry of Defence went straight ahead and spent £3 million on building elsewhere facilities to replace those being lost on the land which it
  1856
  was proposed to give up. I make no criticism of the general concept of the transaction, which was sensible. I am directing attention to the manner in which it was conducted and the lack of the normal safeguards which any hon. Member would himself adopt in dealing with his own property, even though for most of us that property is likely to be of considerably less value.
  Inevitably, aircraft figured conspicuously in our dealings with witnesses. The biggest financial issue in the Report, the purchase of American aircraft, is dealt with in paragraphs 53 to 62. Leaving out the 50 F111s, which were subsequently cancelled and, therefore, do not come into the picture, the transaction which we reviewed concerned the purchase of 170 Phantoms and 66 Hercules transport aircraft at the not inconsiderable price of £610 million. There is a very clear lesson to be gathered from these two transactions taken together. That is—I express no opinion on the merits of it—that would not be appropriate on this occasion—that if a decision is taken to purchase foreign aircraft for the Royal Air Force it is enormously more economical to buy the aircraft "off-the-peg" and to take it as it is produced for and by the manufacturing country than to buy it and make substantial modifications in it.
  On the evidence before us, the Hercules transport aircraft, although there had to be some minor modifications, I understand, in the navigational apparatus, was bought for the Royal Air Force at substantially the same price as the American Air Force pays for it. For that and other reasons, we made no criticism of the transaction.
  In respect of the Phantom, however, the position was very different. In the first place, a decision was taken to incorporate a good deal of equipment which was required on operational grounds for the Royal Air Force planes which differed from that required for the American aircraft. Secondly, a decision was taken that some of the aircraft which were bought for this country should be equipped with Rolls Royce engines. This involved substantial research and development costing, we were told, about £100 million, and the incorporation of a new engine inevitably involved substantial and expensive

  1857
  modifications to the airframe. As a result, the cost escalated substantially.
  I would like to read one or two passages from our Report, first, from paragraph 57:
  "Your Committee were informed that the production cost of the United Kingdom versions of the Phantom is about 50 per cent. more than it would have cost to purchase the U.S. version, and that if the development costs amounting to some £100 million are taken Imo account the unit cost of the 170 United Kingdom Phantom aircraft ordered becomes nearly double that of the U.S. version."
  In paragraph 58, we say:
  "When the increased estimates for developing and producing the aircraft incorporating the Spey engine"—
  that is, the Rolls Royce engine—
  "and other United Kingdom requirements were reviewed in the summer of 1965 the Navy and Air Departments both stated that in view of its high cast they would be prepared to accept the U.S. Phantom with the American engine which by that time had been improved. It was decked, however, to go ahead with incorporation of the Spey engine in view of its superior performance, its potential for further development and the technological and industrial advantages to be gained."
  And in paragraph 59
  "Your Committee have no wish to question the decision to continue with the Spey-engined Phantom in spite of the large increase in unit cost, but they regret that the earlier decisions, and in particular that made in 1965, to purchase the United Kingdom versions should have had to be made on the basis of totally unreliable estimates and before the costed technical programme for the engine was received"
  There appear, therefore, to be two clear lessons from this very unhappy affair. One, which I have ventured to put, is that if one buys a foreign aircraft, one should accept its limitations as well as its qualities and buy the aircraft substantially as it stands. Secondly—this is a matter which the House has discussed before and may well consider again—it is unfortunate when Ministers are placed in the position of having to take decisions involving large expenditures on the basis of estimates which, in the event, turn out to be completely inadequate.
  Compared with the expensive questions of the Phantom, the question of the Basset aircraft is a relatively light relief. None the less, your Committee was very critical of a decision to impose upon the Royal Air Force—which, we were told, would have been perfectly happy to continue to use the Devon as a communica-
  1858
  tions aircraft—the Basset aircraft, a militarised version of the Beagle.
  In the event, as our Report brings out, once military equipment was put on board the Basset turned out to be incapable of meeting the specifications. Indeed, to meet the specifications and put the Royal Air Force load on board, under certain conditions of temperature its effective range was nil. It seems a pity that this money should have been spent on the development of this aircraft when the Royal Air Force was satisfied with the Devon.
  Perhaps the only redeeming feature of the whole matter is the question of nomenclature. Those familiar with Beagles and Bassets, know that as compared with the Beagle the Basset is slower, heavier and feels the heat, and it seems to me that there must have been a humorist with canine knowledge in one or other of the Departments at the relevant time.
  We dealt also with the provision of married quarters for officers. The Minister of Defence is now in a wholly illogical position. It still insists on the provision of these quarters being in accordance with rank rather than family responsibilities everywhere except in London, where, I have no doubt, the Chief Secretary could tell us—although he will not—as the result of pressure from the Treasury. the Department has accepted that family responsibilities should play a more important part.
  The Committee fully accepted that in the case of commanding officers of units, there are obviously special circumstances which require them to be adequately and appropriately housed. But we criticised strongly in our Report a system under which a childless major has to be provided with quarters including four bedrooms whereas a more philoprogenitive captain has considerably less accommodation at his disposal.
  I hope that the Chief Secretary will be able to tell the House that with all proper regard for military tradition, and with complete regard for the special position of commanding officers, none the less a more sensible attitude in the second half of the 20th century will be adopted by the Ministry of Defence in this respect.
  The only other item in our Report to which I desire to refer is the evidence, which appears at pages 26 to 46, of a

  1859
  laxity in financial control by the Department of Education for Scotland. I have no doubt that the Treasury must have been as concerned as was the Committee at the state of affairs which was revealed.
  Briefly, grants were being paid to the managers of schools for buildings, works, and so on, without taking proper steps to ascertain whether payments needed to be made. The money was paid over and in many cases invested, substantial balances being held by some of the schools. On the evidence, the Department, so far from trying to keep any check on the money or to secure that interest was obtained on the balances, was, on the contrary, particulary towards the end of the financial year, urging the managers to take additional payments. Although the sums involved are not large, I am bound to add the personal opinion that, with some experience of Whitehall, I have never seen a similar attitude towards the handling of public funds adopted by any other Department as that which on its own evidence, was shown by the Scottish Education Department in respect of this matter.
  Inevitably, I have had to leave out, or I would have wearied the House, a good many other of the important issues which the Committee discussed. We report in substance on 30 matters ranging in financial importance from sums in excess of £100 million down to sums directly involving small amounts, but often involving important questions of principle and control.
  This is the occasion on which it is our duty to report these matters to the House, to ask the House to consider whether this is the way it wishes the business of the Committee to be conducted, and to seek from the Government some indication of their views on these matters.
  4.30 p.m.
  Mr. Edwin Brooks: I had not anticipated that I would have the honour of following the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) who, as Chairman, has displayed before the House the vigour, authority and perspicacity which regularly delights his colleagues on the Committee.
  It is perhaps one of the sad commentaries upon this annual stocktaking
  1860
  of the work of what I think may fairly be described as a hard-working Committee that this annual debate often seems like a wake from which nearly everyone, including on this occasion many of the mourning members of the Committee, has fled. It is perhaps true to say that this year our colleagues have been more than usually dismayed by the sheer bulk of the volume which is before the House.
  The Report is a massive document which seems inexorably to expand as do the soaring costs of Concorde. Or perhaps the House feels that denunciations of extravagance in public spending should not be muddled with those humdrum facts which the Committee spends its time investigating. At all events, our annual debate is held once more in a House which, perhaps more than usually in certain parts, looks like a morgue, and it is inevitable that at times like this those of us who serve on the Committee should wonder what is the point of all our work.
  I should like to devote a few remarks to this aspect. It may be said that the discipline of the P.A.C. lies less in the actual dramatising of financial scandal as in the deterrent which the threat of such exposure presents to inefficiency in the corridors of power. The presence of the Comptroller and Auditor-General in Room 16 on the twice-weekly day of judgment is bound to loom large in the great spending departments of State and lends authority, I am sure, to the accounting officers in their day-to-day control of the activities of colleagues.
  In one sense, the value of the Committee lies less in what it does than in the fact that it exists. It might be remembered by those who sometimes stridently doubt our democratic institutions that we have succeeded in evolving a remarkably effective instrument of persuasion rather than coercion in the Parliamentary surveillance of spending.
  At this point I think it is appropriate to add my thanks and gratitude to the Comptroller and Auditor-General and his staff, to the Treasury and its representatives and to the Clerk of the Committee for the unfailing courtesy and help which they gave us. But when all these evident virtues have been stated, I have a growing feeling of uneasiness about the ability of

  1861
  Parliament, particularly through the Public Accounts Committee, to impose a truly effective deterrent against financial extravagance and inefficiency. This uneasiness springs from the vast complexity of financial accounting in a mixed economy and a welfare State.
  This ancient Committee, now in its second century, has lived through dramatically changing times. Nowhere has this been more obvious than in the growth of the power of the State. There may be some of my hon. Friends who equate such a growth with the approaching millennium, but I do not share such optimism. I believe that the State should still be regarded with caution as a potential leviathan which needs to be tamed by democracy.
  Accountability, the requirement that, unlike Mr. Baldwin's harlot, power must be matched by responsibility, is of vast and rapidly increasing importance at this time when the State, irrespective of which party is in power, is encroaching on all sectors of society. I wonder whether the Committee, despite its excellent work, has all the resources, expertise and procedures to cope with the hugely extended sphere of State enterprise.
  There is some disturbing evidence in our Report this year that all is not as well as it might be, and I want briefly to indicate one or two examples. The first example lies in the history of the Concorde venture, where repeated and massive escalations of cost have, quite naturally, worried the Committee, and doubtless the House and the country. In our Report we do not devote, as has become the custom in recent years, a great deal of space to analysing this particular project, although in Appendix 12 there is an interesting, if short, memorandum submitted which at least tries to clarify yet another of the ambiguities involved in this project—the relationship between expenditure incurred in research and development, which is well in excess of the total estimate of £500 million, and expenditure incurred in the initial stages of the production programme.
  We must ask ourselves why this enormous escalation has been taking place, despite the efforts of the Committee, the House, and the Ministry of Technology. Clearly this must lie in the technological novelty of. the enterprise, which is at the
  1862
  frontiers of engineering science. Yet neither the Committee nor the Comptroller and Auditor-General—nor that matter, and I mean no disrespect, the Accounting Officer of the Ministry—really have the expertise which ensures that we put the right questions. Even if, perhaps inadvertently, we managed to put the right questions, I am not sure whether we would fully understand the answers, particularly if, as might well happen in certain cases, they had to be expressed in sophisticated mathematical form or engineering terminology.
  It may be that some of these obvious difficulties of probing public expenditure in an increasingly scientific period would be removed or reduced if certain recommendations of the Fulton Committee were implemented—for example, the appointment to senior posts in the major technical departments of a chief scientist or engineer, or the establishment of planning units with senior policy advisers. But it would require a deliberate change in the procedures of the P.A.C. if full value is to be gained from such changes in the Civil Service system of accountable management.
  Apart from anything else, there might otherwise be a danger of these new, and no doubt high powered, senior scientists completely fooling a lay committee relying solely upon the sort of ad hoc interrogation which inevitably proceeds upstairs twice weekly. Even the staff of the Comptroller and Auditor-General's Department might be blinded with science and be prepared to accept, uncritically, excuses for overspending whose credibility lay solely in their incomprehensibility.
  The fact surely is that in the great spending Departments, such as Technology, which are constantly under scrutiny by the Committee, it is becoming all too easy to circumvent Parliamentary control over spending.
  I recall an occasion many years ago when a massive investment programme in nuclear energy was proposed in another place. I think I am right in saying that throughout the debate "kilowatts" were substituted for "megawatts" and, what is more significant, no one apparently noticed the point of difference.
  It is easier to describe the malady than to suggest an effective solution, but it is clear that we need procedures for

  1863
  combining financial auditing techniques with efficiency auditing techniques. If Fulton is implemented, such efficiency auditing should become more effective within Departments. But, just as the value of the C.A.G.'s work lies in its external check upon the Departments, so we need to provide external efficiency checks by those qualified to recognise scientific and engineering fallacies. It might be worth setting up a special inquiry, to which consultants could be appointed, to check on issues under dispute.
  A second example of the Committee's difficulties lies in the concept of what we sometimes term "reasonable profit" and here we have some examples to quote from this year's Report. The Bristol Siddeley affair has already been debated, I think adequately, in the House, and my remarks on that occasion, none of which I have subsequently had cause to regret, were related to the difficulties which arise when a Committee such as the P.A.C. finds itself conducting a quasi-judicial probe into excessive profiteering by a private company. We simply have not devised appropriate procedures for such interrogations, which may recur in the future, and it is surely inexcusable that individuals whom we might happen to select as witnesses out of a large potential field should find themselves, and themselves alone, exposed to a degree of public pillory. But Bristol Siddeley was a special, and I trust unique case.
  The difficulty which I should like to emphasise on this occasion is less dramatic, but likely to be increasingly troublesome as the State becomes more intimately interwoven with private enterprise. It is a difficulty illustrated in the section of the Report dealing with the voluntary price regulation scheme for proprietary preparations, pharmaceutical products.
  I endorse the recommendation of the Committee which urges prompt corrective action "taken if necessary with retrospective effect", and I also agree that the Minister should not be too bashful about fixing prices where profits are demonstrably unreasonably high. But if we are to justify such a managed economy, a sort of State capitalism in which the jungle beasts have been tranquilised, if not fully domesticated, or put out of
  1864
  their misery, we need to give more thought to the concept of "reasonable profit".
  The Treasury has spent many weary months, and even years, in dialogue with the C.B.I. and others over this vexed problem, and I do not want to distort the issue by minimising the value of the quid pro quo which has been achieved. We may, indeed, have gone some way to resolving the old dilemma, of which the Committee was well aware, involving the relative advantages and disadvantages of cost-plus and fixed price contracts. I welcome such developments as post-costing, particularly where the State is dealing with, and to some extent maintaining in business, a monopoly or semi-monopoly supplier. Yet is there not a danger that we shall come, in the Committee and in the House, to regard certain profit levels, not so much as the maximum permissible ones, but as normal and wholly acceptable?
  The value of the capitalist system, historically, lay in its ability to separate the wheat from the chaff. The inefficient firm—at least in the golden days of long ago when perfect competition reigned—went to the wall. Today, as far as I can see in my more gloomy moments, the inefficient firm boosts its profit margins by going to a development area with massive State subsidy, is encouraged to hoard labour because it gains the regional employment premium, and then, when the State negotiates prices with it, the norm is set by the profit margins we are prepared to tolerate in contracts with efficient firms.
  I have no special brief for the particular firms discussed in the Report, but even if the prices negotiated had led to what we would accept as reasonable profits, this would not have meant the State was avoiding the subsidy of an inefficient firm whose high costs were masked by the protection of patents. The problem is complicated still further when we deal with industries, such as the pharmaceutical industry, which require sustained and substantial research investment.
  What is the P.A.C. to make of such a misleadingly simple phrase as "excessive profits" applied across the board, without much explicit regard to the degree of risk in the particular industry, or the years

  1865
  of prolonged, and initially no doubt unrewarding, research which finally produced a revolutionary new wonder drug?
  I suppose my real point is that once we remove the disciplines of the market economy—and with due respect to the right hon. Member for Wolverhampton, South-West (Mr. Powell) I do not see these decrepit disciplines being rejuvenated in their former and romanticised vigour—we have to devise alternative disciplines which ensure maximum efficiency as well as financial probity. One of my criticisms about the Concorde during the whole time that I have been in the House has arisen out of this sense that we have not devised such disciplines. The danger of our present system of State capitalism is that we are neither flesh not fowl, and until we clarify the role of the profit motive in our mixed economy the P.A.C. is a Parliamentary watchdog, forced, for much of the time, to howl at the moon.
  In the case of the first example, which, in cost terms, to use the aeronautical bestiary which the right hon. Member for Kingston-upon-Thames referred to a moment ago, is the St. Bernard of our age, I should have thought that we have a history which gives us more than enough warning about the dangers of relaxing market disciplines and profit criteria without having equally ruthless disciplines to counterpose to the escalating costs of prestige.
  A third problem which the Committee encounter is the measurement of sophisticated, but often hazy, concepts such as social cost benefit. I often think that accountancy is less of a science than one of the black arts, with the devil looking after his advocates, and the special pleading which tries to turn base deficits into golden, but concealed social, gains, makes me wonder whether accountancy is the alchemy of the 20th century. Anyone who tries to follow a take-over bid knows how indispensable is the accountant's Midas touch, and I felt something of the same admiration and incredulity when the Committee tried to find out why we continue to plant forests in Britain.
  I find myself agreeing with the stern tone of the Committee's paragraph 146 when, in discussing the Forestry Commission, it concluded that the
  1866
  "losses, current and prospective, indicate the need for consideration whether the Commission's non-commercial activities, the social benefits of which have yet to be quantified, justify the heavy expenditure involved."
  In other words, I think we need to take with a pinch of salt the vague, and sometimes woolly, talk about social need, without making any effort to quantify the total balance sheet. And this applies generally, certainly not just in terms of the Forestry Commission, which perhaps is having somewhat undeserved attention focused on it because we happened to investigate it in the past.
  Mr. David Howell: Would not the hon. Gentleman agree that this is an excellent example of the need to present the Government's accounts much more in terms of objective and programmes and less in terms of vague categories of administrative activity, as this would allow a more effective focus on Government spending decisions?
  Mr. Brooks: I am sure that the hon. Gentleman will forgive me if I do not develop that argument, from which I am not necessarily dissenting. I am sure that he will have an opportunity to put his argument to the House. It is very much in terms of the point made by the hon. Gentleman that I have tried to raise in this debate these wider considerations of terminology, presentation of accounts, and the basic disciplines which we as Members of the House are competent to understand.
  I agree that it is time we combined sentiment with statistics, and the right sort of statistics. In some fields we are beginning to do this. The classic examples, I suppose, are the decision to go ahead with the Ml motorway, which was analysed with far greater rigour than has habitually been the case in this sort of project, where there are hidden benefits to the community which are not necessarily immediately apparent, and the building of the Victoria-Euston line in London, although one wonders why the same techniques are not applied to a railway system in an area such as Merseyside, where apparently no such hidden benefits are stressed.
  But in the case of the Forestry Commission, which is in narrow accounting terms long since bankrupt, we have yet to make the effort to quantify the hidden factors of cost and benefit which might

  1867
  well show that investment in forestry is wholly right for the nation.
  From my slight knowledge of the factors involved in afforestation, such as the advantages which may arise relatively in terms of hydrology, run-off, and the effects of dam siltation in upland areas, I suspect that the Forestry Commission is a sound investment. But suspicions are not good enough. They need to be confirmed—or, if necessary, invalidated—if we are to make the right decisions about public expenditure in the years ahead.
  I have tried to illustrate my feeling that our procedures for checking public expenditure need to be re-examined in the light of a growing sophistication of economic and technological decision-making. Terms which we sometimes use in analysing various problems, such as—to give a recent example—discounted cash flow analysis as a means of attempting to evaluate the economics of the operation of the Atomic Energy Authority are not necessarily used in other fields of public expenditure. I am not sure that we always have sufficient regard for the depreciation in the value of money across periods of time, such as the fall in the internal purchasing power of the £ sterling of one-eighth between 1963 and 1967. There is a danger of making a too glib examination of the costs of long term development projects.
  I conclude with specific but by no means comprehensive examples. My view is that the Committee, or representatives of it—perhaps including the Comptroller and Auditor-General's Department—should be sent to investigate the procedures for financial accountability being used in other advanced countries. I am thinking in particular of neighbouring states in Europe, where fresh complexities are added to the problem by the integration of State with State and, in the Common Market, of firm with firm, in the development of vast international companies.
  The Committee would do well, as a general principle, to go out into the field occasionally. Some time ago I was able to visit the Farnborough and Bristol centres working upon Concorde, and I know how valuable this detailed, firsthand investigation was in subsequent interrogations of the Ministry of Tech-
  1868
  nology. The provision of plans and other visual aids is also worth considering, since it is extremely difficult to ask the right questions concerning a site unless plans are available for the Committee.
  Indeed, the facilities available to me in local government as a member of a planning committee before coming to this House were immeasurably superior to the facilities enjoyed by the Public Accounts Committee for looking at places where there is a strong hint of dubious happenings which it is our task to unravel. To take one example only, I am sure that our investigation of Swynnerton would have been aided if a plan of the site had been exhibited.
  Many of these suggestions can more properly be discussed in the Committee in detail, but the House is the arena in which Committees report and where it is right to raise procedural matters which affect Parliament's efficiency. The control of public expenditure is desperately important, for this country cannot afford to waste resources in the competitive years that lie ahead.
  4.52 p.m.
  Sir John Vaughan-Morgan: I apologise to the Chief Secretary if I am not able to be here when he replies, since I have another engagement. It is not my intention to repeat anything of the wide survey which my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) gave of the work of the Public Accounts Committee; nor shall I follow in detail the speech of the hon. Member for Bebington (Mr. Brooks), because I agree with it about 100 per cent. I shall have to read it very carefully and then I may find something to disagree with, but at the moment I agree strongly with what he said.
  However, as to procedure, the Committee has enough to do without visiting too many sites, or even watching the Concorde being built. To do that would have taken the Committee even more hours than occupy its time already. With certain exceptions the work of the Committee is immensely successful, for reasons that we all know. It is a threat to the extravagant rather than an attempt to punish the guilty.
  Recently I read the Report of last year's debate on the work of the Public

  1869
  Accounts Committee. It was interesting to look back. Apart from the Committee's attention to aviation matters which form a recurrent theme in our debate there were two other interesting investigations, namely, the question of New Scotland Yard's new building and of university accountability.
  Alas for New Scotland Yard, that whiter than white elephant in Victoria Street is still there, as a standing reproach to someone, but not to the Public Accounts Committee. On the other hand, the accountability of the University Grants Committee, which was so hotly debated, has now come to pass, and as far as I know none of the feared repercussions have yet been seen, although it is early days. In my opinion it was a triumph for the Public Accounts Committee that after many years' work it managed to bring about this big change in procedure.
  I want to refer to three matters which arose in the course of the year. As usual, I find myself fascinated by the varying tones of the Treasury Minute in its comment. It is possible to read between the lines and to deduce when the Treasury really agrees and says so and when, although it agrees, it does not like to say so.
  I want first to refer to the paragraph concerning selective employment repayments. This is a backlash from what I regard as a very foolish tax. In our report we state that
  "The Selective Employment Payments Act made it a condition of payment of premium or refund that the claimant has paid the tax."
  It seems to be a basic principle of taxation that a person should not receive a refund until he has paid his taxes, yet a test examination showed that in many cases this had not been done. It is difficult to quantify the exact loss to the Exchequer when such cases occur, but it would have been more easy to assess—we did so to a certain extent—the cost to the Government of checking this kind of provision.
  It is a small but very significant point that as a result of this refund the number of Ministry of Social Security inspectors alone had to be increased from 1,200 to 1,300. At that, we were told, the Ministry's inspectors can get round all the employers only once in five years.
  1870
  The Ministry of Labour and the Department of Agriculture, which have comparable responsibilities, can get round the employers with whom they are concerned only once in every 20 years, since they check only 5 per cent. of the employers per annum. In the course of the inspections carried out by the Ministry of Agriculture and Fisheries it was discovered that in about 155 of the cases the premium had been repaid before any insurance contributions had been paid in. We were told that there had been one prosecution and that another prosecution was pending.
  The loss to the Revenue is small as far as I know—and the Committee accepted that a 100 per cent. check of all employers would be far too costly. But is it unreasonable to suggest that this is not only an expensive tax to collect, together with the repayment of the refund, but also a very expensive one to administer? Can the Minister give the House some idea of the true cost, not only to the Government but to employers, of collecting the Selective Employment Tax and making the refunds? The Committee's experience illustrates that the complexity of our present tax system is almost as great a burden as the tax itself.
  I agree with what the hon. Member for Bebington said about the Forestry Commission. We should have an entirely new look at its workings and constitution. I am not saying this because I believe that at the end of a critical examination we should necessarily wish to change it very much, but it is high time that Parliament began to appreciate that a State-financed body like the Commission becomes autonomous and begins to move under its own steam without Parliament and the public realising how great a change has occurred. It was founded for strategic reasons and has been continued for both strategic and social reasons. That is not necessarily wrong. The Report says that the social benefits have yet to be quantified, and meanwhile there are substantial current losses and poor prospects. One sentence smacks of "pie in the sky", saying that one day the Forestry Commission might, given certain prognostications being fulfilled, prove very profitable.
  It is time that this policy was totally reconsidered, with regard to uneconomic planning. In Question 2909, it was elicited

  1871
  from the Treasury that they normally expect 5 per cent. as a long-term profit on the total capital costs of a plantation but that, in the case of development areas, they expect only 2 per cent. The difference is a straight subsidy to the development areas. Again, I do not say that that is wrong, but that subsidy should be shown on the Votes of the responsible Ministry and examined by the House as such, and not merely smothered in the trading accounts of the Forestry Commission.
  Furthermore, the Forestry Commission should be able to bargain with the Government about whether or not they will undertake a particular planting unless they think that it is ultimately profitable on the subsidy which might be given.
  Mr. Tam Dalyell: The right hon. Gentleman has great experience in Government, and I am listening to him with interest, but how does one quantify factors such as the long-term prognostications of the F.A.O. and the other rather incoherent factors which were given to the Committee?
  Sir J. Vaughan-Morgan: That was not quite my point. I was saying that, if the Treasury expects 5 per cent. return on certain plantations and only 2 per cent. on others, that 3 per cent., which is a straight subsidy, should he shown as such in the accounts of the Government Department which is demanding money, rather than in the Forestry Commission's accounts.
  The last issue with which I want to deal is the false claims to personal reliefs from income tax. This was in our Report and received considerable and restrained comment in the Press. There must be understandable concern when, in one particular community, it appears that 52 per cent. have been claiming reliefs under false pretences. Surely, evasion on such a scale is, to put it mildly, unusual. The Committee's comments on this startling disclosure seemed to me rather weak, although the Committee had been very shocked. It noted that the results of the amnesty were not encouraging. Indeed, they were almost negligible, but the Committee failed to appreciate that the Inland Revenue itself is frankly at the end of its tether to find
  1872
  a solution. The Committee ended by saying that it trusted that this matter would be given urgent attention.
  That reaction is totally inadequate. I was the Member responsible for forcing the Committee to divide on this issue and I should like to draw attention to the orginal draft which was before the Committee, which read as follows:
  "From the evidence furnished to them, it is clear to your Committee that tax avoidance on this scale cannot be dealt with by administrative action except at disproportionate cost in money and manpower".
  It ended by saying:
  "Your Committee therefore recommend that urgent consideration be given to the alternative of legislation designed, for instance, to limit dependants' allowances to dependants resident in this country."
  I still believe that that is the right course and I hope that we shall hear tonight what the Government have in mind.
  I said earlier that the Department was at the end of its tether. Again, I refer to Question 2800, when the Treasury Officer of Account said:
  "I think I would sum up the Accounting Officer's evidence by saying that one either tightens up on administration at a disproportionate cost or one has legislation. Those seem to be the choices."
  However unpleasant it may seem, the House must demand that the Government act quickly in this matter, and make its choice.
  There is a very good reason why. Any failure to act quickly will be unfair, first, to the other taxpayers, second, to the leaders of the Indian and Pakistan communities, who have co-operated very well with the authorities in trying to eliminate this evasion, third, to the Governments of India and Pakistan, who have tried to stamp out this nuisance, and, above all, to other immigrant communities, such as the West Indians, with whom no such evasion problem exists, and against whom no charge is levied. So I hope that we shall hear that the Government are contemplating legislation on this point.
  5.7 p.m.
  Mr. William Hamilton: I do not propose to follow the right hon. and learned Member for Reigate (Sir J. Vaughan-Morgan) in his excursions on the tax evasion problem or the Forestry Commission. It is in the nature

  1873
  of these debates that we tend to focus attention on the problems with which we are immediately interested, and the debate must be disjointed.
  I want to deal with what the Committee said about the Forth Road Bridge. I was not a member of the Committee, but I have a vital constituency interest in what it said about the project. As the Committee rightly underlined, in purely monetary terms, the finances of the bridge are in a mess. Second, judged by comparisons with the old ferry charges before the bridge was built, which varied from 4s. to as much as 57s. 6d. for a heavy commercial vehicle, the 2s. 6d. flat rate now charged on the bridge represents considerable savings in time and money for its users.
  As the Committee reminds us, the bridge, plus the approach roads, cost £20 million and, under the terms of the 1958 Forth Road Bridge Order, the Government undertook to provide a grant of £4,650,000. The six local authorities concerned were to provide £500,000 and there was to be a loan of over £14½ million. Since the Exchequer took no interest on the loan during construction, that was worth another £1½ million, SC there was really an outright grant of over £6 million.
  The loan of £14½ million, plus interest, had to be repaid over 30 years, and it is that sum which had to be financed entirely by tolls on the users of the bridge. The toll agreed by the Joint Board was a flat rate of 2s. 6d., and it has remained unchanged since the bridge was opened in September, 1964. It is clear from the evidence adduced in the Report that it was suspected almost from the outset that such a toll would he inadequate to repay the loan, plus interest, plus the cost of the maintenance of the bridge for the agreed period of 30 years. Nevertheless the Forth Road Bridge Joint Board managed to persuade both the Scottish Development Department—and, presumably, the Treasury—that reconsideration of tolls should be deferred until September, 1966.
  By then, of course, the Government's standstill on prices and incomes had come into effect, and that operated until the end of 1966. Then, early in 1967, there was the period of what was called "severe restraint". That meant that for a variety of reasons, including those that I have
  1874
  mentioned, there was no change in the toll. At that point the Treasury made it quite clear that plans for increases in tolls should go ahead as soon as possible.
  Various schemes for increasing the revenue from tolls were put forward in late 1967, including a flat rate of 3s. or 3s. 6d. for private cars and a variety of differential tolls for commercial vehicles. From the evidence in the Report, it seems that after 30 years of the existing flat rate of 2s. 6d., and making certain assumptions about traffic growth—the assumption was, in general terms, an average growth of 8 per cent. increase compound—there would still he £16 million outstanding; that even in the 56th year—that is, in 2020 A.D.—there would still be between £12 million and £13 million outstanding, and that annual expenditure in that year would exceed revenue. That is the information par excellence.
  It is true that my right hon. Friend the Secretary of State for Scotland has power, exceptionally, to increase the period of repayment beyond 30 years. It is rather interesting to note that the period of repayment on a very expensive capital project like the Forth Road Bridge is 30 years, but that the period of repayment on a council house is 60 years. I shall return to that point in a moment.
  It seems to me that the answer to this problem does not lie in the direction of increased tolls—in fact, it does not lie in tolls at all. My hon. Friend the Minister of State for Scotland yesterday indicated that a public inquiry was to take place, but there is no guarantee that the calculations on which such future increase might be based would be any more reliable or accurate than those on which the original toll was based. On simple arithmetical and accounting grounds, an increase in tolls, whether flat rate or differential, would appear to be a satisfactory solution to the Public Accounts Committee, sitting here in Westminster and concerned, as it was, solely with £ s. d. matters, but the issue is very much more complicated and less straightforward than that, and I do not see any reference made to it in the Report.
  When, in 1946, the Government originally offered the grant of £4·65 million towards the cost of building the bridge, that sum represented three-quarters of the then estimated total cost. By the time

  1875
  the bridge was built the total cost was £19½ million, but the Government grant remained static and therefore represented less than one-quarter of the total. The grant is less than the cost of the approach roads, which have also to be financed out of the toll money.
  I believe that the approach roads should at least be regarded as trunk roads or motorways chargeable to the Exchequer. That is what they are, and that is how they should be financed. To do that would also leave the finances of the bridge alone to be put on a more realistic basis, and that might be done by a series of differential tolls, if tolls there are to be. I would hope that they would be differential, but my own consistent view has been that they are not the way to finance such a project. In my view, increases in tolls would not do anything to help, and might conceivably hinder, the economic development at Fife and the East of Scotland generally. They would clearly add to the overall cost of transport, and to the cost of individual daily commuters across the bridge.
  It is true that in 1958 an agreement was reached—this was the argument advanced by my hon. Friend the Minister of State yesterday—between the Joint Board and the Government, and it had to be honoured. But circumstances alter, and agreements have often to be altered to take account of changed circumstances. I must apologise to the House and to my right hon. Friend at this stage because I shall have to disappear from the Chamber almost immediately I sit down, but I shall be back later. I hope that the House will understand that. My right hon. Friend the Chief Secretary will recall that the various nationalisation Acts laid down in general terms that each nationalised industry or undertaking had to pay its way taking one year with another. Those may not be the exact words but that was the general meaning. But these statutory agreements have never been adhered to. The finances of the nationalised corporations have frequently been reorganised in the light of changed circumstances.
  On 3rd December I put down to the Chancellor of the Exchequer a Question asking how much of the capital debt of the nationalised industries had been written off over the last five years, include-
  1876
  ing the proposed writing off of 90 per cent. of such debt owed by London Transport. The figures I got were quite startling. The British Overseas Airways Corporation has had £110 million written off; the National Coal Board—£415 million; British Rail—£1,262·1 million and the British Waterways Board has had £15·5 million written off. London Transport, assuming that the Bill goes through, will have £243 million written off.
  If these vast capital debts can be written off—in the case of London Transport written off in the most prosperous area of the country—how much more relevant is it to think about writing off the £16 million capital debt on the Forth Road Bridge, which is situated in the middle of one of the most difficult development areas of the United Kingdom?
  I have stated the view, and I repeat it now, that these bridges and tunnels should be regarded simply as extensions of our road networks. There does not appear to be any consistency in the policy of financing these ventures. The Mersey Tunnel has tolls, the Clyde Tunnel has no tolls, and the Forth Road Bridge has tolls and the unpaid interest is capitalised, while that in respect of the Tay Bridge is not. Repayment for the Forth Road Bridge is to be over 30 years while on the projected Erskine Bridge it is to be 20 years.
  We have all these anomalies and inconsistencies because we seek to treat a bridge such as the Forth Road Bridge quite differently from any motorway or trunk road because it happens to cross a stretch of water. I have never accepted that it should be so treated. I hope that the Treasury, in view of its obvious determination to solve the problems of the development areas, will regard the Forth Road Bridge as an essential part of the road network of Scotland and will give it the same treatment as it gives other projects in the development areas.
  5.22 p.m.
  Sir Douglas Glover: I congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), not only on the quite brilliant speech he made this afternoon in putting the Report before the House, but on the work he has done as Chairman of the Public Accounts Committee, on which I have had the privilege of serving for many years. It has always been

  1877
  an amicable relationship. The Chairman has never had to call me to order, contrary to what happens on some occasions in debates on the Floor of the House.
  My right hon. Friend is a superb chairman. He extracts from witnesses the maximum amount of information which is of tremendous value to his colleagues on the Committee. It must be something of an ordeal for a Government Department or organisation to be summoned before the Committee knowing that the first inquisitor will be my right hon. Friend.
  I am sorry that the hon. Member for Bebington (Mr. Brooks) has left the Chamber. I felt a wee bit jealous of his speech as it was very much the sort of think I wanted to say. I cannot devote too much of my time this year to the Report because, as many hon. Members will be aware, in March, April, May, June and part of July I was absent from the Committee. Therefore a great deal of its activities were achieved without my able, or unable, assistance. I am sorry if I put an additional strain on the Committee as it was necessary for its members to be more assiduous in attendance than otherwise might have been the case.
  What the hon. Member for Bebington said is very true. Even in the Public Accounts Committee I do not think it would do any harm to take a severe look at our procedures. The hon. Member said that the Committee has been in existence for 200 years. He also said that the Chamber on this occasion looked rather like a morgue. I wondered whether he thought that we were all corpses which hid been here for 200 years, but I pointed out to an hon. Friend that the Committee had not had the same membership all that time. The Committee has been in being for a very long time and perhaps we ought to think of some innovations, for instance, about the Swynnerton site.
  I do not want the Committee to get into the position of some other Select Committees which seem to spend a great deal of time travelling round the world, but it would not be a bad thing if on some occasions the Committee went, or sent one of its representatives, to look at a problem on the ground. I am thinking particularly of the case we discussed last
  1878
  year of the Post Office building in Durham. We all felt that we would have had a clearer view of the problem had we gone to see it or if we could have had official photographs of the area. It is difficult to appreciate some of the aspects of these problems simply from a description given in evidence.
  I hope that the hon. Member for Bebington will read my speech for I think that he was a little pessimistic in what he said about the workings of the Committee. I do not think he gave nearly enough appreciation to the amount of work done by the Comptroller and Auditor-General and his Department. It might be a good idea if some time as a Committee we inquire into the workings of the organisation of the Comptroller and Auditor-General's Department. It appears that the Department acts as an accountancy or audit branch, whereas, I agree with the hon. Member, there are problems which go wider than that. Perhaps the Department could be given responsibility for providing information such as the plan of the Swynnerton site for the use of the Committee and the responsibility of providing photographs of certain buildings and areas which would make the evidence we are to receive much more clear to the members of the Committee.
  I am often very critical of Government expenditure. I do not at all withdraw my criticism that we are running today with far too heavy a burden of bureaucracy. This is a great disadvantage for the nation. Yet we are dealing with a budget running into tens of thousands of millions of pounds, and we have a Comptroller and Auditor-General's Department with a staff, I believe, of about 600. My right hon. Friend might confirm that——
  Mr. Boyd-Carpenter: A little less.
  Sir D. Glover: That is the sort of figure. That staff is delving into all the great Departments of State. Then it provides a number of problems for our Committee of 14 to investigate during a year. It says a great deal for the calibre and attention to duty of the great mass of civil servants throughout the country that the cases thrown up are so moderate in size and I take the opportunity of paying tribute to them.

  1879
  One thing which I have found when working on the Committee is that heads of Departments in the Civil Service do not stay in their positions for a long enough time. We often find when evidence is being given that my right hon. Friend says "Sir Marmaduke", or "Sir Wilfred", or whoever it may be, "I know that you were not there when this dreadful thing happened, but can you tell us about it?" The person who was responsible can rarely be called over the coals for a failure of administration. I have thought for some time that if a case is bad the person who was the accounting officer at the time when the trouble arose should be called upon to give first-hand information about how the thing happened. If that procedure were adopted, it would do a great deal for the morale of the Civil Service.
  The problem is—and Fulton may have something to do with it—that the changes of responsibility in these great Departments happen at such a quick rate. A man will only just be seized of the problems of his Department when he is moved somewhere else and has to hand over to a colleague. We are never dealing with the man who was there when the problem with which we are concerned first arose.
  Mr. Dalyell: I have been following the hon. Gentleman's argument with interest. Is not the difficulty, very often, that the people whom the Public Accounts Committee really wants to see already have retired from the Civil Service, perhaps two or three years before?
  Sir D. Glover: I agree that that is one of the problems. But I do not think that any alteration of the Service will change that. The only way to alter it would be to alter the age of retirement. It is a problem which is faced by any system. However, it does not apply in all cases. A lot of those whom we would like to see are moved to other offices of State and are not left to deal with the problems which they have helped to create. This is very frustrating to the Public Accounts Committee.
  For a few minutes, I want to refer to some of the items discussed in the Report. The first of them is the Royal Ordnance Factory at Swynnerton. I am certain
  1880
  that, had it not been for the Public Accounts Committee, that would still be a more or less derelict site, and no action would have been taken. As a result of the matter coming before the Committee, the Departments responsible took some action. That shows, in that case alone, that the Departments concerned knew that we should demand action and began to get things moving.
  The section of the Report dealing with forestry is very disturbing. I was not present when the subject was debated, but it appears to be one where the idea is born that a certain policy will be good for the nation, it goes on rolling with no one reviewing it or checking on it enough, and, after a time, the whole situation has altered. It is clear that it is necessary for the whole of the Government's policy and expenditure on forestry to be reviewed. It may be that it is a very good investment for the nation, taking into account not only the wood grown in the forests but all the social and other benefits accruing to the nation. But it appears that it is not a very profitable venture from the Treasury's point of view. It may be that the accounting system of valuation is wrong. Trees are growing, and it may be that we are not writing up the assets sufficiently. It may be a great advantage to the nation, and I hope that that was what would come out in the Report. However, I think that we have disclosed enough in the Report to demand a deep and searching review into the whole subject.
  My final comment relates to what has been said already about false claims for personal relief from Income Tax. We have had a great many debates in the past two years about immigration. We have created the Race Relations Board and we have passed legislation in many other spheres. We have made it an offence for people to take any action which is discriminatory against anyone of another race. When we debated the Representation of the People Bill, I was able to say quite seriously to the Under-Secretary of State for the Home Department that, in considering minorities, he had better be careful to include them all and that, if he did not, he would be guilty of racial discrimination.
  We have a problem here. As people begin to understand that this kind of

  1881
  avoidance is taking place, it may create more ill-feeling and whip up more misunderstanding in racial terms than almost any other issue. It is obvious that the Inland Revenue cannot do any more. Therefore, it is up to the Government to take action to see that this evil stops. If they do not, this one chapter in the Report could do more damage to race relations than almost anything else.
  After all, one of the most common unthinking remarks of many people today is that people are coming here and enjoying the benefits of our Welfare State without contributing to it. When it becomes widely known that £20, £30 or £40 million in a sample packet is being fiddled away from the Inland Rvenue, it will create great feeling in the country. It is a matter of urgency for the Government to legislate about it very soon to make sure that tax allowances are paid only where they are controllable; that is, to dependants in the United Kingdom. I hope that the Chief Secretary will be able to offer some encouraging comments about that when he replies to the debate. Despite the fact that it is not the greatest amount of money which is being misapplied, for the future of the nation, it is probably the most important stone that we have turned over in the past 12 months.
  5.35 p.m.
  Mr. Tarn Dalyell: In most cases, I have given notice to the Departments concerned that I should be raising certain subjects. However, before the right hon. Member for Reigate (Sir J. Vaughan-Morgan) leaves us, and, as he has indicated that he is in a hurry, I want to follow him and the hon. Member for Ormskirk (Sir D. Glover) on the very important issues raised by them relating to false claims for personal relief from Income Tax.
  As I understood it, the right hon. Gentleman referred to his own Amendment, which reads:
  "From the evidence furnished to them, it is clear to Your Committee that tax avoidance in this scale cannot be dealt with by administrative action except at disproportionate cost in money and manpower. Indeed, even at disproportionate cost, it is apparent that verification of claims would be ineffective owing to the absence of the necessary basic records in
  1882
  certain overseas countries. Your Committee therefore recommend that urgent consideration be given to the alternative of legislation designed, for instance, to limit dependants' allowances to dependants residing in this country."
  That would be a very important Amendment.
  I understood the right hon. Gentleman to say that a number of the members of the Committee, one of whom is his hon. Friend and some of whom are mine, are perhaps minimising the seriousness of this matter. That is the gravamen of his charge. It strikes anyone who has read through the evidence that, if the right hon. Gentleman's Amendment had been carried, he would be penalising the innocent as well as the guilty. It occurs to me that the limited practical effect of his Amendment would be to create a situation where there was a sudden influx of dependants into the country. Had the Public Accounts Committee agreed with him, surely there would have been very practical difficulties in a sudden influx. I wanted to make that point because I know that the right hon. Gentleman has to go and, in the circumstances, it is only fair to give way to him.
  Sir J. Vaughan-Morgan: The hon. Gentleman exaggerates a little if he imagines that a Report of the Public Accounts Committee is studied so closely in India and Pakistan that its publication would immediately provoke a flow of dependants to this country. However, all that he has said makes no difference, in my view, to the case I was trying to put, that the matter cannot be altered except by legislation, and the House and the Committee ought to face that.
  Mr. Dalyell: The right hon. Gentleman will, perhaps, forgive me for thinking that the Report of the Public Accounts Committee is important, since the next subject, a very different one, namely, the increase in tolls on the Forth Road Bridge, had a dramatic and, in my view, deleterious effect. No one can doubt the effect which the Committee's Reports have, and I wonder whether the right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) would agree that they are unimportant. Although, heaven knows, the importance of the Committee's work may not be reflected by the attendance at the

  1883
  debate today, any Amendment which had been carried would be of some weight in this matter.
  Sir J. Vaughan-Morgan: The hon. Gentleman did not listen to what I said. I did not suggest that it was not important. I merely doubted his statement that such a recommendation would have provoked a flow of immigrants from India and Pakistan, since I doubt that they would ever read it.
  Mr. Dalyell: Perhaps it is a somewhat sterile argument, and I apologise if I misunderstood the right hon. Gentleman. None the less, I am sure that these things are noted in the Press and certainly could be made to appear as of considerable importance.
  I have given adequate notice to the Government Departments concerned that I wish to raise several topics. The first is the question of the Forth Road Bridge, the southern and financially productive end of which is in my constituency of West Lothian. Given that the terms of reference of the Public Accounts Committee required that it look at the problem simply in the context of the Forth Road Bridge Order, 1958, one can hardly challenge its concern at the level of tolls, the inadequacy of which was suspected by the Department at the outset has since been confirmed. Perhaps, as my hon. Friend the Member for Fife, West (Mr. William Hamilton) said, one could comment on the acceptance by the Department of an agreement which, according to the Public Accounts Committee, it regarded as inadequate in the first place to cover the assessed charges which the bridge would impose. What the Public Accounts Committee could not take into reckoning was that the Forth Road Bridge Order—here, it is no different from the Severn Road Bridge Order—is, perhaps, the most lopsided bargain since Esau sold his birthright for a mess of potage.
  How did it come about that the then Secretary of State for Scotland, John Maclay, for whom many of us have a high regard, whatever our politics, accepted such a bargain? Perhaps in questioning this I am taking advantage of hindsight, and being unfair, because the climate of the time was different and the bridge was a priority. But, granted the
  1884
  road programmes of the 1960s, it is certain that, if the bridge had not been included in the schedule of the early 1960s, it would, as part of the highway, have been included in the schedule of the late 1960s.
  The nub of the 1958 agreement was, as I understand it, and as my hon. Friend the Member for Fife, West, understands it, "You will get your bridge more quickly if you have tolls", and speed, rather than the eventual carrying out of the project, was what determined the decisions of the men of the late 1950s. That was certainly the basis on which the local authorities agreed.
  Therefore, in so far as we should have toils at all, they should represent payment of the interest between the time when the bridge was opened in September 1964 and the time when a bridge in the scheduled ordinary programme would have been completed had events taken their course. This sum should come approximately to payment for five years' use of the bridge. On the other hand, it is possible to argue that, at a time of rising costs, the building of the bridge in the early 1960s rather than the late 1960s might have saved the Exchequer some millions of pounds.
  The real issue, an issue upon which the Public Accounts Committee, because of its terms of reference, could not reflect, is whether the collection of tolls is a sane way of raising revenue in a modern State. Of course, it is not, unless one has unskilled manpower, as in Italy, or enormous stretches of turnpikes without turnoffs, as in the United States. In fully employed Germany, tolls went out with the mediaeval Rhine barons around Königsberg and St. Goar. We should have the same attitude towards tolls in this country.
  The Chief Secretary may recall that in an Answer of 26th November the Financial Secretary told me that the average cost of collection of Inland Revenue taxes was £13,800 per million, or 1·38 per cent., and for the Selective Employment Tax the cost is much lower, at 0·385 per cent. The question I put now to my right hon. Friend, of which I have given his office notice is: what is the cost of raising for the Revenue £1 million from tolls on a bridge such as the Forth or the Severn Bridge? My submission is that it is a much more expensive way of raising

  1885
  revenue in terms both of manpower and resources than any other way which the State has for raising revenue. Perhaps my right hon. Friend will be able to put a figure to it.
  The present tolls on the Forth crossing are an irritant causing annoyance out of all proportion to the revenue gained, and increased tolls would be more harmful still. In this connection, it is legitimate to turn to Question No. 2461, asked by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon):
  "May I take it that no studies of elasticity of demand were undertaken on this matter, also?"—
  to which the answer was to the effect that the working party had considered it.
  I have news for the working party, if may put it in that way. If tolls were to go up, then, according to my constituents and many of those who live in the constituencies of my hon. Friends the Members for Fife, West, and Dunferline Burghs (Mr. Adam Hunter), a great many people would cease to use the bridge or would go round by Kincardine.
  In a sense, it is a justified cri-de-coeur that those who have got into the way of life of commuting across the bridge either to work at Fife or from Fife to work in Edinburgh or The Lothians would be hit in their pattern of employment if there were any changes. I have letters from school teachers and others who live south of the Forth and who now have posts of responsibility north of the Forth and who, if tolls went up, would have to search for another job. If that is true of school teachers, it is true of a number of other people, too.
  Sir John Gilmour: I appreciate that no one wants to pay increased tolls, but is it not fair to say that those who are travelling across at the present level of tolls are making a considerable monetary saving on what they used to pay for a ferry and are saving immeasurably in time?
  Mr. Dalyell: Is this not also true of those who live close to any recently constructed motorway? One comes to the point, in answer to the hon. Member for Fife, East (Sir J. Gilmour), when burdens and increased charges will not increase the number of vehicles crossing the bridge, but will encourage them to by-pass it and to reduce its usefulness, just as, in the
  1886
  same way, better communications across land will make mobility easier. This is the sort of development that we welcome. I ask the hon. Gentleman: is this situation, in which we need mobility, consistent with the Government's regional economic policy? Is there consistency here?
  That is a question to which the Chief Secretary, who has done so much for areas like mine, and to whom I have reason to be particularly grateful, especially for his help over the B.M.C. works at Bathgate, should address himself. How can the granting of Government assistance to attract new industries to the East of Scotland be reconciled with the imposition of tolls on the many arterial roadways? Arterial roadways are constructed to make mobility more possible. Why should those who have to travel over water rather than over land suffer in this respect? This is the kind of question to which the hon. Member for Fife, East ought to address himself.
  I have also given notice to the Chief Secretary of another question, and it is: why has the situation been made worse by charging the cost of the approach roads to this particular bridge? When he comes to answer my hon. Friend the Member for Fife, West and myself, will he break down the interest paid on the approach roads and the interest paid on the bridge proper? It clearly is not right that the cost of the approach roads should be included in the total cost. What is the basis of the anomaly that a road which has to be carried across water is treated differently from ordinary trunk roads, or indeed a bridge over land?
  For example, the estimated cost of the elevated section of the M.4 between Chiswick and Boscombe Manor alone is £7,840,000. This includes work on the approach roads, and the estimated cost of the approach roads, and the estimated cost of acquisition of land not yet completed, but excludes the cost of land at the Chiswick roundabout and the flyover. It is a question of what is sauce for the goose is sauce for the gander. If the policy is to charge a toll, there shuld be a charge on the Chiswick fly-over and on many other of the modern constructions that we all welcome.
  Good luck to those who signed the Public Accounts Committee's Report, my hon. Friend the Member for Heywood and Royton (Mr. Barnett), my hon.

  1887
  Friend the Member for Ashton-under-Lyne and my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) when they get the Manchester-Sheffield trans-Pennine motorway, for which bridges and cuttings alone will outdo the Forth crossing. I imagine that my hon. Friends have little desire that their constituents should pay tolls. These capital projects, such as the trans-Pennine motorway, are exceedingly expensive, out of all proportion to any construction costs that this country has known in communications.
  There has to be a consistent policy. It is either one thing or the other. There is really no difference between difficult mountain roads and crossings of estuaries, such as the Forth and the Tay. I do not wish to be personal, because I sat under the chairmanship of the right hon. Member for Kingston-upon-Thames, but I shall take kindlier to the recommendations of the P.A.C. on the Forth tolls, and the proposal that they should be inceased, the day that we hear that the right hon. Member is holding public meetings in his constituency advocating to the people of Kingston-upon-Thames that they pay 10 cents or "a bob" a time on the Kingston by-pass.
  Is there any qualitative difference between tolls on the Forth Road Bridge and tolls on the Kingston by-pass? I will willingly give way to the right hon. Gentleman if he feels he would like to focus his mind on this important logical matter.
  Mr. Boyd-Carpenter: If the hon. Gentleman invites me I must respond. First of all, I would invite his attention to the fact that those who live in the Royal Borough of Kingston upon Thames are the least likely of our fellow citizens to wish to by-pass it. They will, on the contrary be using the roads into it. Secondly, if the hon. Gentleman can find administrative methods of collecting tolls on the immense variety of traffic which enters the by-pass, not by one road, not at just two points at either end, but at innumerable points along it, then he is an even greater administrator than I think he is.
  Mr. Dalyell: One can always rely on the right hon. Gentleman's wit. What he says about turn-offs is true, and that is why I am against tolls on motorways as
  1888
  such—because there are to many exits end entrances. But just because ours is over water, why should we be taken advantage of? This is the nub of the argument. Surely, in our heart of hearts, we would really all agree that this policy was ill-conceived at the beginning and that it ought to be changed in the way suggested by my hon. Friend the Member for Fife, West.
  Any Member of Parliament who advocates either increased public expenditure for a pet project or the loss of revenue to the Treasury through taxes should specify precisely where he would make up the alternative revenue. That seems to be a very proper condition for making speeches of this sort. I would point out that the Government have poured money into Scottish industry. Much of it has been well spent, some of it has not. Perhaps the figures speak for them-Selves. In 1963, the Government brought in £7 million of identifiable financial assistance, excluding agriculture and fishing. In 1965, it was £8 million and by 1967 it was £79 million—a tenfold increase.
  There is no doubt that my constituents, and many others, have benefited vastly from this Government's spending. The fact is that, whereas five years ago, there was serious unemployment in our area, the situation is greatly improved today. The Secretary of State for Employment and Productivity was able to give the most heartening figures 10 days ago on the youth employment situation in Scotland. All this is to the good, but I ask the Chief Secretary whether the time has not come to change the appliance of help to the development areas, partly away from industry and into infrastructure. I would have thought that the abolition of tolls would have been an example of how infrastructure can be improved in the East of Scotland development area.
  I do not want to digress, but to close this argument a little I think that the policy of giving money to industry is one which the P.A.C. could look at in its next session with a considerable degree of scrutiny. Many Scottish managements we are told should he put into more effort in education and training of managers. This is from a report by a Working Party set up by the British Institute of Management and the Confederation of British Industry. Facilities

  1889
  for management education and training offered by Scottish universities and technical colleges are being under-used by Scottish managers, says the report.
  It is in the light of this kind of evidence that perhaps there should be some scrutiny into the way in which public funds are used when they are put directly into private industry. I ask the question whether projects such as "detolling" our bridges and improving the quality of our airports are not better ways of helping the East of Scotland than by giving money direct, and sometimes almost regardless, to private industry?
  Finally, on this point I wish to raise a slightly different question. In Question 2497, reference is made to the revenue from commercial vehicles. It tells us that the information was given to the Committee but it was not printed. Perhaps because I am no longer a member of the Committee I understand the situation, but it seems to me that this could be an example of the unnecessary secrecy which too often dogs our public documents. Last month, when my right hon. Friend the Prime Minister was reviewing the Government's attitude to the Fulton Committee's Report, I asked him:
  "Is my right hon. Friend prepared to say anything about getting rid of unnecessary secrecy or of inquiring into unnecessary secrecy both in policy-making and in administration?"
  My right hon. Friend replied:
  "I have studied reports on this question. That might be the point which my hon. Friend might make some suggestions on today, but it is one which I would rather leave to my right hon. Friend to take up, though as yet I do not think that she will have much more to say on it than I have just said."—[OFFICIAL REPORT. 21st November, 1968; Vol. 773, c. 1556.]
  My right hon. Friend was referring of course to my right hon. Friend the Paymaster-General. Here, I thought, was a minor, perhaps rather trivial, but, nevertheless, still an example of the sort of information that would be interesting to those studying these affairs, which I can see no conceivable reason for not giving.
  Mr. Boyd-Carpenter: I am relying on my memory concerning the precise circumstances involving the information. The hon. Gentleman himself has indicated the probable reason why it does not appear in the Report. As he knows, some
  1890
  material is not printed on either security or commercial grounds. The Committee has submitted to it a great deal of material relating to points not of the first importance, and if we were to print the lot this enormous volume would be of excessive size. I would not like to say without notice—I make no complaint that the hon. Gentleman has not given me notice—why the decision was taken to which the hon. Gentleman refers, but I would guess that it was on de minimis rather than on security grounds that we did not include it.
  Mr. Dalyell: In general terms, the problem of secrecy is better dealt with by the P.A.C. than by another Committee of which I have experience in that P.A.C. documents which are secret are kept in the room available to right hon. and hon. Members of the Committee, but are otherwise under lock and key. Members of the Committee are quite clear as to what is secret and what is not. It is one of the Committee's great virtues. At the same time, from my recollection of the P.A.C., is it not the case in general that a good deal more information could be made available to those who study the reports than is made at present? Perhaps the Committee as a whole and the Comptroller and Audtor-General are a little over sensitive to problems of commercial secrecy.
  The second feature I wish to raise is the case of the approved schools. There may seem, on superficial reading, all the evidence to justify the rather black conclusions in paragraph 35 of the Committee's Report. The Scottish Education Department is accused of having shown a lack of responsibility in the handling of public funds. Coming from the P.A.C., this is indeed a damaging charge.
  Before I start on a defence, or what seems to me a defence, of the Department, I had better admit at once that, in certain respects, there was clearly fault. The witness was unwise not to appear with detailed figures of the sums involved at each school on which the Comptroller and Auditor General had reported, and, as my hon. Friend the Member for Bebington (Mr. Brooks) has suggested, any money held could have been placed somewhere where it would have attracted interest.

  1891
  But having taken these factors into account, I reflected that this summer I was arraigned before another Select Committee of the House—the Committee of Privileges. I know better than most hon. Members how difficult it is to sit in the witnesses chair in Room 16 and do one's case justice. It is too easy to be made to look stupid and negligent, arrogant or a concealer of the truth by fastidious, sometimes pedantic and sometimes irrelevant questions put by members of the Committee to whom one cannot put questions in return. Indeed, it is salutary for hon. Members sometimes to take some of their own medicine. I thus have a fellow feeling for those whose fault, or what appears to be a fault, is that they have shown too much zeal.
  I attended the debate on the Fulton Report and I think that right hon. and hon. Members must think a bit straight and make up their minds. Do we or do we not want the Civil Service to show more initiative? In the case of the approved schools, there is no indication at any time that the Scottish Education Department or any of the parties involved have been dishonest. Furthermore, there is no indication in the Report of the Comptroller and Auditor-General that, in the main area of expenditure—control of school building—there is any lack of proper control.
  I know that it is part of the philosophy of the P.A.C. that no sum is too small to be considered, but I think that perhaps one of the shortcomings of a report of this kind is that it does not put the whole picture into context and there is no reference to what many of us would conceive to be the considerable achievements in cost control by the Department. Reading the Report, one would not get a picture in any kind of totality. This detracts from the value of the work of the P.A.C.
  Having made generalisations, I must now be specific. According to Question 3878, the Chairman asked the witness:
  "I think you said in some cases this representation by the managers was made orally?"
  The witness, Mr. N. W. Graham, replied, "Yes". The Chairman then asked, "In how many cases?" Mr. Graham replied:
  "I am not sure that I have the precise number of the cases, but it was certainly in a considerable number of cases oral."
  1892
  Question 3880 was:
  "But do not your Department's own regulations provide that money is only to be issued in response to a written request?"
  Mr. Graham replied:
  "That is so, but these bodies, as I have said, are very lightly manned; they have no full-time staff on this side and we find it in practice extremely difficult to get written information from them."
  I put it to Ministers and to the House. How often do we, in our business or professional lives, carry out our business by telephone? Surely it is very often indeed. Before the P.A.C. jumps to this kind of conclusion, should there not be some reflection on how human beings work in their day-to-day relationships? I want to give other examples. Question 3883 was:
  "Have you taken any disciplinary action in respect of the staff concerned for the breach of your own regulation?"
  Mr. Graham replied:
  "No, Sir, the matter has been brought to their attention but they have extreme difficulties in working with these bodies which are quite different from the normal run of bodies, local authorities and so on, with which we work. They are just a group of voluntary people with someone who is designated as the official correspondent who may be part-time, and I think even in some cases acting in a voluntary capacity."
  In my view, that is a very reasonable answer. Do we, as the House of Commons, want voluntary bodies in this field? If we do, it seems that this kind of criticism may be a bit harsh and wide of the mark. There is this contrast, which seems to be important, between the realism of how Departments behave as human beings and the fastidiousness often demanded by the P.A.C., and here I am not criticising current members, because when I was on it, I was as bad as anyone.
  I have two more examples. In Question 3884, the Chairman asked:
  "I appreciate perhaps as well as you do the problems of voluntary bodies with small staffs. My question, however, relates not to voluntary bodies but to your body of professional staff who you have told me acted contrary to your own regulations."
  The reply was:
  "I appreciate that, but my officers are I think very much influenced by the fact that we are under extreme pressure to find places in these schools and they feel an obligation to do what they can to keep these schools going."

  1893
  Granted that that is an honest reply, and I am sure that it is, the question is whether we want more civil servants, and we have to make up our minds on this issue. It we are to be as exacting as the questioning indicates that the right hon. Gentleman would like us to be, we have to have a bigger bureaucracy—and I do not like the term, but I use it—and not a smaller bureaucracy.
  In Question 3885 he was asked:
  "Do they also feel an obligation to carry out their instructions from you?"
  The reply was:
  "I hope they do, Sir, but I think in this case they may have regarded the strict letter of the rules as less important than the spirit in trying to keep these bodies afloat."
  That brings us back to the Fulton Commission. Do we want civil servants sometimes to stretch the rules, presumably acting in good faith—and no one is saying that the members of the Scottish Education Department are not acting in good faith? Do we want them to behave as many of us would in private firms, or in our professional lives? As I understand it, there is no indication of dishonesty or of fixing, but there is an indication of busy men trying to do their best in difficult circumstances, and it seems to me that the Public Accounts Committee has been unduly harsh in this respect.
  Mr. Boyd-Carpenter: I draw the hon. Gentleman's attention to two points. First, I do not think that he appreciated to begin with that these criticisms related to the staff of the Scottish Education Department and not to the voluntary bodies with whom they were dealing. Secondly, while there is a great deal to be said for the hon. Gentleman's view as to flexibility and ease in staffing, surely when the expenditure of public money is involved, if regulations are made, they should be honoured and obeyed.
  There may well be a case for reviewing the regulations, but the criticism made of the accounting officer in question is that he made regulations, did not suggest their alteration, but appeared to have allowed them to be broken. I am sure that the hon. Gentleman will appreciate that when public money is involved. that is the worst of all worlds, and that is why the criticism was, I admit, very severe.
  Mr. Dalyell: I am forced to agree with the right hon. Gentleman that the regulations themselves should have been reviewed. Perhaps I can put that view in the form of a question to my hon. Friend the Under-Secretary of State for Scotland, who has done me the courtesy of attending the debate, and ask him, in the light of what the P.A.C. has said, what changes have been made in his Department, particularly in the reviewing of the regulations.
  I also have to thank my hon. Friend for being here because I should like to raise the question of the Hamilton College, a matter of which I gave the Department notice. I am a little surprised that the hon. Member for Hamilton (Mrs. Ewing) is not here, because this is in her constituency and it must be a matter of some importance to her. As I understand it from both the Report and the evidence, the main burden of criticism by the Public Accounts Committee is that the excessive possible accommodation was provided before it was needed. In the view of the Committee, this constituted a waste of public money.
  It is normally the reverse complaint which is made when we complain when we see new schools or new training colleges going up and two or three years later find that there is no accommodation for those who would like to use them, and a vast expenditure is incurred by the contractor having to go back to the site and the public is put to extra expense. If there were fault here, I would have thought that it was fault in a good and not a bad direction, certainly not as bad as the chopping and changing which in the long term is the result of under-provision.
  I ask, not impertinently, I hope, because I have too much respect for the members of the Public Accounts Committee for that, whether the Committee and the C.A.G. in this context took account, or had any notion, of the costs of a contractor on a big job like this going on site, coming off and then going back again, which seems to be what the Committee is asking the Scottish Education Department to cause contractors to do. I therefore ask the Chief Secretary whether he will be prepared, granted that there was some miscalculation, to say that the fault at Hamilton was very much

  1895
  slighter than the P.A.C. would have us believe.
  The Public Accounts Committee seems to have a special nose for my constituency, because it turned its attention not only to the Forth Road Bridge, but also to Livingstone New Town. It was I who as a member of the Public Accounts Committee first drew attention, in somewhat unorthodox style, to the problems of Livingstone New Town and for that I have absolutely no regrets, because it was extremely important that the P.A.C. should examine the problems of new towns and the relationships of contractors, especially as new towns are not subject to local authorities and are therefore not subject to local opposition, nor subject, as are most towns, urban district councils and other local authorities, to criticism.
  I am glad that the Government have accepted the recommendation that the Ministry of Housing and Local Government should study the Scottish practice in the contract provisions for liquidated damages to see whether they can be applied with advantage in England. I should like the Chief Secretary to say what was the exact result of the investigation of the extent to which the liquidated damages clauses in building contracts are implemented and to tell us what is the Government's attitude to whether there are valid grounds for not implementing liquidated damages clauses.
  Much has been said about the Forestry Commission and it is fair to ask whether the Commission's non-commercial activities, the social benefits which have yet to be quantified, justify the heavy expenditure involved. I am not at all certain that expenditure of this kind can be quantified in any meaningful form of specific calculus. Here again, there were questions put by the right hon. Gentleman the Member for Reigate and me, and perhaps, when he winds up, the Chief Secretary will be able to say something about it.
  On the question of the royalties on nuclear power stations, the Treasury minute says:
  "It is arguable that this left room for the Government to determine a rate of royalty significantly higher than what was actually fixed, while still leaving to the Generating
  1896
  Boards a clear commercial advantage from adopting the A.G.R.; but this must be a matter of judgment. However, the Government agree that the Committee's recommendation should be borne in mind when further decisions are taken on royalties on nuclear power stations."
  What is the Government's attitude to this?
  I would have thought that this subject might have been better examined by the Select Committee on Science and Technology which, after all, is steeped in the problems of the nuclear power industry to a degree that the members of the Public Accounts Committee, however able, could not possibly be.
  On the question of the "Ark Royal". the Committee says that
  "Your Committee, while not wishing to question the strategic arguments advanced in justification for continuing the refit, are nevertheless very concerned that a decision to spend some £30 million may result in no more than two years' further operational life for the carrier."
  Perhaps the Chief Secretary could comment on the findings of the Public Accounts Committee on the Argylls—[HON. MEMBERS: "The what?"]—A Freudian slip I mean, the "Ark Royal" refit. All I can say is that this is what comes of valiantly following the Patronage Secretary's instructions to keep going for a decent time. Perhaps I can be given a hint from the Front Bench when my hon. Friend wants me to come to an end.
  Meantime, the question I wish to raise of which I gave notice probably 10 minutes ago, and of which I wish to give notice, concerns American aircraft. The question can be put very crisply. Is it really a sensible policy to adapt spares to an aircraft built for different reasons in another country? Some of us for a long time have had very grave doubts whether we can fit other engines or avionics into airframes for which different equipment was designed and intended. I am not suggesting that the Phantom and the Rolls-Royce Spey engine present anything like the problem of the Starfighter. Nevertheless, in the minds of all of us who are interested in these technical matters, there must be some doubts about this in relation both to cost and safety.
  Mercifuly, what I have to say finally is cut short by my agreeing, as other hon. Members have done, with much of what has been said by my hon. Friend

  1897
  the Member for Bebington. However, I should like to offer a reflection on the workings_ of the Public Accounts Committee. I take the work of the Committee extremely seriously, much more seriously than most other institutions in Britain. I think that it is a little of a reflection on the Committee that I should have been called so early in this debate, without keeping others out, and allowed to go on so long. It is a little of a reflection, also, on the House of Commons and, indeed, the malfunctioning of the House, because this is the day, surely, when, above all days, we can exercise our function of scrutiny and it really does reflect on Members of Parliament that they have become far too interested in being critical in general and not interested enough in being critical in particular.
  I say a word of acknowledgment to the Chief Secretary who, like myself, was here at 4.30 this morning and at 4.30 yesterday morning, his time being more arduous than mine, but it strikes me that when civil servants go to enormous trouble to prepare evidence for the Committee, and when a great many other people go to enormous trouble, particularly witnesses, it is something of an insult to them by politicians that all this is not taken a great deal more seriously.
  I really do feel, if I may put it this way, that it would have been much healthier if I had been kept waiting, by hon. Members desperately wishing to speak, till ten minutes to nine tonight, because that would have reflected hon. Members' interest in scrutiny. The unfortunate thing is that they are not interested. The good temper of the right hon. Gentleman the Member for Kingston-upon-Thames is well known, but I wonder what his feelings are—he will not reveal them to the House of Commons—that, after all the work 'he and other members of the Committee, including my hon. Friend the Member for Bebington, have done, there are so few of their colleagues here who are at all interested in all the work which has gone before.
  I would have thought that this really reflects itself in public criticism of Parliament, because if we were seen to be a hit more concerned with this one of our functions—not the most important function but one of the important functions—of scrutiny, we would be taken a little more seriously by industry and a great many other important outside interests.
  1898
  This brings we to one of my conclusions, that although there is the difficulty about side-lining—which I do not intend to go into—nevertheless, I would like to see the Public Accounts Committee, before most other Committees and before the House itself, televised. This may send a shudder down the spine of the right hon. Member for Kingston-upon-Thames, but I think that it would be good for democracy to see the right hon. Gentleman, and my hon. Friend the Member for Heywood and Royton and my hon. Friend the Member for Bebington, certainly my hon. Friend the Member for Fife. West cross-questioning civil servants.
  Both parties would come out of it very well, I think, and it would be good for Parliament and, indeed, good for the civil servants. Nothing would put up their reputation higher than to see these extremely competent heads of Departments actually answering in a logical way critical questions which they are asked. To the television companies I would say that this would be excellent television, rather better than the drooling debates that might be televised from the Floor of the House of Commons.
  One other thing, the whole effect which the Public Accounts Committee has on industrial decision-making in relation to Government Departments—decision-making as a whole in relation to Government Departments and their complex relations with industry. As the member of the Public Accounts Committee who first suggested that Sebastian de Ferranti, an industrialist, should be brought before the Public Accounts Committee, I am now, in retrospect, not very proud of that particular action, because whereas Ferranti's were definitely at fault, in that, it is alleged, they did not "come clean" about various transactions which they had with the Government, nevertheless there is a very real problem, and I can see it now that, perhaps, I am wiser than I was, when industry says, "If we are to have to face the kind of situation which faced Ferranti and Bristol Siddeley, can we be sure of ever making a high profit? And if we are not ever to make 'a killing' have you not got to compensate us for all the failures?" Therefore, the whole relationship of the Public Accounts Committee and of the Government with industry is something which would repay

  1899
  a good deal of study. I am sure that out of Fulton there will come a new atmosphere, a new ethos, in which the Civil Service, and particularly the technical Departments of the Civil Service, will feel much freer than hitherto to use their initiative.
  The hon. Gentleman the Member for Guildford (Mr. David Howell) made an extremely interesting speech during the Fulton debate, in which he said:
  "I believe—I hope I am not being too depressing about the effort which has gone into the Fulton Report—that we will make little progress in administrative reform and in creating an efficient bureaucracy until the Treasury abandons its detailed control in favour of more modern methods."—[OFFICIAL REPORT, 21st November. 1968; Vol. 773, c. 1633.]
  If the Treasury is to accept changes, and perhaps changes in favour of less detailed control, less concerned with Gladstonian candle ends, then the corollary is that we as Members of Parliament must give different terms of reference to the Public Accounts Committee.
  Having spoken for far too long, for which I apologise, simply to cover our Parliamentary interests, which it was possible to do without preventing other hon. Members from speaking. I thank the House for its attention and hope that by next year some thought will have been given to the changes in the operation of this extremely important Committee.
  6.30 p.m.
  Mr. Jasper More: I, too, should like to congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) on the excellent Report and on his speech introducing it to the House. I apologise, as others have done, to the Chief Secretary for not being able to be here to listen to his reply. I was interested and pleased to see the hon. Member for West Lothian (Mr. Dalyell), in his new role as Whip's delight, no doubt performing an important function for the House. I thank him, too, for his kind service to me for as far as possible emptying the Chamber, since what I have to say is unsuitable for a wide audience and will, I hope, be treated as a confidential chat to my right hon. Friend the Chairman of the Public Accounts Committee and to the Chief Secretary.
  1900
  It is curious how the debate on this very extensive volume, worth every penny of the £3 16s. which my right hon. Friend said is its selling price, has focussed itself on the comparatively small section which relates to the Forestry Commission. It is on that topic that I wish to make a few halting observations. The Report has made fascinating reading. Paragraph 146 of the conclusions contains this remarkable statement regarding the accounts which are apparently being considered:
  "… and their value as a measure of the Commission's efficiency and commercial success is therefore limited."
  That is one of the greatest under-statement of the second half of the 20th century. There is an almost equally remarkable sentence immediately following:
  "Your Committee … are of the opinion that the losses … indicate the need for consideration whether the Commission's non-commercial activities, the social benefits of which have yet to be quantified, justify the heavy expenditure involved."
  On reading some of the exchanges which are recorded in the main body of the Report, one enters a world of enchantment, and it is sometimes difficult to decide which are the more delightful, the questions asked or the answers given.
  My favourite question is one addressed by my hon. Friend the Member for Carlton (Mr. Holland) to a Forestry Commission witness:
  "… can you tell me what is the purpose of growing timber by the Forestry Commission?—We do attempt to grow it for profit but we have these constraints on us."
  When he was asked to elaborate on that, the witness said that there were Ministerial directives. Further probing produced the answer that land use came into it. My hon. Friend was not quite clear about land use, as I am not myself. This was explained as being:
  … the concept of practising multiple land use, improvement of agriculture, soil conservation, all these things."
  After further probing, a new concept was introduced in the next reply, the problem of the saving of imports. This throws an entirely new light on the activities of the Forestry Commission. Earlier, the Report mentions the historical origins which have already been referred to, that is to say, the strategic reserves which after the war were thought should be established in this country.

  1901
  I intervene with trepidation in the debate not having been a member of the Public Accounts Committee. I am not sure of the procedures, but reading between the lines of the volume, it appears to me that, although only one witness is named on page 322 as being under examination, he was accompanied by others, some from his own Department, and some from the Treasury, breathing I hope not too closely down his neck. The answer to Question 2909 is given by a Treasury representative. The first Treasury horse came up to the fence but shied and eventually refused it. It was left to the second Treasury horse to take the fence, which he did in this way, in words which have an enchantment which one did not imagine to exist outside the Forsyte Saga. He said:
  "The policy that we have agreed with the Commission is that one would normally expect the return of 5 per cent. … "
  But that apparently does not apply to Scotland. My hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan), who was putting the question which provoked this answer, asked, not unreasonably:
  "A return of 5 per cent. on what?—Total capital cost"
  The next question was:
  "When do you expect to achieve that return?—This is a return at the end of the 60-year period of the planting."
  That is an ambiguous answer on which I may wish to comment as I proceed.
  The main factor which emerged in the opening exchanges was that the Forestry Commission is now apparently dominated by what are called sociological objectives. I find difficulty in debates in the House in understanding these long words. I go to the dictionary and find that "sociological" means:
  "of or connected with the science or study of the origin, history and constitution of human society."
  As applied to trees this definition seems to postulate some rather highbrow trees among our Forestry Commission plantations. I say confidentially to my small audience that forestry is a special thing in our lives. There are two special diseases which are exclusive to forestry, one affecting the growers and one affect-
  1902
  ing forestry accountants. A person must be a little queer to plant trees at all. I do it myself, so I am speaking from experience. When such a person sees a piece of land not being used, or overgrown with brambles and bracken, something inside him says, "Had we not better clear those and do something with the land?" Very often if the land is hilly or rocky the answer is to plant trees, so trees are planted.
  Almost as strange is the disease which overcomes accountants when confronted with forestry. Their minds move upwards in the realms of profit and loss and they have to go into the ground evaluation of the financial result of the enterprise. Some members of the Committee who have spoken have become quite angry about this and have felt that the whole of the operation of the Forestry Commission has been quite unsuitable and not within the rules which self-respecting accountants would expect.
  In my own limited experience, people seeing me engaged in planting trees have asked, "Will this make a profit?" It is quite easy to answer that. One answers it by saying, "If you, by your will, appoint someone on 1st January, 2030, to meet someone appointed by me in my will under the clock at Waterloo Station, assuming that it still exists, and you define to me 'profit', you say whether, apart from the sociological features involved, profit includes any estimate of the capital appreciation or otherwise of the land planted and any estimate of the profit which might have been made from the land by putting it to an alternative use, the answer can be given easily. There is no difficulty about it."
  The Forestry Commission is rather more courageous. It works out these matters. It has to take refuge—and one cannot blame it for that—in certain formulae. As always, it gets into these technical terms. The two technical terms which seem to mesmerise the Commission are, first, plantations information and, second, plantations with expectation value. A remarkable line is drawn between the two. One speaks of plantations which have not yet been thinned and of plantations which are already in the thinning period.
  Then one comes back to the remarkable statement in Question 2912 about

  1903
  the 60-year period, and the following Question reads:
  "So really the costing should be done by the estates rather than in total, should it not?"
  The ambiguity of this is not making it clear whether the account is to be presented in general at the end of 60 years, which will be 1978, or at the end of the growing period of each separate parcel. All this postulates that, in any true calculations, these dates and facts must be known.
  That is another very odd feature of forestry. It is very unwise to rely on such matter as records, files, facts and figures. It is much better to rely on oral tradition and local knowledge, and to use names which are easily recognisable. It is important to know the date of planting, and what we do in oar little property is to give each planting a distinctive name. For example, the area that we planted in 1957 is known as Macmillan Wood. In 1963, using a horrible pun and a gross mispronunciation. we replanted the Home Covert. Owing to the present financial stringencies, we have not been able to manage a Wilson Wood, but we are saving up for the great celebration, when in 1970 we shall replant an area which has long needed it and which, fortunately, is known as the Heath Plantation. That is the way to do it, because the names and dates can be easily remembered and firmly anchored in people's minds.
  The moral of all this is that forestry and forestry accounting, although they have always been treated in terms of three dimensions, are really four-dimensional. Forestry cannot be usefully evaluated unless one considers the fourth element of lime. With great respect to my right hon. Friend the Chairman of the Public Accounts Committee and to the Treasury, we should not be considering the profitability of the forestry exercise but the profitability of the Public Accounts Committee exercise.
  The only real rules that apply to timber growing are fairly simple ones which are rather remote from public accounting. One is that good land in terms of timber produces a better result than bad land. Another is that all trees, if they are not felled or blown down, ultimately die. A third one which is nearer the accounting question is that the way to make money
  1904
  out of forestry is to cut down trees and sell them. A fourth is that the way to lose money on forestry is to plant trees without having any to cut down and sell. Anyone who abides by those four rules cannot go far wrong.
  The logic is that one must shed reason, policy or consideration of accounts and rely on what really matters, namely, instinct, tradition, emotion and dedication. Therefore, I suggest to my right hon. Friend that, when the Public Accounts Committee next considers this matter, it should be divided into two parts. Each half of the Committee should go to opposite ends of the Committee Corridor, one into Room 1 and the other into Room 18. One half should deal only with the side of the Forestry Commission which does the planting. It should work out costs, compare them with the area planted, and see whether it has been done economically and is a worthwhile operation. The other half of the Committee should consider the fellings, deciding whether the right prices have been obtained and whether the return from the area in question is adequate. It is important that never the twain should be allowed to meet and never should the two sides of the account be compared.
  There is one other alternative, though I hesitate to suggest it while the present Government are in office. This enterprise seems inevitably to involve the taxpayer, for a limited period at any rate, in considerable loss. In my view, it should gently be sold off to private enterprise, where I think a willing buyer would be found, leaving to the Forestry Commission what surely are the proper spheres of governmental activity, namely control and advice.
  6.45 p.m.
  Mr. Ian Lloyd: I hope that my hon. Friend the Member for Ludlow (Mr. More) will forgive me if I do not follow him too closely into the aesthetic aspects of tree growing and planting, except to say that, having seen the giant redwoods in California, it is clear to me that in the millenium of planting there were neither accountants not politicians interfering at that time.
  I, too, want to apologise to the Chief Secretary for the fact that I shall not be

  1905
  here when he replies to the debate. Indeed, I had not expected to participate in it and, therefore, I share profoundly the views expressed by the hon. Member for West Lothian (Mr. Dalyell) about the functions of hon. Members of the House in scrutinising public expenditure. On one of the most important occasions in the House, it is virtually empty. One could explore at great length some of the reasons why. One that I would suggest is that hon. Members are under such continuous, growing and relentless pressure to be everywhere except at Westminster, both when the House is sitting and when it is not, that perhaps some search may be made beneath the pressure for the reason why Parliament is failing to discharge its appropriate functions as rigorously and effectively as it should.
  Mr. Dalyell: Those hon. Members who sweat their guts out on Select Committees do not get any recognition as such. After all, an hon. Member cannot go to his constituents and say, "I have served well as a member of the Public Accounts Committee", because the average constituent would merely reply, "What is that?". Surely that is an extra argument for public education by the televising of our Committees.
  Mr. Lloyd: I share that view, and it is largely our fault that the point is not made. If extremely interesting cross-examinations of this kind were to appear on television, following the performances and records of those in the United States, some contribution would be made to general public understanding of what it is that a Member of Parliament is supposed to do.
  I turn now to the specific issue of the Spey Phantom. As those who are not familiar with the aircraft industry might suspect, it is not a ghost on a Scottish river, nor even a skeleton in the Government's cupboard. It would be more aptly described as a skeleton in the Government's graveyard. It is the micro-economic case of public expenditure par excellence. We hear the macroeconomic debate almost ad nauseam. We all know the phrases and the arguments which are used. The ball is held effectively in the air and sometimes it is interesting and exciting, but not always is it altogether relevant.
  1906
  We are always challenging each other to deal with specific cases of public expenditure. I suggest that here is a specific case which is quite alarming. We are told in this fascinating Report that the additional cost to the taxpayer of this single decision to put Spey engines in the Phantom aircraft was about £80 to £90 million. That is not a small sum. If the taxpayer could be relieved of that burden there would be some appreciable result in the economy. We are speaking in large numbers and magnitudes. To break it down and say that the cost of the aircraft was doubled by this decision—about an extra £1½ million for each aircraft—also suggests that this was a basic major decision. Therefore, the fact that the Public Accounts Committee has brought to light in great detail why the decision was made and why in some senses it went wrong deserves the close attention of the House.
  Five principal reasons are given for this decision. These were carefully considered by the Public Accounts Committee. First, that it was only by putting the Spey engine in the aircraft that it could take off from British carriers. Secondly, that the higher powered American engine, the J.79, did not exist in the improved version at the time the decision was made which might have enabled the Government to think otherwise had they so chosen. Thirdly—and the Committee and those giving evidence to it are frank about it—that the main reason for the decision was to give industrial support to Rolls Royce. Fourthly—equally interesting though on a totally different front—that the special equipment needs of the R.A.F. and the Royal Navy would have had the result had we bought the American Phantom as it was off the peg, of a deterioration in operational efficiency. Fifthly, that with the Spey Phantom the aircraft would have improved range.
  Let us look closely at some of those reasons. The first, and probably the most important, concerning carriers, and I should like to read the evidence given on this point. The question was whether the carrier was the principal issue, and the answer was:
  "The primary value and purpose of putting it into the Phantom was that the Phantom could not fly off a carrier unless it had this engine. Later on the J.79 was improved; also certain naval techniques were improved when the subject was reviewed and later on it was

  1907
  judged to be possible to fly off a carrier with the American engine. At this point the whole question was re-examined and it was decided in spite of this that the Spey still gave us an operational advantage in terms of range, as I have described it, plus the industrial advantages and the Government decided to continue to go on with it."
  This is an interesting point of view. But throughout one question was not asked. It may be a silly question, but I should like to ask it now in case the Government can answer it. Did the Government at any stage consider, instead of incurring the risk of spending £80 to £90 million—and this was an ascertainable risk even in 1964—lengthening aircraft carriers? It is possible to build a 1,000 ft. tanker—I am thinking primarily of the steel work—with everything that goes into it for £6 million. We all know that military equipment and all kinds of naval vessels seem to invite a different stratum of cost from ordinary commercial vessels. None the less, this would have been a straight-forward lengthening operation which the more sophisticated shipyards in the world are capable of doing. Assume that it costs £6 million. If we double it for luck and add another £6 million for fun, because we know it is a naval operation, we arrive at £18 million. Two carriers would cost £36 million, which is less than half of the cost actually incurred.
  Another big question is: did we at any stage consider buying American carriers so that these aircraft could be used? Finally, at £80 to £90 million, did we consider building a new carrier in relation to this decision?
  The hon. Member for East Lothian (Mr. Dalyell) has drawn attention to this point, and it needs reinforcing. This expenditure was incurred merely so that this aircraft could fly off carriers between 1969 and 1972—this is the main justification—after which time it will be phased out and become a land aircraft for the R.A.F. This is an additional £80 million for three years for 28 aircraft to enable them to fly off carriers. We know that £30 million was in any event spent on refitting the Ark Royal. This is an astonishing decision with an astonishing consequence and it deserves the attention of the House on those grounds alone—the raison d'être given.
  Mr. Dalyell: These are important points. Would the hon. Gentleman care
  1908
  to state on what strategic grounds this decision was taken? If he feels that this is outside the scope of his speech, does he draw the conclusion that the Public Accounts Committee's investigation is too limited to be useful in modern conditions?
  Mr. Lloyd: I take the hon. Gentleman's point. I do not think that it would be profitable to explore whether the Public Accounts Committee is the appropriate body to explore the strategic assumptions on which these decisions are made. However, I share the view that the strategic assumptions ought to be explored by somebody. Whether this Committee or another we can debate.
  The next point concerns the J.79. Here again, I should like to quote from the Report at Question 4463:
  "I gather that the operational advantages were not significant. The Comptroller and Auditor General says that the Service Departments both stated that they would be quite happy with the J.79, so the operational advantage was not a significant point? "
  Answer:
  "They would have been happy with it later, this is perfectly true. The decision to use the engine in the R.A.F. version was mainly taken on industrial grounds."
  That is the next point to which I turn. Industrial grounds are very popular today. But what supports the view given in yet another paragraph of evidence to the Committee? I apologise for quoting so much from the Report, but it is essential to my case. A question was asked about the industrial grounds, to which the answer was:
  "The American engine is an old engine. It was considered at the time, I am sure entirely correctly, that the development of the Spey engine by Rolls Royce was an essential thing in order to keep Rolls Royce in the forefront of the technical development of aero engines, and I think the recent order for the R.B.211 engine, for example, is an indication of the importance of keeping Rolls Royce right in the forefront of technology."
  It will he common ground on both sides that it is essential to spend a great deal of public money in one way or another if this is the basic decision we have taken. It may be the right decision to keep Rolls Royce in the forefront of modern aircraft engine technology. But did the Government Departments really think that, without support for the Spey,

  1909
  Rolls Royce would, in the words of the Report, have failed
  "to keep in the forefront of the technical development of aero engines"?
  Rolls Royce is one of the world's premier aircraft engine firms. We know that the world's premier aircraft engine firms claim, with justification, that they cannot exist without extensive Government support, particularly of a military kind. But here is a firm, pre-eminent in its sphere, with a turnover in excess of £100 million. Is it seriously contended that a firm of this kind will flounder if it does not receive this support of about £12 million?
  Perhaps a more fundamental question arises. This is covered in the Committee's Report in the evidence on the R.B.211. Why do we not support it directly? Why, if we want to keep Rolls Royce in business, do we not say that we want to keep Rolls Royce out on the technological frontiers and, therefore, support development at that point rather than the development of an engine which apparently by common consent—and we are none of us experts—though technologically advanced, is by no means a supersonic engine.
  Then we come to perhaps an even more disturbing feature of the Report, the fourth reason, the special equipment needs of the Royal Air Force and the Royal Navy. Here the fundamental point is made that there is a basic incompatibility between United States Air Force equipment and the equipment used by the Royal Air Force and other N.A.T.O. Powers, particularly in their main strategic aircraft. If this is so, why is it so? The evidence at a later stage of the Report is disturbing. It is that when these aircraft operate together strategically and tactically in Europe they have to be controlled by their respective tactical headquarters; they cannot communicate with each other. That is a most remarkable state of affairs between air forces which have been co-operating as allies for between 15 and 20 years.
  If these aircraft—and this applies particularly to the British case—are made in the same factory, for the same purpose, to he operated by air forces which know themselves to be allies, and which in all foreseeable contingencies are likely to be allies, should not this be in the forefront of the air staff's attention wherever they
  1910
  can give attention to this, and should not the Government bring the heaviest pressure to bear on all concerned to make sure that the question of compatibility in defence needs comes to the fore in our thinking in the immediate future?
  The only point which remains on this Phantom Spey question is that of range. and even that, at the end of the day, after all the evidence is given, remains of marginal advantage.
  I have covered one point rather intensively, but it is appropriate that the House should consider this. This is a vast sum of money. It appears on the surface to be a vastly wrong decision, and I hope that the Chief Secretary will comment on it when he winds up the debate.
  7.2 p.m.
  Mr. Frank Hooley: I apologise to the House for being absent for most of the debate so far. I have been abroad, and, unfortunately, I have spent the last two hours getting from Heathrow to the House.
  There are one or two points to which I should like to draw attention, and I apologise again if I go over ground which has been covered by previous speakers.
  The first point of interest in the Report arises on the budgetary aid given to Malawi and Gambia. This raises rather a curious, and perhaps unique, problem. in that we are involved in discussing the financial affairs of two independent States. This must be inevitable if, as we are entitled to do, we are to study the administration of aid to other countries, but I think that it raises peculiar problems, and I am not wholly certain that the Committee has taken into account all the problems that this involves.
  It is difficult under any circumstances to look very closely at the financial administration in a developing country, where difficulties arise, not from any desire on anybody's part to use funds loosely or carelessly, but very often from a sheer lack of expertise on the part of the civil administration in a country which has been for so long under colonial rule that it has not had time, or the opportunity, to develop the skilled professional men necessary for its own civil administration. Arising from that, it is all the more important that those concerned at this end should study carefully the funds which are being dispersed, and make sure

  1911
  that errors are not committed because of a lack of sufficient supervision.
  My view is that whatever the discrepancies which may have occurred in the disbursement of these funds, the arrangement whereby funds which may be saved on budgetary aid can be made available in the form of development loans is important and useful, and will in itself contribute eventually to relieving this country of assisting other countries by means of budgetary aid. It clearly is a much sounder policy for this country to provide funds for the development of the national resources of a developing country than simply to give what amounts to deficiency grants to make up shortfalls on revenue.
  I hope that as budgetary aid is tapered off—which is hinted at in the Treasury Minute—this will not mean an effective reduction in the gross amount of aid which may be given to these countries, or indeed to any other countries which are benefiting from aid given by the British taxpayer. I hope, too, that this investigation will not lead to any misguided conclusions about the value of aid as such.
  I want to touch briefly on a matter which I think has been thoroughly ventilated in the debate, and that is the question of the Phantom aircraft. I do not want to go into the strategic arguments referred to by the hon. Member for Portsmouth, Langstone (Mr. Ian Lloyd), but I am disturbed to find that the advantages of purchasing off the shelf from another country should, in this case, appear to have been wholly squandered by the demands of the Services for modifications of one kind and another.
  The question of the use of the British Rolls-Royce engine is a more difficult and complex one because of the industrial considerations involved, but I am alarmed that the Committee has come to a conclusion such as that mentioned in paragraph 57:
  "Certain radio equipment was necessary for uniformity and compatibility with other Royal Air Force aircraft, and the navigational attack system, though not essential, was desirable on operational and dollar-saving grounds."
  I tried to probe the question of compatability, because it seemed extraordinary that we had to put special electronic equipment into a plane being
  1912
  used by a major ally, with whom, presumably, we would have to co-operate in military operations in the event of any conflict. It seemed to me that this was something which had not been thought out, or that somehow it was not possible to use these aircraft with the weapons we possessed.
  The central point is made very forcefully in paragraph 59, where it says:
  "The purchases of Phantom aircraft … demonstrate that when off-the-shelf purchases are made, the benefit of reduced costs arising from long production lines can be totally lost if the standard version is substantially modified."
  That is clearly relevant to future purchasing policy, because I understand that it is the policy of the Government—and it is a sound one—that in future the purchase of highly-sophisticated weapons such as military aircraft shall be done more and more on a basis of co-operative effort between ourselves and our allies in Western Europe.
  If the Services are to be allowed to insist over and over again on their own special specifications, either for electronics or for major items such as engines, the possibility of any kind of economic benefit resulting from inter-country cooperation seems remote. I strongly suspect that the failure of the A.F.V.G. project arose essentially from differences of opinion, or excessive detailed separate requirements, by the different air forces of France and Britain rather than from any inherent weakness in the project itself.
  If we are to depend on joint purchasing of military aircraft or any other kind of sophisticated weapons or joint procurement of weapons developed by allies, this insistence on their own special requirements by the Services must be kept strictly under control. It is somewhat absurd to argue that a Power as sophisticated in military techniques as the United States does not install in its aircraft electronic navigational systems which are up to the requirements of the R.A.F.
  Paragraph 86 of the Report concerns the use of industrialised building methods and their cost. What concerns me is the number of different industrialised building systems in use by various local authorities. During the course of inquires I got the impression that some contractors were using the taxpayers to

  1913
  carry out experiments in various forms of industrialised building which may or may not be wise and useful.
  In one case it appeared that components were being hauled from Scotland to England and, I believe, vice versa. This seemed an extraordinary way of achieving any kind of economy. What worries me is the conclusion which the Committee came to, in which I believe the Ministry concurred,
  "that there were probably too many industrialised systems in use to secure the advantages of large scale production, but that they were not in a position to dictate a reduction and were largely relying on market forces to achieve this."
  I cannot see why the Ministry, through the system of subsidies, should not be able to inform local authorities that it will grant subsidies only for specified types of industrialised building systems. I do not see why subsidies should be paid by the taxpayer to any old system which a contractor may care to put on the market, and which some local authority may feel like trying out. As far as I know, at present almost anyone can persuade a local authority to have a go at an experimental system. Then, if it does not work, the taxpayer foots the bill.
  Some of these systems do not work. We had evidence from Scotland of a house where joints were not waterproof, and when it was suggested that for a house to be waterproof was an elementary requirement the answer was, "Too bad. In this system it just did not happen to work out." That is a scandalous waste of the taxpayer's money. It is wrong to expect him to finance all kinds of experimental systems of industrialised building with no apparent limit on their diversity. If I recall the facts correctly, the number of different systems in existence exceeds 100, and apparently no limit is to be placed on any new ones which may come along.
  There may be scope for experiments of this nature—although in terms of cost we do not seem to have made much headway—but to experiment wholly at the expense of the taxpayer seems to be going too far. I would have thought that the Ministry could exercise considerable control, through the system of subsidies, in getting a reduction of the multifarious systems and promoting only those which, over a period, have proved themselves to be reasonably effective, efficient and economical.
  1914
  I also want to comment on what should have been the bulk purchasing arrangements of hospital authorities. Here there seems to have been a lamentable lack of progress. In one case where some progress towards bulk purchase has been achieved, namely, in the range of commercial paints, £100,000 was saved in the first year and yet, apparently, discussions on other matters—beds, nurses' uniforms, lockers, and so on—have been going on for year after year and year and still no bulk contracts have been placed and no standard designs are being approved.
  I draw special attention to paragraph 93, which says:
  "It is particularly unsatisfactory that, five years after the report of the Committee of 1962–63, bulk contracts for textiles, which promised large savings through long production runs, have yet to be placed. Your Committee expects the Health Departments to take more vigorous action to expedite the adoption of standard designs which will not be over-elaborate or expensive to produce and recommend that exercises to secure improvements in design should not be allowed to delay the placing of bulk contracts for current requirements."
  I would have thought that this was the most elementary common sense. It would be interesting to know where, along the line in the hospital authority system, the blockage of solid conservatism exists which is preventing its obvious recommendations from being put into effect with more vigour.
  One aspect of the purchase of drugs, referred to in the next part of the Report, is disquieting, because it occurs in another field of public purchasing and has arisen in the case of the supply of equipment to the Post Office. I refer to the question of profits made by wholly-owned subsidiary companies of the main suppliers of proprietary preparations. In paragraph 96 reference is made to the fact that when certain figures were produced and investigated by the Ministry's accountants they discovered
  "that the costs included substantial sums for raw materials supplied by a wholly-owned subsidiary company."
  The Minister very properly demanded that the accounts of the subsidiary company should also be investigated. Apparently the firm concerned resisted this proposal for some time, but eventually agreed, and the investigation was made.

  1915
  I would have thought that it was fairly elementary that the costs of the supply of raw materials to a company which is providing equipment or goods to an important public purchaser were a serious element in the prices paid by the taxpayer for those goods or equipment. But it becomes peculiarly important when the subsidiary is entirely owned by the main supplier, since in this way there is an obvious means of making substantial profits without apparently, the Ministry having an absolute right to investigate the subsidiary at all.
  This in itself is unsatisfactory, but it has caused me to refer to it in this debate because I have noticed that the same thing is arising in the case of the supply of telephone equipment and has had an influence on tender prices quoted by firms competing for important contracts for this equipment. This seems to need closer inquiry and better scrutiny.
  My final point relates to the siting of the Post Office building at Durham. This is curious and interesting, because it is not dissimilar to the problems of the headquarters of the Metropolitan Police, which were discussed on last year's Report. In both cases, someone fairly high up in the hierarchy seems to have decided that it would be nice to have a particular site and has gone for that site, despite the fact that others were or could have been more economical, and has then produced all kinds of ex post facto reasoning to justify the choice of the central site rather than another which a more thorough investigation might have led them to buy at less cost to the taxpayer.
  I wonder whether the degree of control exercised by whoever is responsible over this choice of sites for important Government buildings should not be looked at again. It is difficult to say how one can exercise this control, whether a Department or body not immediately concerned might give an impartial view of a site or choice of sites when expensive and important Government buildings are being put up at a cost to the taxpayer.
  Last Session, the Committee scored some notable victories. In the matter of post-costing and agreements on profits of major contracts between Government and industry, a series of investigations which the Committee carried out, and its recom-
  1916
  mendations, have, after a long time, borne fruit in much more satisfactory arrangements for safeguarding the public purse in respect of very large contracts in difficult fields.
  I hope that some of my points tonight and those of other hon. Members may also bear fruit and that we shall not have to wait three, four or five years and have to investigate major scandals before some of these things can be put right.
  7.23 p.m.
  Mr. Peter Hordern: It is my privilege to congratulate my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) and the Committee on an admirable, not to say monumental, series of Reports and evidence. No hon. Member will be surprised to learn that my right hon. Friend missed not a single session of the Committee, nor that he pursued his investigations with his customary vigilance and zest, always tempered with tolerance and courtesy. I should have the agreement of the House, I think, if I said that my right hon. Friend is a distinguished servant of the House and a true House of Commons man.
  It must be the mark of a good Chairman that it is possible to find such penetrating and critical Reports on Government expenditure from an all-party Committee, and on such a wide variety of subjects. The Public Accounts Committee is not supposed to concern itself with policy matters, yet it is impossible to read its Reports without noticing how very close is the relationship between administration and policy. If the Committee deliberately falls short of suggesting what policy should be, it nevertheless produces the evidence on so many occasions for how a change of policy should be called for.
  It is a short but nevertheless very important step from discussing the need for a different policy in the Public Accounts Committee to discussing in other all-party Committees what these policies should be. Speaking personally, this is a step which I think should and could be made if proper arrangements were made for staffing such Committees, and it lies at the heart of Parliamentary reform.
  But we are concerned with evidence and recommendations. They range from

  1917
  boots to Beagles, from the size of married quarter:, to nuclear power stations and from overseas aid to the National Seed Development Organisation. I hope that I shall be forgiven if I do not cover them all, but it is possible to distinguish three different categories among the various Reports. There is the administrative category, the accountancy category and the policy category. Of these, I would class the administrative category, concerning for example the Post Office building at Durham and Army boots, as the most straightforward, although by no means the most unimportant category, but the surplus stocks of boots were partly caused by the development of a new boot as well as by larger feet. I do not think that important considerations of accountancy practice and policy really arise on those matters, and it is to these two categories that I will now turn.
  I will take first the Atomic Energy Authority's trading funds and the payment of royalties on nuclear power stations. The Authority claims that the trading fund is operating under financial arrangements resembling those of other industries, and is not subsidised. At the same time, it says that it would not be in accordance with commercial practice or with the practice followed in other countries to add to the capital value a sum specifically reflecting the cost of relevant research and development work——
  Mr. Peter Emery: On a point of order. May I call attention, Mr. Irving, to the fact that there are not 40 Members in the Chamber?
  Mr. Deputy Speaker (Mr. Sydney Irving): In view of the hour, I am unable to institute a count at this time.
  Mr. Emery: Further to that point of order. Is not the relevant time 7.30?
  Mr. Deputy Speaker: The closed period is 7.30 to 8.30, but the practice of the House is not to accept a count at this time because it will actually take place four minutes later, and therefore in the closed period.
  Mr. Hordern: As I was saying, the Committee was right to question this view. What other industry can operate with such advantage? I suppose that it
  1918
  can be argued that the price at which the steel industry was nationalised did not take into account the research and development costs incurred by the steel companies, but every time a company develops a patent held by N.R.D.C., it certainly, and rightly, pays a royalty. The A.E.A. was given advantages and rightly so, which are not available to ordinary commercial organisations. It was given these advantages partly because we need to develop a new and ultimately cheaper form of electricity, and partly because other countries also give their nuclear industries similar advantages. But there can be no pretence that it operates in the same way as any other commercial undertaking.
  The Authority has performed exceedingly well, and has invested surplus funds of £12·85 million. Dr. Hill in his evidence pointed out that the Authority has very heavy capital expenditure projected at Canenhurst, and that its cash resources will have to be used. That is quite true, but it seems to me to be a questionable practice that the largest part of the Authority's funds, some £6·4 million, should have been placed on deposit with local authorities for a period of two to three years. The Treasury should have first call on the money, for it was never the purpose of the A.E.A. to set up as an investment trust. No one will know better than the Chief Secretary what the present cost of borrowing is.
  I turn now to the question of royalties on A.G.R. stations. It appears that the total cost of developing the A.G.R. system was some £110 million. There is no prospect that this sum will be recovered until the completion of a further substantial programme after 1975. What is at issue is how much of the advantage quoted of ·03d. in unit costs over the American system should be given to the Generating Board and how much to the authority. The Treasury was called in as umpire and decided that royalties of 014d. per unit, representing £26 million, should be paid over.
  This seems a very dubious decision. It is clear that a political decision was made not to recover the expenditure on A.G.R. systems by royalties at this stage but to make sure that the C.E.G.B. contract was gained against the Americans. This is a perfectly proper political decision, but there is no reason to go further

  1919
  and allow the C.E.G.B. the advantage of about £25 million in favour of the electricity consumer rather than the taxpayer, who is already footing so substantial a sum. The point which the Committee makes about the true cost of nuclear power being thus disguised is certainly a fair one, although that is by no means the only fuel that has been subsidised by every kind of means. For example, we have been told this afternoon that the coal industry has had £415 million written off its debt.
  I turn now to some examples of policy decisions which have already proved very expensive, and which appear likely to be just as expensive as time passes. I refer, first, to the refit of the Ark Royal at Devonport Dockyard. Some £30 million is being spent for two years' further life for the carrier. It is said that only £7 million would be saved if the Ark Royal were cancelled now, and that overheads account for a large part of the expense. Another reason for the extra expense was making the Ark Royal capable for Phantom aircraft.
  But what is the cost of keeping the dockyards open? How far have they been reduced to conform with the present and projected size of the Royal Navy? How is it that the cost of constructing ships in Royal dockyards seem to be so much higher than it is in other yards—in fact, by £1 million for a frigate costing £4·5 million? The Government will have to consider carefully the whole questiton of naval dockyards after the damage they have done by running down the Royal Navy.
  Anyone who has followed the history of aircraft purchases over the years, as the Public Accounts Committee has, cannot but be horrified by the quite extraordinary gap between the estimates and the outturn in the cost of these aircraft. For example, it appears that we could have bought almost twice the original number of Phantom aircraft if we had not altered that aircraft to include British equipment and engines, and it is doubtful whether there has been any overall saving in dollar costs at all. It may well be—I am sure that it is—that on strategic as well as on industrial and commercial grounds, in the case of the Spey engine this expenditure is more than justified,
  1920
  but that should have been made clear at the beginning. The Committee is right to castigate the decision made in 1965, which was based on totally unreliable estimates and before the costed technical programme for the engine was received.
  If there is one matter about which all hon. Members can be certain it is that however astronomical the estimates for aircraft construction are they will be greatly exceeded when the bill is finally presented. It does not seem to be the kind of forecast which lends itself to careful and conservative estimates, but I am sure that the Government could make matters a good deal easier for themselves if they separated, or tried to separate, original research and development work—which is being carried out largely for strategic and industrial reasons, and where costing is so largely speculative—from aircraft which can be bought off the peg for our defence.
  I turn very briefly to the drug prices charged by two firms which have been having protracted negotiations with the Ministry. What is the position now? Does the Minister intend to use his power to fix prices, or does he not?
  I come now to what has generally been received as the most important part of the Committee's Report, and which urgently requires a firm statement of Government policy. I refer to the section dealing with false claims to personal reliefs from Income Tax. The facts are not in dispute. Of a sample of 1,000 immigrants from India and Pakistan, from 20 different tax districts, as many as 50 per cent. of claims for dependants abroad have been shown to be false. False certificates have been issued, and genuine certificates have been falsely attested. The Department assesses the loss at between £5 million and £7 million a year for four years up to 1967. We are now almost into 1969, and we have to face the fact that the revenue has lost between £30 million and £40 million in total as a result of these claims. An amnesty has been tried, but only 1,419 cases came forward out of 125,000 Indian and Pakistani immigrants working in this country.
  This is a situation that clearly cannot be allowed to continue. What is to be done? The Committee itself was divided as to what its recommendation should

  1921
  be. Some of its members suggested that dependants' allowances should be retricted to dependants resident in this country but, as the hon. Gentleman the Member for West Lothian (Mr. Dalyell) properly pointed out, that would seem to be unfair to West Indian and other immigrants from the Commonwealth who have not made fraudulent claims.
  What, then, do the Government propose? Has there been any improvement in the situation since the President of Pakistan warned Pakistani immigrants of the risks they were running? The Chief Secretary must give some indication of the Government's proposals. It may be that the Government will have to consider introducing legislation to ensure that allowances will be given to dependant; abroad only where the Revenue can be satisfied of their existence. Whatever the Government decide to do they must act soon, for delay can do nothing to improve what is an extremely delicate situation.
  I conclude by expressing my admiration for the way in which the Chairman and the Committee have carried out their important and onerous task. The House has been well served.
  7.38 p.m.
  The Chief Secretary to the Treasury (Mr. John Diamond): The right hon. Gentleman the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), with his typical courtesy, opened his speech with courteous references to me and to the Treasury, for both of which references I am most grateful. He then went on, and I wish to associate myself with him, to pay his tribute to our most distinguished Comptroller and Auditor-General and to those who serve him in a very large and important Department.
  What the right hon. Gentleman did not go on to say, and what he could not go on to say, was that this House, the Government and the nation are served by a body of most distinguished men who form the Public Accounts Committee, hon. and right hon. Gentlemen who have wide experience and are of great ability, and I would also say—and I hope that it will not be misunderstood—men of great earning opportunity, who could have chosen to have devoted their time to ordinary commercial and professional fields instead of devoting day after day
  1922
  and week after week to the honorary service of this House.
  What the right hon. Gentleman did not go on to say was the debt which this House, the Government and the nation owes to them. I say it because I feel it very sincerely, having spent a long time in this field—not snooping but being available to look at all possible errors, human errors, errors of decision, errors of avoiding the daylight and being prepared to make a contribution on all these items and therefore to be known to be in the background in a helpful and constructive way and so keeping up a standard in a way which otherwise would not be possible, not only in regard to the items to which they pay attention but to all transactions.
  That is the key. The function of an accountant or auditor is not to find out mistakes but to deter mistakes being made by the knowledge that he will come along and may find them. The function of the P.A.C. and the Comptroller and Auditor-General is that. No one can calculate the amount to which the nation is indebted to him because, fortunately, these are savings which never come up for calculation, so I am most grateful to the right hon. Gentleman.
  He went on to say that his Committee is of course conducted on a non-party basis—that is the great value of it—and so is this debate. Because of that the matters which are covered are dealt with irrespective of which Administration or which element of investigation is concerned. If I am asked to give the dates, I will give them so far as I am aware of them, but I do not think that that comes into our consideration. The essential point is that the Report of the Committee helps in the administration of the nation's affairs and we should pay the fullest possible attention to it.
  Before turning to detailed points I want to take up one point which the right hon. Gentleman made in a general way. He referred to the criticism which, no doubt, has been made about him: certainly it is made about me, I hope every day of the week, that I pay overmuch attention to "candle ends". I hope I shall never conduct myself so that that criticism cannot be made. I justify it in this simple way: I ask anyone who is about to criticise me for paying too much attention to candle ends to bear in mind what this

  1923
  means. The present level of public expenditure is of the order of £16,000 million. I do not know what size a candle end should be, but presumably it could not be less than 1 per cent. of the candle or it would be an unimaginably small proportion. Applied to £16,000 million it is £160 million, or, to put it in a more forceful way, it is equal to 6d. on the standard rate of Income Tax.
  Anyone who says, "Will you please not pay so much attention to candle ends", is asking me to do what I would be happy in his individual case to do, to put up his tax by 6d. on the standard rate. That is the effect of paying even 1 per cent. less careful attention to the public expenditure of this country.
  I shall inevitably have to detain the House for some little time because I have been asked a great number of questions about this wide and embracing Report. Perhaps I might now go on to the individual items and add something to the information which has been already made available. I ask the House to bear in mind that there is a great deal of information available. There is the Report itself and of course the Treasury Minute indicating the attitude of the Government on most of these items.
  The first item which the right hon. Gentleman and many hon. Members have touched upon is the question of tax claims. He and others have pointed out the sensitive nature of this problem. I want to add one or two comments to put the matter in context. Figures have been based on an inquiry into fraudulent tax claims particularly by immigrants from two countries. Nobody, certainly not the right hon. Gentleman with his legal knowledge, would say that it proved more than that there is evidence of fraudulent tax claims in respect of dependant relatives of immigrants from those two countries.
  It would be quite wrong to deduce from that that fraudulent tax claims are generally made by immigrants. Because we have no evidence one way or the other, it would be quite wrong to assume—I am sure no one does assume—that all white people are more conscious of their tax responsibilities than are all coloured people. It would be quite wrong to assume, because we have no evidence on the matter at all, that immi-
  1924
  grants from a variety of countries on the continent of Europe, for example, are more conscious of their tax responsibilities or less conscious of them than we are or than other immigrants in this country are. We must deal with the facts before us and the facts before us relate directly to the immigrants from two particular countries.
  Mr. Brooks: I wonder if my right hon. Friend has seen the answers to Questions 2783 and 2784. The question was put:
  "Has in fact any investigation been carried out of any immigrant population, notably those, say, from the West Indies?"
  The answer was, "Oh yes." Then the question was asked:
  "Has tax evasion been found to be significant?"
  and the answer was, "No". This, I think, goes a little further than my right hon. Friend said.
  Mr. Diamond: Indeed it goes a little further, although along the same lines. I do not want to particularise but merely to restrict to the knowledge we have and to comments justifiably made in relation to the knowledge we have. The fraudulent claims are substantial. They arise because of a total difference in the countries concerned to responsibilities for tax, a totally different way of levying tax in those countries and a totally different acceptance of responsibility compared with ours and from the lack of details of births, marriages and deaths in the countries in question.
  That poses considerable administrative problems. I have been asked, what is the altitude of the Government? The right hon. Gentleman immediately saw that the only answer I could give to that question was to say that I could not answer if it were to be a matter of action being taken, because if so it could only be budgetary action if it were in the field of legislation. If it were in the field of administration, I could of course deal with the matter, but I think the Committee was satisfied, and certainly the Treasury and the Government are satisfied, that we cannot deal with this matter by administration alone. Therefore it is a matter for the Chancellor of the Exchequer to deal with or not to deal with when he introduces his next Budget. It is not possible for me to say more on that topic at this stage. I hope I have

  1925
  made clear that everyone recognises the alternatives of administration or legislation arid that dealing with the problem administratively would not be capable of leading to a satisfactory solution. One is therefore driven to legislation, and a Finance Minister is driven to say nothing.
  Turning to the second matter which has drawn a great deal of attention, our old friend——
  Mr. Hordern: Do I understand the right hon. Gentleman to say that legislation will be introduced at the time of the next Budget?
  Mr. Diamond: The hon. Gentleman has keen ears, and keen intellect, and is familiar to me, if I may say so. He heard me say exactly what I said, and he does not expect me to add to it. He heard me say that a Finance Minister is therefore compelled to say nothing. The answer which the hon. Member for Horshatn (Mr. Hordern) can repeat as much as he likes is "The Chief Secretary came to the Box and said, 'The answer is nothing'."
  Mr. Hooley: Is my right hon. Friend saying that all the resources of administration have in the view of the Government been exhausted of this matter?
  Mr. Diamond: No. I did not say that all the resources of the Government had been exhausted. If one put every single Inland Revenue employee on to this, one could produce greater results than are produced at the moment, but it is not wise to do so, and it is not the intention of the Government to do so. What I hope I indicated is that we are satisfied, and the Committee is satisfied, that this problem will not be solved by administrative means alone. Therefore one has to turn to other means, if it is to be solved by legislation.
  I was turning to our old friend, the army boot, about which, as indeed about every other matter, I am fully briefed. I think I am right in saying that Army boots were the only matter with which I did not go wholly as to the facts with the right hon. Member for Kingston-upon-Thames. When the new boot was adopted there were no more purchases of the old boots, except for specific and immediate use of the old boots. The bulk purchase of the old boot was in
  1926
  1956, before the decision to use the new boot. Since then 18,000 pairs were subsequently purchased—in 1960—but they were purchased for the Guards and Territorials, who were in any event continuing to use them for particular reasons.
  We are left with the situation that the stock had been built up some time ago and, owing to the change of boot and the reducing numbers of those who would use the boot, the stocks were not run down as fast as they might otherwise have been. I certainly accept the view of the Committee that attention was not given to running down of stocks as early as it might have been. That is now taking place, and while I accept the view of the Committee that it should have received attention earlier, it does not necessarily follow that there has been a loss, or any substantial loss, of public funds.
  The stocks are now being run down at a not unsatisfactory price. When the Chief Secretary says "a not unsatisfactory price" he means a not unsatisfactory price. The simplest way of conveying this to the House is to say that the break-even price would be 5s. per pair. That is, so long as one can get 5s. a pair for the old boot, it is better to continue buying the new boot, because the new hoot is cheaper to buy and to use than the old boot, as well as being more comfortable and serviceable and so on. If one is getting more than 5s. per pair one is, at the end of the day, better off than one would have been in continuing to use the old boot. The first 140.000 pairs have been sold at an average price of 21s. 7d. That is turning out reasonably satisfactory.
  The next thing that I was asked about was the sale of land at Woolwich to the G.L.C. The criticism made there was not that there was a loss of public funds, but that there was inadequate clarity in the arrangements, and that there was no firm agreement between the parties. The Committee specified the ways in which it considered that public funds were put at risk by the absence of a firm agreement in this case. I accept that there was not as firm an agreement as there should have been. It is a long story, broadly of co-operation between two large public bodies, the Ministry of Defence on the one hand, and the L.C.C., later the G.L.C., on the other.

  1927
  I want to make it clear that, although I entirely accept the view that there should be clarity of arrangement and firm agreements, both as to the date at which the land should be handed over, the price to be paid and interest provisions and so on, those criteria should not preclude a Government from meeting local authorities and similar responsible bodies part of the way. One does not necessarily need to state any particular concession one has in mind, but one would want to co-operate in a way which is rather different from a sale between two private individuals of a parcel of land.
  The next thing that I was asked to deal with by many hon. Members was the question of the purchase of United States aircraft and equipment. I do not suppose that we shall ever be free entirely of difficulty and anxiety when we are dealing with acquiring aircraft of the latest capacity and design. We are dealing with something which is, I think the phrase is, on the frontiers of knowledge. Certainly, as far as correct and accurate estimating goes, we are dealing with something about which, by its nature, one cannot be too accurate in one's estimates one cannot foresee precisely what will happen because, ex hypothesi, one is in new territory.
  This was a case where we were in some difficulty. I owe it to the House to go into this in some detail, because it has obviously been causing a great deal of anxiety to several hon. Members. I refer now to the dates merely to place the matter in perspective. These naval Phantoms were ordered in the early part of 1964. At that time, the intention was to build a new carrier. There was a change of Government and a change of plan. The overall situation resulting from that change of plan, and the decision to phase out the carriers was referred to by my right hon. Friend the Secretary of State for Defence in the defence debate as long ago as March, 1966, when estimating the net saving from the phasing-out, he said:
  "So the net saving over the next 10 years is about £500 million … "[OFFICIAL REPORT, 7th March, 1966; Vol. 725, c 1793.]
  I merely wanted to give that to show the background to this, assuming that hon. and right hon. Gentlemen accept that fact, as I do. I do not want to argue that.
  1928
  It follows from that that these other matters have to be considered. In February, 1965, the decision was taken to purchase the R.A.F. version of the aircraft. The reason it had to be taken, and taken fairly swiftly, was that it was understood that arrangements had to be completed by the end of June, 1965, in order to catch the United States production line. That line would have phased out had we not made our decision by that date. There would otherwise have been delay, calculated to have been at least a year, which would have been quite unacceptable on military grounds.
  For both versions therefore, the best estimates that could be made at the time had to be used and in the highly complex nature of the programme of the aircraft, these turned out to be too low. Certainly, they were too low. Certainly, it is right to add this. Whatever estimate one has in any circumstances for any kind of modern aircraft, guided weapon or the like using the latest technology, one can multiply by 2 or by 3, as one fancies, to come nearer to the actual ultimate cost. That seems to be the history of the matter. However, if one is responsibly considering at the time what an estimate should he, so long as one goes into the estimate with the greatest care, so long as the manufacturer makes allowances for contingencies, and so long as the Government add further allowances for contingencies—all of which was done—one should be able to rely reasonably on the outcome of that consideration.
  The argument then always comes, "But it is bound to be more than that". One's reply is that fullest allowance for all contingencies has been made. If one did not do that, there would be no point in having estimates at all. But, as the machine moves more and more towards its final shape, more development is needed of one kind or another, and more cost is incurred.
  Mr. Hooley: Part of the essence of the argument was not that this was on the frontiers of knowledge, not that something of an unknown quantity was being purchased. This was an aircraft which in the United States version had been in production for five years. The costs should have been definitely known.
  Mr. Diamond: The application of that argument to this machine provides one

  1929
  of the reasons, which I explained a few moments ago, why it was necessary to make a decision quickly, as it were, because one was then buying a machine on the production line. I was going on to point out, however, that there then developed a need to modify the aircraft so theft British equipment could be incorporated.
  The reasons for incorporating the British equipment were three. First, the equipment was operationally necessary. Second, the installation of British equipment would be of assistance to United Kingdom industry. Third, it would cost sterling and save dollars. For all those reasons, it was thought right to do what one knew would inevitably entail some adjustment to the airframe and some difficulty in the smooth flow of production. This inevitably happens when one wants a change of that kind in the production line. Estimates were made of this factor at the time. Unfortunately, those estimates were exceeded.
  I do not say that we were unwise to do what we did. The reasons were valid reasons, and, had we known at the time what the costs would ultimately be, I do not say that we should have altered our plans. It was essential for operational reasons that we adopt the British equipment. It was a major argument that we should be spending sterling instead of dollars.
  Mr. Dalyell: With the advantage of hindsight, it is, I think, impossible to blame the authorities in this matter, and I do not blame the Government or any of the participants. But may we have an assurance that both the Committee's conclusions and the evidence in this affair will be studied by those in my right hon. Friend's Department who are concerned with a possible Anglo-German variable geometry aircraft?
  Mr. Diamond: My hon. Friend can have the assurance that this is a lesson which has been learned. But it is not a new lesson. It really confirms what everyone in the field would know, that an attempt to add to or to vary a complicated item of production during the course of production is bound to lead to difficulty and considerable additional cost much greater than that of the unit items concerned. One has to take that into account, and in other matters one has
  1930
  to take into account also, where one is dealing with consortia—I think that this is what my hon. Friend has in mind—or Governments jointly responsible for production, the complexities which stem from that as opposed to straightforward single-firm production.
  I hope that I have put that matter in context and explained the reasons why the decisions were taken.
  Mr. Boyd-Carpenter: Will the right hon. Gentleman kindly deal with the point made explicitly in our Report, that the decision to install the Spey engine was taken on the basis of estimates which, apart from all the allowances, were wildly out? What steps have been taken to prevent Ministers being put in that position in the future?
  Mr. Diamond: I shall gladly go over the ground again for the right hon. Gentleman. The estimates were carefully considered. The estimates were wildly out. Both statements are correct. The right hon. Gentleman then asks how one protects a Government or the taxpayer against this sort of thing in the future.
  I find this extremely difficult. As I have said, if I were asked, as a very unbelieving, rather tough accountant type, I should simply say, "Multiply the best estimate by 3". Go into it with the greatest possible care, but, having done that, and having applied the best possible present knowledge, take into account the likelihood that three times will be as near to the answer as one can get. But that is based on hunch—nothing more than that. It is based on some experience, but based on hunch it finally is.
  The other point of view is to say that one should take an estimate prepared by the best brains and with the greatest knowledge available, with every intention of covering the cost and providing for a reasonable profit, so that there is a bias towards a higher rather than a lower price in that sense. The manufacturer or designer says that he has made full provision, in view of everything that has gone on in the past, and by way of contingency for everything likely to happen he has added X per cent. Then, because he knows that he cannot foresee the future, he adds something beyond that, which we call Y per cent. Then the Government Department concerned says, "We have been through all this

  1931
  before. We shall take that figure of cost plus X plus Y per cent., and we shall add Z per cent.".
  How can one say that that is wrong? I only say, speaking for myself and not putting responsibility on anyone else, that I think that it would be right, looking ahead five, six or seven years, to take that figure and multiply it by 3. But one cannot justify that except from previous experience. Why it should be so I do not know. All one can say is that foresight and hindsight differ by a factor of 3.
  Mr. Brooks: Perhaps the reason may not be quite so inexplicable after all. A manufacturer has an interest in putting forward a comparatively low estimate so as to secure the contract. The Rolls-Royce estimate for the Spey engine, which was in no sense a technological novelty, was £110,000. The Ministry added £20,000. That is my right hon. Friend's X plus Y plus Z factor. Yet the final cost was £154,000, an escalation of 40 per cent. over the best estimate of the firm which, presumably, was the specialist in that field. Does my right hon. Friend consider that there is a curious consistency in that we always multiply by 3 and never divide by 3?
  Mr. Diamond: I do not quite follow the last sentence.
  As regards the earlier sentences, it is proper to approach these matters with care, caution and, if one likes, an element of suspicion. But I am sure that no one would deceive my hon. Friend, for example, if he had the fullest opportunity to examine the estimates which were put before him and the fullest opportunity to examine the people who were presenting them. He should not, therefore, assume that others having the same facilities are likely to be deceived. Moreover, he should not assume that Rolls-Royce has the slightest desire to deceive anyone. I have had many dealings with Rolls-Royce, and—I ought to say this—I find that company a perfectly straightforward one with which to deal. The answers one gets at the top level at Rolls-Royce are honestly given, and intended to give the whole truth.
  Therefore, the matter is not quite so simple as saying' that there is a natural interest to get an order at any price.
  1932
  and that once a firm is in it can charge whatever it likes, that it can charge the moon. That is a simpliste view, if I may be forgiven for saying that to a most sophisticated man like my hon. Friend. There is no complete answer. It is true, as the right hon. Member for Kingston-upon-Thames said, that the estimate escalated beyond expectation. It is equally true that care was taken in studying the estimate, although I have made it clear that there was not all the time in the world, because delay then would inevitably have meant increasing prices, and it would have been an unacceptable delay on defence grounds.
  I now turn to the question of married quarters. The right hon. Gentleman, or one of his hon. Friends, was careful to distinguish between those cases where the Treasury were happy and those where it was not without disclosing any secrets. I repeat how grateful the Government feel from time to time towards the Public Accounts Committee for its views. I am happy to say that on this occasion the practice is being changed. As the official reply indicates, the Government accept the principle that family size as well as the officer's rank should be taken into account in providing and allocating officers' married quarters. Building programmes are being modified and a review is taking place of the need, bearing in mind that there is a variety of needs to meet and a variety of existing quarters available. Certain married quarters which are in an early design stage have been suspended until the whole matter is satisfactorily cleared up. I think that the answer I can give to the right hon. Gentleman is that we are moving in what he and I and, I am sure, the whole House, would call the right direction.
  The right hon. Gentleman's Committee seriously criticised the Department of Education in Scotland. The basis of the criticism was that the Department had decided to disregard the rules clearly laid down, what one might call Treasury control, and to make in advance of architects' certificates quarterly payments towards certain institutions which were having approved schools built for them. In that that was a departure from a clear rule intended to safeguard public funds, I am bound to accept the criticism. One of my hon. Friends suggested that the criticism was too severe, but I

  1933
  think that the severity is justified in that sense. But I must add, because I want to put the matter in context, that the Committee did not say—and I am making it clear—that the loss of public funds was, if anything, tiny. At the most, it was the loss of interest on funds which should have been invested and were not invested, or not invested as well as they might have been. Some was on deposit account instead of being invested and earning a higher rate of interest. It is difficult to make a calculation, but I should have thought that it was not more than £2,000 in total. As the capital sum involved was about £100,000, it would be that sort of figure.
  That may be true, but what the right hon. Gentleman is concerned about, and what I am concerned about in supporting him and the Committee, is keeping the standards and discipline, without the observance of which trouble will arise. It is impossible for any Minister to accept responsibility for £16,000 million-worth of expenditure unless he knows that all the methods of checking are functioning, and functioning well, and unless he can rely on the right hon. Gentleman and hon. Members and on the Comptroller and Auditor-General and so on having their eyes very wide open. I say that without any suspicion towards anybody, because there is no justification for it. I say it with the knowledge that the kind of difficulties that came to light here compare immensely favourably with the whole of my experience in commercial life.
  A commercial firm does not have the full glare of publicity on all its activities, and therefore, if one is not careful and makes comparisons, one begins to think that it is only in Government expenditure that such difficulties arise. On the contrary, they are human errors which arise throughout money and financial transactions. My experience from years on the commercial side is that in Government there is, as there should be and as one would expect and pays to achieve, in terms of the huge Department serving us in this respect, less difficulty than in commerce.
  With respect to my hon. Friend the Member 'or West Lothian (Mr. Dalyell), who I think mentioned the point, I am grateful to the right hon. Gentleman and his Committee for the attitude they take
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  on such matters. All the prepayments have now been fully used. The loss of public funds is negligible. But it is a wise lesson for us to learn.
  Mr. Dalyell: Are my right hon. Friend and the Treasury now satisfied that the methods of control in the Scottish Education Department have been put right?
  Mr. Diamond: Yes indeed. I am grateful to my hon. Friend for asking me that.
  I should detain the House too long if I went through every item that was raised, so I will pick out the major ones, and if the House is not satisfied I shall give way to any hon. Member who wants me to deal with a further point. I propose to come to the problems of the Forestry Commission and the Forth Bridge.
  There are two sides to the Forestry Commission problem: first, the question of accounting and, second, the question of wise alternative use of resources. I think that the accounts before the Committee were the first drawn on the new basis by the Forestry Commission. Beyond making a profit and carrying out its normal function, it has a number of social responsibilities, which are not separately accounted for and are not separately shown. If they could be separately measured and extracted from the rest of the accounts, which would not be an easy task, there would remain in the accounts the figures relevant to the normal commercial work of the Commission. The House would then be in a better position to judge whether that commercial activity was being carried on with full efficiency.
  The new grants highlight the effect of the mixture of objectives underlying the Commission's policy, and the Government are considering, as the Committee suggested, whether the social benefits of the non-commercial activities of the Commission justify the additional expenditure which is incurred on their account, although I repeat that it is not possible to quantify it with complete precision. I hope that this will satisfy the House and the Committee that we have taken their views carefully into account.
  It is true that the target rate for use of capital is a return of 5 per cent. normally and in development areas a return of 2 per cent., showing a 3 per cent.

  1935
  preference in favour of development areas. That is part of Government policy in assisting development areas. It is a major policy which we cannot debate now but I do not want to hide the distinction from the House. It is one we think it right to make.
  I turn now to the difficult matter in which a number of my hon. Friends have been particularly interested. This is the question of the tolls on the Forth Bridge. First, we must get clear why the tolls are charged in this case. Some of my hon. Friends think that tolls should not be charged at all. A clear philosophy has been established. Tolls are charged where no crossing—I am talking of bridges and tunnels—previously existed, where the cost of the structure is very expensive and where the vast majority of travellers and goods vehicles find sufficient saving of time and money to make use of the new crossing preferable to an alternative route.
  They are justifiable criteria. They have been applied throughout. I do not think that there is any substantial inconsistency. Nor do I think that there is any inconsistency in the calculation of the tolls, although I admit that, in the calculation of tolls and Government assistance, an element of consideration of the merits of each case has entered into the matter.
  I was asked about the cost of collecting the tolls for this bridge. It is just under 6 per cent. and, with the new rate of tolls, will be 4¼ per cent. The cost of collecting the Selective Employment Tax is about one-third of 1 per cent. As the House is aware, but does not always make clear to the outside world, the S.E.T. is the cheapest tax to collect of any revenue tax. It is about one-quarter or one-fifth as expensive to collect as all the other taxes we regularly collect.
  Even so, it is clear that the cost of collecting tolls is immeasurably more expensive. But that does not mean that it is not worth while collecting them, or that the collecting of sums of money of that order is too expensive. My hon. Friend the Member for West Lothian is looking anxious. I point out to him that, if one is collecting comparatively small sums of money—small as compared with S.E.T. and taxes generally—the cost is likely to be a higher percentage than in the collection of a large sum.
  Mr. Dalyell: I understand the small differences, but this is a difference of 12 to 20 times as much for the money collected.
  Mr. Diamond: That is an interesting fact, but that is about all we can say about it.
  I repeat, I am not to be deterred from collecting money because it would cost me 4¼ per cent. to do so. I hold a broad view on these matters and keep both hands open. No money has been wasted in the collection. The erection of the bridge was justified on the basis that there would be tolls to cover the cost. New rates are to come into force which will cover the cost—that is, they will service the loan in the usual way—and the general arrangements, including, in this case, a substantial Government contribution, are such as to make it fair and equitable as between this and other bridges. So long as users are prepared to pay the toll, and go that way rather than another, that is a sensible exercise of freedom on the part of travellers in deciding what it is worth-while for them to do.
  Mr. William Hamilton: I am trying to square my right hon. Friend's argument for justifying the writing off of £243 million of London Transport capital while refusing to write off £16 million capital for the Forth Bridge, which is in a development area.
  Mr. Diamond: There is no proposal in the P.A.C. Report criticising the writing off of large sums in connection with certain large groups, such as that which my hon. Friend has referred to, so that is not a consideration here.
  My hon. Friend asks me why we should not write off the capital for the Forth Bridge instead of charging for its use. The bridge was built on the basis that the users would pay for it. The users are prepared to pay for it and, as long as that is the case, I cannot recommend to the House that revenue of this kind should be forgone when there are so many useful purposes to which revenue can be put. I would otherwise be faced with a loss of X millions of pounds needed for the social services and a host of other things, and, so long as the road users are happy to save time and avoid inconvenience by paying for it, I, too, am content.

  1937
  I think that I have more than taken up the patience of the House in covering the various items. And I have said, the Treasury has given its views on a number of matters. The Committee is fully aware of them and it would not be right for me, therefore, to go into all of them in great detail.
  Mr. Hordern: Will the right hon. Gentleman make one or two remarks about the trading fund of the Atomic Energy Authority?
  Mr. Diamond: I have little to add there to what is already in the answer given by the Treasury, but I will be happy to give a reply to the hon. Gentleman if I can find it. I am sorry. It escapes my attention at the moment. I hope that the hon. Gentleman will forgive me. I can talk to him about any other of about 29 items if he cares to ask me about them and I am sure that, the moment I sit down, the item about the Atomic Energy Authority will stand out in large print—an experience all of us undergo.
  The earlier work and Report of the Committee in relation to excess profits and the question of post-costing, and so on, has been referred to. I want to finish on a constructive and hopeful note. We took full note of the views of the Committee in these respects. As the House knows, we, and I in particular, have been anxious to come to arrangements as between the Government as buyer and industry a s seller on a basis which would prevent, as far as humanly possible, that kind of situation from ever arising again. It seems to me that this was the sensible way to deal with the issue. It has taken time for agreements to be reached voluntarily but they have been reached voluntarily, and the situation is now a happy one—I hope that it will continue to be happy—and for that we are much indebted to the work of the Public Accounts Committee.
  Question put and agreed to.
  Resolved,
  That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last Session of Parliament and of the Treasury Minute dated 4th November 1968 on those Reports (Command Paper No. 3818).

  ROYAL ASSENT
  Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act, 1967, that the Queen has signified her Royal Assent to the following Acts:

  1. Customs (Import Deposits) Act, 1968.

  2. Royal Bank of Scotland Order Confirmation Act, 1968.

  HOUSE OF COMMONS (SERVICES)
  Power given to the Select Committee on House of Commons (Services) to report the Minutes of their Proceedings from time to time.—[Mr. O'Malley.]

  HOUSE OF COMMONS (SERVICES)
  Sixth Report of the Select Committee on House of Commons (Services), in the last Session of Parliament, to be considered forthwith.—[Mr. O'Malley.]
  Considered accordingly.
  Resolved,
  That this House doth agree with the Committee in the said Report.—[Mr. O'Malley.]

  WELSH GRAND COMMITTEE
  Ordered,
  That during the Proceedings on the Statement of Government proposals for reorganising Local Government in Wales, the Welsh Grand Committee have leave to sit twice on the first day on which they shall meet.—[Mr. O'Malley.]

  CHURCH OF ENGLAND (NATIONAL ASSEMBLY MEASURE)
  Order read for resuming adjourned debate on Question [31st October].
  That the Prayer Book (Further Provisions) Measure, passed by the National Assembly of the Church of England, be presented to Her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament—[Mr. van Straubenzee.]
  Question again proposed.
  Mr. Speaker: May I remind the House that hon. Members who spoke in the earlier part of the debate may not speak again tonight?
  Mr. Michael English Mr. Michael English (Nottingham, est) rose——
  Mr. Speaker: I think that the hon. Gentleman spoke in the last debate. If he was speaking when the Measure was "talked out", then, with the willing concurrence of the Chair, he has the Floor.
  Mr. English: I wish to raise a simple point of order. You said, Mr. Speaker, that Members who had spoken in the previous part of the debate would not be allowed to speak again. I hope that with your concurrence we may ask for the leave of the House to do so on this occasion, as I understand that an assurance may be given by the supporters of the Measure which its opponents, of whom I am one, may wish politely to accept.
  Mr. Speaker: I would hope that the House would not give the hon. Gentleman leave to speak again. If the hon. Gentleman reads Erskine May, he will find the sort of occasion on which the House gives leave to an hon. Member to speak again, but such an occasion is very rare. I know that many hon. Members would like to have the opportunity of speaking again by leave of the House. If the hon. Gentleman asks for it, the House may give it, but I would hope that it would not.
  8.35 p.m.
  Sir Harry Legge-Bourke: I have studied all that was said about the Measure on 31st October and since then I have had the opportunity to discuss with the clergy of the Diocese of Ely who have livings in my constituency and with the Bishop of Ely who was present some of the more important Church Measures and other ecclesiastical matters coming before us, particularly this Measure.
  The point with which I deal tonight was not then mentioned in the way in which it was raised with me, but before I come to that I should like to ask the hon. and learned Member for Brigg (Mr. E. L. Mallalieu), who, I imagine, will reply to the debate, some questions. May I express my sympathy with him in that, owing to the sudden hurry of business, he was not able to be present on the last occasion; nor was I. My question arises out of Clause 2(1). I have been studying
  1940
  the Act of Uniformity, 1662. Section 1(4) of the Measure says:
  "The saying or singing of Morning or Evening Prayer"—
  by a layman is the implication—
  "… shall, for the purposes of section 1 of the Act of Uniformity 1662 … be deemed to be a reading by the Minister of the parish.".
  Section 1 of the Act also provides for services to be conducted by Ministers.
  However, Clause 2(1) of the Measure says:
  "Notwithstanding section 10 of the Act of Uniformity 1662 … a lay person specially authorised by the Bishop … may distribute the Holy Sacrament of the Lord's Supper to the people."
  I am prepared to stretch a point now and again as to the meaning of words, but to say that notwithstanding Section 10 a layman may do that and to compare it with what Section 10 of the Act says, is stretching the meaning of words a very long way.
  Section 10 says:
  "And no person whatsoever shall thenceforth"—
  this is after St. Bartholomew's Day, 1662—
  "be capable to be admitted to any parsonage … nor"—
  and these are the operative words—
  "presume to consecrate and administer the holy sacrament of the Lord's Supper before such time as he shall be ordained preist … "
  To say that a layman may now distribute the holy sacrament, notwithstanding Section 10, seems to be stretching the meaning of words too far. Although I do not for a moment suggest that the need does not arise where a layman should be authorised to do this very thing, the right way to do that is to amend the Act of Uniformity, 1662, and not do it by Measure. That is the only point I wish to make on Clause 2 of the Measure.
  I turn now to the Clause which caused the main controversy on the previous occasion. It is one which I discussed with the clergy in the Isle of Ely not so long ago. It is the question of godparents. I am not proposing to re-enter the legalistic wrangle which took place here on 31st October. That is not the point. The point I wish to put, and which I discussed with the clergy in my constituency, is this. The Church of England is alleged now to be bringing its various

  1941
  rules up to date and to make what rules it has enforceable. I know that what is now happening over godparents and what is being put into this Measure about that is desirable but where it is thought desirable to amend the rule over godparents this is already being done. That Clause in the Measure will really make no difference at all in the places where it is likely to be operative in future, because that is already being done there.
  What disturbs some of us is this. If the Church of England is, as I believe rightly, trying to bring its rules and regulations up to date, to put it in a secular manner, it seems to me very important that whatever changes it makes shall at least be capable of enforcement. Clause 3 of the Measure is not enforceable. It may express desirability, it may express what is happening, but it cannot be enforced. Because it is already happening one has to ask oneself, is it really necessary to have this Clause 3 in this Measure at all?
  One of the great difficulties, which we realised on several occasions on 31st October, about these measures is, that this House has no right to amend them. We have to accept a Measure in toto or not at all. I put this very question to the clergy in my constituency and I asked, "Do you feel the need to bring this in, in a way which does not make it enforceable, would justify throwing out the whole Measure?" The impression I got was that the majority said, "Yes."
  This is not, of course, consistent with the voting in the Church Assembly on this matter. We have the record in the Report from the Ecclesiastical Committee at the top of page 5. The House of Bishops voted, Ayes 23, Noes nil; the House of Clergy, Ayes 141, Noes 6; the House of Laity, Ayes 119, Noes 52. So this Measure certainly has strong support in the Church Assembly, and yet one feels, when one talks to one's own clergy about it, that they are not entirely in tune with what the Church Assembly has done.
  I suppose it would not be right for me to go into the methods by which the Church Assembly is brought together, or to do into the question of its composition, but perhaps I may be allowed to make this passing comment. I have for long felt that one of the great difficulties about
  1942
  the whole Church Assembly procedure is that there is not enough contact with the parishes, and diocesan representatives in the parishes are not frequently enough in communication with the parochial church councils, of which they do not have to be members though they normally are. Therefore, one consideration to bear in mind is that, whatever the Church Assembly may do, it should not automatically be thought that that represents the views of the people in the parishes generally.
  I do not dispute that the Church Assembly thinks the Measure desirable, but to me the most impressive part of the discussion I had with the clergy in the Isle of Ely the other day was this, that after going into all these matters we came back to the hard, brutal facts which they had to face today in the world around them, and what I found most fascinating was that their interest in tackling the problems in the world, and which they have to face, is more important to them than this sort of tinkering about with legal amendments of the rules, and particularly if the rules cannot be enforced.
  Of course, were the clergy to flout what is proposed in this Measure, then certain aspects of flouting might involve the clergy themselves in the operation of the Church Discipline Measure. However, I should think that very few instances, under these Clauses of this Measure, would fall into that category.
  We all yearn to see the Church of England, and, indeed, all the demoninations, respected by the people, and to be seen to be efficiently organised and capable of running their own affairs. We all know that there are many weak links, but it seems to me very regrettable that, after all the time that has been spent on these sorts of matters, at the end we finish with Parliament being asked to approve something which is incapable of enforcement.
  For that reason I am, very regrettably, opposed to the Measure. I am conscious that we should not make things more difficult for the Church of England, but if the rank and file of the Church of England were brought into closer communication with those who are trying to improve matters, they would find that members of the Church of England, or indeed Christians anywhere, are not

  1943
  interested in matters of this sort. They are interested in how well men live their lives and how they can in their own lives help the world to live at peace. These are things which matter far more, and for that reason I resist the Measure.
  8.46 p.m.
  Mr. E. L. Mallalieu: I will not weary the House by again traversing all the points raised by this Measure which, in spite of the modesty of his opening remarks in the previous debate on the subject, was done with such excellence in my absence by the hon. Member for Wokingham (Mr. van Straubenzee).
  I shall refer to the point on which there was some difficulty in the minds of hon. Members, and I must also reply to the points put by the hon. Gentleman the Member for the Isle of Ely (Sir H. Legge-Bourke). The hon. Gentleman is a very direct man; had he been tackling the subject dealt with by Clause 2 he would have done so in a much more direct manner. Whether it would have held water in a court of law, I am not prepared to say, but he is not a Parliamentary draftsman, and I can assure him that Clause 2, indirect, circuitous, serpentine as he may feel it to be, is merely machinery to achieve an end which has the sympathy of the great majority of the active members of the Church of England.
  There was on the previous occasion much difficulty on Clause 3. The hon. Gentleman asks whether it is necessary. Yes, it is necessary. Although the things now allowed by the Clause have, in practice, been done for a long time, they have been done under pain of reasonably dire sanctions. If a thing is done in practice, it is surely better for it to be done legally, and that is precisely the purpose of the Clause.
  The meaning of the word "confirmed", in Clause 3, caused difficulty in the minds of hon. Members on the previous occasion. The House will remember that the Clause introduces a new rubric into the Ministration of Public Baptism of Infants, and lays down that godparents shall be persons who have been baptised and confirmed. Since the last occasion on which this Measure was discussed, I have taken the
  1944
  advice of the lawyers who advise the Church. They have expressed the clear view that the meaning of the word is "confirmed in the Church of England".
  Clause 3(1) substitutes a new rubric at the beginning of the Public Baptism of Infants service in the Book of Common Prayer of the Church of England. Its meaning must be interpreted in that context. Therefore, surely it is reasonable to assume that, when the Prayer Book speaks of "confirmation", it means confirmation in accordance with the order in that book. This confirmation comes just after the baptism services and is separated from them only by the Catechism. Furthermore, there are other references in the Prayer Book to "confirmation" which can only have the meaning that I have just attributed to it.
  At the end of the public baptism service itself, the godparents are told to take care that the child be brought to the bishop to be confirmed by him. That must mean confirmed in the Church of England by a bishop of that Church.
  I realise that the Ecclesiastical Committee has reported that the meaning is not altogether clear having regard to the rites of other Churches. Some hon. Members have been troubled about it. However, I am authorised to say that the Church of England will act upon the advice which it has received from its lawyers. I have now reported that to the House, and I am confident that there is no intention of discriminating between Churches of other denominations. In the atmosphere of increasing good will between Churches, now that there is an express power to dispense with the requirements of confirmation it is reasonable to expect the exercise of Christian charity to be more prevalent than before. Indeed, the Ecclesiastical Committee said that this power should enable any difficulty to be surmounted.
  When the Measure was last before the House, doubt was expressed about whether the Clause constituted a relaxation of the present law as stated by the Legislative Committee of the Church Assembly. However, I have reason to believe that it is now generally agreed by right hon. and hon. Members that the requirements of the present Baptism Rubric and of Canon 29 of the Canons of 1603 are that there must be three godparents who are communicants. It is

  1945
  to be hoped that it is now generally agreed that these requirements are relaxed by the Clause under discussion. I have just referred to the relaxation part of it, which is the power given to the minister to dispense with the requirement of confirmation if he so desires.
  As for there being no sanction for that, surely this is not the real point. There can be no sanction for the exercise of a discretion. He is given a discretion. If he exercises it one way or the other, he cannot possibly be sanctioned in any way. I cannot see that that is a reason why it should not be incorporated in the Measure that he should have this discretion.
  However, in the debate on the Measure in the Church Assembly, at the stage of final approval there was an assurance by the Bishop of Chester, who spoke in his capacity as Chairman of the newly-created Canon LAW Revision Commission. That Commission is charged with keeping under constant scrutiny the revised Code of Canons. He gave the assurance that the question of the qualification of godparents would at an early date be considered in the light of the developing relationship between the Church of England and other Christian communions. His words were:
  "I will give my personal assurance that, as soon as the way forward is clearer, this Commission will consider the point that is raised in the amendment of the House of Laity."
  He said, later:
  "I would repeat the assurance that this matter will have immediate attention in the Canon Law Commission."
  Sir H. Legge-Bourke: On the question of sanctions, I had in mind that no sanction can be brought to bear on a godparent who fails to carry out a godparent's duty.
  Mr. Mallalieu: That is true. That has always been and, I suppose, always will be the case, but I submit that is nothing to do with this Measure. It has always been there and is not altered by the Measure.
  The Canon Law Revision Committee has only recently begun its deliberations,
  1946
  but already the question of the qualification of godparents has been given preliminary consideration. Of course, it will bring forward its own suggestions as soon as possible.
  I hope that the House will understand that I have only made this statement after very careful consideration and with full authority. I trust that the House will now be able to say that this Measure should be presented to Her Majesty for her Royal approval.
  Mr. English: On a point of order. May I ask the leave of the House to speak again?
  Mr. Deputy Speaker (Mr. Sydney Irving): I must remind the hon. Member of the remarks made by Mr. Speaker, deprecating a submission by an hon. Member on the right to speak on a second occasion. The quotation for this can be found in Erskine May on page 445. If the hon. Member insists, I must put it to the House. However, I must, once again, deprecate his move to do this.
  Mr. English: Further to that point of order. You may realise, Mr. Deputy Speaker, that this is not with any desire to oppose the Measure, although I was one of its opponents. I would also point out that on the earlier part of this adjourned debate the hon. Member for Wokingham (Mr. van Straubenzee) was allowed to speak again, in effect by the permission of the opponents of the Measure.
  Mr. Deputy Speaker: I cannot recall what happened on that occasion. I am not sure that the facts are correct, anyhow. The hon. Member does not stand in the same relationship to this Measure as the hon. Member for Wokingham did on that occasion. Therefore, I hope that he will not persist.
  Question put and agreed to.
  Resolved,
  That the Prayer Book (Further Provisions) Measure, passed by the National Assembly of the Church of England, be presented to Her Majesty for Her Royal Assent in the form in which the said Measure was laid before Parliament.

  SCHOOLS, KINGSTON UPON THAMES (BUILDING WORK)
  Motion made, and Question proposed. That this House do now adjourn.—[Mr. Fitch.]
  8.57 p.m.
  Mr. John Boyd-Carpenter: I feel that I owe the right hon. Lady the Minister of State an apology for bringing her here twice within a fortnight to answer the same Adjournment debate. But she will recall and, I hope, agree, that, in the circumstances a week ago last Friday, when the Chancellor of the Exchequer wished to make a statement which the House very much desired to hear, it would have been quite wrong had I sought to stand on my rights and take the Adjournment. None the less, I thank the right hon. Lady for her courtesy in being present on both occasions.
  The Secretary of State for Education and Science, this summer, cancelled approvals already given for work on a number of schools in the Royal Borough of Kingston upon Thames. In the questions, to which I shall refer in a moment, which I addressed to the right hon. Gentleman and his right hon. Friend. I referred to three of these schools. As the right hon. Lady knows, four schools are concerned. On a previous occasion I arranged for her office to be notified that I would make, at any rate, a passing reference to the fourth. I hope, therefore, that there is no misunderstanding between us on this point.
  I hope, too, that neither the right hon. Lady nor the House will seek to take the point that I, a fairly vigorous exponent of the need for economy in public expenditure, am inconsistent in that line in urging expenditure in these matters affecting my constituency.
  There are two factors here which distinguish this case from the general run of requests for expenditure with which the House and the right hon Lady must be only too familiar. First, I am not asking for a new approval, or newly thought out demands. I am asking simply for the implementation of agreement already given, of approvals already granted in respect of the work. Secondly, this is a case in which the reasons given across the Floor of the House so far for the with-
  1948
  drawal of approvals already given have been so irrelevant to the whole matter as to cast considerable doubts on their validity.
  The matter arose this summer, and when the withdrawals became known I followed them up with some Questions. The first Question to which I invite the attention of the House was asked on 25th July, when I am reported as having asked the Secretary of State for Education and Science
  "why he has now withdrawn his approval for the urgent work previously authorised at St. Paul's Church of England School, Beverley Boys' School and Bonner Hill Secondary Girls' School in the Royal Borough of Kingston upon Thames; and what account he took of the disagreement over secondary school reorganisation in making these decisions."
  The right hon. Lady replied:
  "These projects have not found places in the reconstructed school building programme for 1968–69. My decision had nothing to do with secondary reorganisation since the schools were originally submitted prior to the circular on secondary reorganisation and included in a programme."—[OFFICIAL REPORT, 25th July, 1968; Vol. 769, c. 971.]
  In a subsequent answer the right hon. Lady referred to the debate which had taken place in the early hours of that morning.
  Not being satisfied with that, I resumed Questions on 24th October, when the House returned after the Summer Recess. I then asked the Secretary of State a general question:
  "… why he has now cancelled school-building projects previously approved by him."
  Again, the right hon. Lady replied:
  "The major programmes for 1968–70 had to be recast when the resources for school building were reduced following the postponement of raising the school-leaving age and the wthdrawal of the associated building allocations. As a result, some projects previously authorised to start in those years or earlier are being deferred. If we had not controlled the backlog of unstarted projects, we should not have kept within the expenditure limit fixed for this year."
  To complete the picture, in a further Question, to which the right hon. Gentleman replied, I suggested that the money being expended on the Newsom Committee might be better expended on these schools. The right hon. Gentleman's reply, with which I wholly agree, was:
  "That depends on the right hon. Gentleman's social priorities."—[OFFICIAL REPORT, 24th October, 1968; Vol. 770, c. 1566–67.]
  I think that the money would have been better spent on these projects.

  1949
  I propose to deal, first, with the question whether an approval already given can and should be withdrawn because there has been a change of policy in respect of tie school-leaving age. Whether or not an argument can be founded with respect to the two secondary schools in this list, to suggest that a change in the school-leaving age can have any relevance whatsoever to proposals for work on the two primary schools is really so absurd as to be quite unworthy of being put from than: Box. How can a change in the school-leaving age, which, admittedly, can affect secondary schools—though I shall suggest to the House that on the facts of this case this has no bearing on the matter—have the slightest relevance to much-needed work on primary schools which are completely unaffected by whatever the school-leaving age may happen to be at any time? I hope that the right hon. Lady will indicate how that answer came to be given.
  Subsequent to my seeking this Adjournment debate—no doubt by one of those happy coincidences which adorn our public life—the Royal Borough of Kingston-upon-Thames was informed by the right hon. Lady's Department—although, on a point of courtesy, I was not—that the two primary schools which had been taken out of the 1968–69 programme would be put into the 1969–70 programme. To that extent, perhaps, we have made a little progress. None the less, the effect of delaying projects which had been previously approved for earlier programmes to the 1969–70 programme is to continue thoroughly difficult and overcrowded conditions in these schools, and has the further result, at a time of rising building costs, that these schools will now cost more to have the work done than would have been the case had work proceeded at the time for which approval had been given.
  With the present change in building costs this will be a substantial element and, I suggest, a wholly unnecessary one. I must therefore ask the right hon. Lady for an assurance. We are told that these two primary schools will now go into the 1969–70 programme. Is that a firm assurance? They have already been approved in earlier programmes, and arbitrarily and unilaterally taken out by the right hon. Gentleman. May I have the right hon. Lady's assurance that in no circum-
  1950
  stances whaever will this undertaking of acceptance for the 1969–70 programme be subjected to the same treatment? In other words, may I be told that this placing, in this admittedly later programme, is firm.
  I now turn to the two secondary schools—Bonner Hill Girls' School and Beverley Boys' School. There is no need for me to take up the time of the House in arguing that the work required is urgently needed. That is accepted, because these schemes had been approved by the Department, which cannot now seek to argue that they are other than urgently required. With all the demands that fall on the right hon. Lady and her right hon. Friend, where schemes have actually been thought to be urgent and to demand such priority as to be approved, it is inconceivable that at this time of day anybody could seek to argue that these are not urgently needed.
  Bonner Hill Secondary Girls' School—I do not know whether the right hon. Lady knows it—carries on under difficult and almost medieval conditions. The fact that a remarkably good teaching job is done there is due solely to the complete devotion to duty of its staff but the conditions under which children are educated there are not good enough in the modern world.
  The situation is different in the case of Beverley Boys' School. This is a good school, but it is now very overcrowded. The work involved is an extension, which was approved at a cost of £100,000. I understand—and this reinforces the point that I made in respect of the primary schools which will be in the 1969–70 programme—that the work approved which could have been done at the relevant time for a cost of £100,000 will now cost £116,510. We have no assurance that that school will be placed in that programme, or in any programme. I have here a letter from the headmaster of this school, in which he says:
  "The extension of this school is of great urgency and even this extension will only bring the school up to the standard required by the Minister and would not be an improvement above the normal. We have the site and this building would be necessary whatever happens regarding reorganisation"—
  he means secondary reorganization—
  "in the borough. The building is necessary for the work of the school as it is at present

  1951
  situated and would be necessary for any future development in education."
  Yet there has been no assurance yet from the Department that this will be placed in any programme.
  In my earlier Question, I asked the right hon. Lady whether this treatment of the educational programme for the Royal borough was connected with the fact that those responsible for education there take a different view on the system of secondary education appropriate to the borough from that taken by the Ministry. There is a perfectly genuine and open difference of opinion.
  In her earlier Answer to me, the right hon. Lady denied that this decision of which I complain had anything to do with that disagreement. I hope that this is so, because the House would feel it utterly unworthy of a great Department of State to bring financial pressures of this kind to bear, involving the repudiation of approvals already given, simply because there was a difference of view on policy.
  I hope that this may be reaffirmed, but the right hon. Lady will appreciate that she is in a dilemma. Has the Royal borough been singled out for particularly bad treatment in this respect? If so, why is that? If so, what other reason is there but an attempt to punish the borough, and therefore the children, because of a disagreement on policy? Or—this is the other leg of the dilemma—is this being done all over the country? Are approvals already given being revoked throughout the country? If so, the right hon. Lady and her Department are entirely free of the charge of any unfair discrimination, but on the other hand this would indicate an appalling state of affairs.
  Hon. Members familiar with these matters know the hard preparatory work which must be done to get a particular educational building project into the programme. Rightly, the right hon. Lady's officers test these programmes rigorously before they can go forward for approval and they must be examined in competition with other projects in other areas. This is right, but when projects have passed those tests and been given priority over others because of their urgency, when they have been accepted as necessary, it is a very serious thing to upset the plans of the local authority and the hopes of
  1952
  the parents by retrospectively withdrawing those approvals.
  I have mentioned the disagreement in principle on the reorganisation of secondary education between the Department and the education authority of the Royal borough. I do not wish to exacerbate that, but I hope that the right hon. Lady will understand the exasperation which is caused to a local education authority in an area intensely conscious of the need for education to be at one and the same time nagged by the Department to make changes which, whatever merits they would have, would involve considerable expense, and to be faced with approvals already given for necessary work being withdrawn. She could hardly create a worse atmosphere.
  Her right hon. Friend observed at Question Time today that changes in the attitudes of local authorities towards secondary reorganisation were being forced not by him but by public opinion. In Kingston-upon-Thames, this issue of secondary education was a major one at the recent local elections. I do not want to hurt the right hon. Lady's feelings, but I must point out that at those elections only one member of her party was returned to a council of 60, and that one, as I must in all fairness and frankness admit, because of his personal qualities and service to the borough rather than because of any affection for his party. Therefore, whatever is being done by the borough council in this respect is being done in accordance with the will of those who elected the council, which is something, I might add, to which we here might pay equal attention.
  What does the right hon. Lady propose in respect of the two secondary schools—Bonner Hill Girls and Beverley Boys? Are the approvals, now promised for the two primary schools for 1969–70, confirmed? Is the disruption of the programme and the withdrawal of four approvals part of an attempt to put pressure specifically on a local authority with which the right hon. Lady is in dispute, or is it, as some suspect, typical and characteristic of what is happening throughout the country?
  9.15 p.m.
  The Minister of State, Department of Education and Science (Miss Alice Bacon): The right hon. Gentleman the

  1953
  Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that he had brought me here twice for the same Adjournment debate. I fully recognise why that is so, and I would thank him on behalf of the Government for the way in which he so readily gave up his Adjournment debate a fortnight ago so that my right hon. Friend the Chancellor of the Exchequer could make his statement. As I say, the right hon. Gentleman apologised to me for bringing me here twice, but I have been thinking that it could have been worse—we might have been making our speeches at 5.30 this morning. That, at least, is something for which we must both be thankful.
  The right hon. Gentleman said that he believed in the utmost economy but, like so many others, he believes in economy in general but not in particular when it affects his constituency.
  Mr. Boyd-Carpenter: I have dealt with that.
  Miss Bacon: He also said that these schools are special cases. This argument is not unknown to me when I receive deputations both from Members of Parliament and from local authorities. Of course, when looked at by those in the vicinity, all schools are to them special cases, but this is an argument that I get on many occasions——
  Mr. Boyd-Carpenter: The Minister of State really must have misunderstood my argument. I suggested that they were special cases, not because of their merits, which are not in dispute, because they have been proved, but because what is involved is not a request for new approvals but merely the honouring of old ones already given.
  Miss Bacon: I am coming to that point. The right hon. Gentleman will appreciate as we go along that Kingston is not alone.
  The schools are: Beverley Secondary Boys' School, the extensions to which will cost £125,000; Bonner Hill Secondary School for girls, to be rebuilt on a new site at a cost of £329,000; St. Paul's Church of England School, which is a 240-place instalment of a 320-place junior school, to cost £75,000, and Clarence Avenue Junior School, which is a 120-
  1954
  place instalment of a 320-place junior school, to cost £49,000.
  As the right hon. Gentleman says, the Beverley School was included originally in the authority's approved building programme for 1967–68; the Bonner Hill School in that for 1966–67; St. Paul's in that for 1968–69, and Clarence Avenue in that for 1969–70. The local education authority could have started the two schools at any time before 31st March, 1968. One of them could have been started any time between April, 1966, and March, 1968, and the other between April, 1967, and March, 1968. I am a little puzzled why if these schools are so urgent the local authority did not start them during those periods when they could have done so.
  Mr. Boyd-Carpenter: It was because it trusted the Department of Education and Science to allow it to proceed in accordance with its plans on the basis of a firm approval given. It has learned now not to trust the Department.
  Miss Bacon: We have a certain amount of money each year to be allocated for school building. It is a little unfair to other local authorities when local authorities ask for schools which they consider to be really urgent and when they are allocated a school to start in April, 1969, and have not started that school by April, 1968. They are pushing out of the queue schools in other local authority areas which would have been allowed to go ahead in April, 1966. This is a point I make in passing because with a certain amount for school building any local authority which does not start the school building in the year which it is allocated means that another local authority ready to go ahead has been pushed out of the queue.
  I shall explain to the right hon. Gentleman what has happened about these schools, and indeed, others in the rest of the country. In January my right hon. Friend the Prime Minister announced measures for dealing with the economy. He said that it had been decided to postpone the raising of the school leaving age for two years, but local authorities had already been allocated £36 million for each of three years for building for the raising of the school-leaving age. It was in order to save

  1955
  the £36 million in each of two years that this decision was taken. It was impossible, as I am sure the right hon. Gentleman will realise, to take £36 million worth of school building out (DI' one year's programme which had previously been allocated without taking out some schools which had been in the original programme. One cannot just take £36 million out of a year's building without postponing some of the projects and schools which have already been allocated.
  My right hon. Friend said that he could see that this might affect secondary schools but not primary schools. We have a global figure and recasting priorities in the way we do means that the whole school building programme has to be recast throughout the country. The right hon. Gentleman will know that we have to give first priority in the school building programme to areas of new population and increasing birthrate before we can deal with projects which are replacements of old buildings. I add in passing that the full £36 million was not withdrawn because £7 million was allocated in each of the two years to help those local authorities which had been relying on the raising of the school leaving age money to start secondary reorganisation in 1968–69.
  I am pleased to say that the £7 million in each of those two years has meant that no comprehensive scheme due to start in 1968–69 had to be postponed. However, because of the changed circumstances and the fact that we had to take out £29 million from the school building programme in each of the years, local authorities were asked to review their proposals for 1968–69 including schools allocated in earlier years but not expected to start before 1st April, 1968. We asked local authorities to look at their priorities in the light of the changed circumstances because we thought it only right to ask them for their revised priorities in the light of the new situation.
  I can assure the right hon. Gentleman that there were many local authorities like Kingston which had had schools approved but had not built them before the announcement of the postponement
  1956
  of the raising of the school leaving age. Indeed, adding all the schools which had been allocated to local authorities before that time the amount of backlog of unstarted schools was £70 million. Like Kingston upon Thames, some local authorities had had schools allocated and had not built them in previous years. It was clear that if nothing were done local authorities would have substituted schools from this backlog and there would have been no saving at all and no control whatever over the annual expenditure on school building.
  In passing. I mention that our new procedure for new school building programmes should get rid of the backlog problem in future. In future we shall approve only those schools which are ready to start within the year they are allocated. Local authorities were asked to review their proposals for 1968–69 and 1969–70 and submit new proposals with their revised priorities. In the case of Kingston the local authority changed its priorities for its proposals for 1969–70. and put first of all the St. Paul's Church of England Junior School, secondly the Clarence Avenue Junior School, third, the Beverley Secondary Boys' School extension, and fourth the Bonner Hill Secondary Girls' School rebuilding.
  The junior schools were justified on basic need grounds, as a shortage of places, and were both accepted in the 1969–70 programme which has just been announced. This means that two of the schools about which the right hon. Gentleman is complaining, the St. Paul's and the Clarence Avenue Schools will be able to start at about the same time that they would have been ready to start. The approvals for these projects have not been withdrawn, and Kingston can start these schools at any time it likes.
  The Beverley and the Bonner Hill Secondary Schools are basically improvement projects rather than basic need—that is shortage of places. The local authority has said that it considers that there is an element of basic need because numbers in the catchment areas of these schools are rising. However, there has been no suggestion that there was any difficulty about accommodating secondary school children in the borough as a

  1957
  whole in the years in question. Indeed, I understand that the local authority is considering closing the Burlington Secondary Girls' School, Malden.
  As the right hon. Gentleman knows, in this period when we have to be very careful about the amount of money we spend on school building we have to give first priority to areas of new population. No newly authorised improvement projects were allowed to start in 1968–69 in the whole of the Greater London area, except those which qualified for a share of the additional allocation of £7 million for secondary reorganisation. Kingston, therefore, is not alone in this. The right hon. Gentleman said that these two schools were not allowed because Kingston has riot so far submitted an acceptable plan for secondary reorganisation. It is true that Kingston has no acceptable plan. I met the local authority about this some time ago and told it that our policy, which has been stated on many occasions since 1965, is not to approve new secondary schools projects which would be incompatible with the introduction of a non-selective system of secondary education.
  I will not weary the House, those of us who are left in it, by going through the statements which have been made, but I could give the right hon. Gentleman statements made in circulars going back as far as 1966, and in speeches made by my right hon. Friend the President of the Board of Trade, when he was Secretary of State for Education. The right hon. Gentleman tried to infer that, because of the attitude to secondary reorganisation, the Labour candidates had not had very much success in the Kingston local elections. But my information is that among the people of Kingston there is a shift of opinion in favour of comprehensive reorganisation and that in many areas which are by no means Labour there is a demand from the general population for schools to be reorganised on comprehensive lines. However, as I have said, there were reasons other than the question of secondary reorganisation why these schools were not included in this year's programme.
  As regards the future, Kingston's bids have already been put in for the new design and preliminary lists to be considered in future years, and they are at
  1958
  present under consideration in my Department. I cannot say what future allocations to Kingston will be. I could not tell any local authority what schools it will be allowed in future years. It depends on the total amount of resources to be devoted to school building. It depends, too, on the priority relative to schools in other areas. Also, as my right hon. Friend has said, as I have said, and as his predecessors have said on many occasions, we would give priority to secondary schools which are compatible with a scheme of comprehensive reorganisation.
  I have pointed out that there were other reasons why these schools could not be included, but it would be wrong to suggest that we should not in the future take account of whether or not new secondary school buildings were compatible with a scheme of secondary reorganisation.
  I claim that Kingston has had its fair share of school building in this year's programme, considering that its two top priorities, the junior schools, have been given a place in that programme. I am sure that the right hon. Gentleman will realise that, to that extent, Kingston has not been singled out for treatment different from any other area.
  Mr. Boyd-Carpenter: How does what the right hon. Lady has just said about her decision being affected by the disagrement on secondary reorganisation between her Department and the borough accord with the Answer which I have already quoted which she gave on 25th July:
  "My decision had nothing to do with secondary reorganisation … "?
  Miss Bacon: The right hon. Gentleman has not put the whole of it. What I intended to say—I am sorry if it was not clear on that occasion—is that these schools had already been included and Kingston had been told that it would have these schools before Circular 10/66 was issued. So the original decision had not been affected by that. But, of course, we cannot say that in looking at future allocations for secondary schools we can put out of our minds the national policy of the Government which is to have schemes of secondary reorganisation

  1959
  throughout the country. However, even if there had been a scheme of secondary reorganization in Kingston, it is clear from what I have said that these two schools could not have been given
  1960
  priority for the reasons which I have stated.
  Question put and agreed to.
  Adjourned accordingly at twenty-six minutes to Ten o'clock.

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  PAYMASTER-GENERAL (SPEECH)
  CHANCELLOR OF THE EXCHEQUER (SPEECH)
  CHANCELLOR OF THE EXCHEQUER (SPEECH)
  WOMEN'S CONSULTATIVE COUNCIL
  WOMEN'S CONSULTATIVE COUNCIL
NATIONAL FINANCE
  Foreign Currency Operations (Authorised Dealers)
  Foreign Currency Operations (Authorised Dealers)
  Scientists and Engineers
  Scientists and Engineers
ECONOMIC AFFAIRS
  Development Areas (Scotland)
  Development Areas (Scotland)
FOREIGN AND COMMONWEALTH AFFAIRS
  United Nations (Outstanding Contributions)
  United Nations (Outstanding Contributions)
LOCAL GOVERNMENT
  Cultural Buildings (Loan Sanctions)
  Cultural Buildings (Loan Sanctions)
SCOTLAND
  Burrell Art Collection
  Burrell Art Collection
  Scottish Fashion Fair
  Scottish Fashion Fair
  Grant Committee (Recommendations)
  Grant Committee (Recommendations)
  Mineral Deposits
  Mineral Deposits
  Industrial Development (Aid)
  Industrial Development (Aid)
  British Standard Time
  British Standard Time
  Milk and Dairies Legislation
  Milk and Dairies Legislation
  Water Rate
  Water Rate
  Statutory Appointments
  Statutory Appointments
  Land Use
  Land Use
  Health Services (Green Paper)
  Health Services (Green Paper)
  General Teaching Council
  General Teaching Council
  Storm Damage (Grants)
  Storm Damage (Grants)
  Land Court (Legal Aid)
  Land Court (Legal Aid)
SOCIAL SERVICES
  Day Nurseries
  Day Nurseries
  Prescription Charges
  Prescription Charges
HOSPITALS
  Pontypridd and Rhondda (Eye Operations)
  Pontypridd and Rhondda (Eye Operations)
  Nuneaton
  Nuneaton
  Ear, Nose and Throat Facilities Nun- eaton (Transfer to Coventry Hos- pital Wallsgrave)
  Ear, Nose and Throat Facilities Nun- eaton (Transfer to Coventry Hos- pital Wallsgrave)
  Coventry Hospital, Wallsgrave (Operating Cost)
  Coventry Hospital, Wallsgrave (Operating Cost)
  Hampton Hospital
  Hampton Hospital
  Nurses' Salaries
  Nurses' Salaries
BOARD OF TRADE
  Electric Lamps (Monopolies Commission Report)
  Electric Lamps (Monopolies Commission Report)
  Weather Advisory Trawler "Orsino"
  Weather Advisory Trawler "Orsino"
  Unemployment (Ashington)
  Unemployment (Ashington)
  Advance Factories (Northern Region)
  Advance Factories (Northern Region)
TRANSPORT
  LASH Lighterage
  LASH Lighterage
  British Standard Time
  British Standard Time
ROADS
  Fylde Coast (M6 Link)
  Fylde Coast (M6 Link)
RAILWAYS
  Leases (British Railways)
  Leases (British Railways)
WALES
  Planning Authorities
  Planning Authorities

Preamble
The House met at three of the clock: The LORD CHANCELLOR On the Woolsack.
Prayers—Read by the Lord Bishop of Leicester.
The Viscount Trenchard—Took the Oath.

THE EASTER ACT 1928
3.6 p.m.
LORD MERTHYR: 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, with reference to the Easter Act 1928, and in particular to Section 2(2) thereof:—

(1) how many "opinions officially expressed by any Church or other Christian body" have been received since the Royal Assent was given to the Act on August 3, 1928;

(2) how many of such opinions were

(a) in favour of, and

(b) against
the Act;

(3) what action, if any, has been taken "having regard to" such opinions;

(4) how much longer time, if any, is to be allowed for the receipt of such opinions;

(5) upon what date it is intended to bring the Act into force.]

THE MINISTER OF STATE, HOME OFFICE (LORD STONHAM): My Lords, following the passage of the Easter Act 1928, opinions were sought from 19 Christian Churches in the United Kingdom, and from the Holy See through the diplomatic channel. In March, 1964, a further approach was made to the British Council of Churches and to the Roman Catholic authorities here. It seems that all the major Christian denominations in this country would welcome a fixed Easter
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but that few, if any, would wish to see it introduced without general agreement among the Western Churches, and with the Roman Catholic Church in particular. The World Council of Churches have been prompted to consider the matter and further action by the Government must now depend upon the amount of agreement they can achieve. So far, of the 232 member Churches and associates 120 have replied. All of these favour a fixed Easter, but only 37—and they with some hesitation—would contemplate Easter being fixed on a regional basis. The Government cannot set a term to the deliberations of the World Council of Churches, nor, in the circumstances, can they predict when it may be possible for the Easter Act to be given effect.
LORD MERTHYR: My Lords, would the noble Lord agree that there is not a word in this Act of Parliament, passed 40 years ago, about the agreement of all the Churches, or any of them?
LORD STONHAM: My Lords, when the Act was passed in 1928 it showed that there was a wide measure of acceptance by the Churches of the principle of a fixed Easter, but it was qualified then, as now, by the wish that this should first be agreed upon among Christian communities in general. The difference between then and now is that active measures are being taken to achieve this wider objective. But if the noble Earl thinks that this Government would think of dictating to the Christian Churches in this matter, then he is quite wrong.
LORD BROOKE OF CUMNOR: My Lords, is the noble Lord aware that it was on my initiative that the further discussions which he mentioned in March, 1964, were undertaken with the Churches in this country, and that this was done as a deliberate act of policy so as to see whether the Government could speed up a general decision on a fixed date for Easter? Will the noble Lord give an undertaking to your Lordships that the Government will not wash their hands of the matter, but will continue to urge in every way they can that a sufficient measure of agreement should be obtained so that this reform can take place?
LORD STONHAM: My Lords, I assure the noble Lord, Lord Brooke of

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Cumnor, that there is no question whatever of the Government washing their hands of action in this matter. Good Friday and Easter Sunday comprise the most solemn Festival in the Christian Calendar, and it is not to be thought of that we should dictate in this matter. As the noble Lord is probably aware, the Vatican Council have declared in favour, in principle, of a fixed Easter, but they have also indicated that they would not go ahead until agreement had been reached with the Eastern Orthodox Church. So far there has been no such agreement. We have to move forward together in this matter. The situation now (and this is a further answer to the noble Lord) is that consultations are to be held between the Faith and Order Commission of the World Council and the Roman Catholic Secretariat for Unity, and these are being held in June of next year. So one can hope that agreement may well be reached in somewhat less than just the "foreseeable future", and in that case the Government will almost assuredly act.
LORD DERWENT: My Lords, the noble Lord said, I think, that there could not be an agreement until the Eastern Orthodox Church had agreed. But their Easter is on a different date now, is it not?
LORD STONHAM: My Lords, in the Eastern Orthodox Church, because they do not use the Gregorian Calendar, Easter Day is different. Before the Vatican Council are prepared to move forward they want to get agreement with the Orthodox Church. In other words, it is unlikely that we shall get this agreement for a fixed Easter unless all the major Churches of the World Council of Churches can come to agreement. That is the particular difficulty that we have yet to overcome.
LORD BALERNO: My Lords, in the absence of the President of the British Council of Churches, the most reverend Primate, may I, as a Vice-President, inquire whether, in the event of the British Council of Churches making a recommendation that the date of Easter be fixed, the Government would give serious
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consideration to that recommendation regardless of the position of the Orthodox Church?
LORD STONHAM: My Lords, the Government would give serious; consideration to any recommendation of the British Council of Churches. But I would remind the noble Lord of the first Answer I gave, which was that no one was in favour of action on a regional basis. One would imagine (though I cannot really believe that this would happen) that if there were a separate recommendation from the British Council of Churches, as the noble Lord envisages, it could be only on a regional basis, and I should have thought that this ought not to be acceptable to them; and I cannot say that it would be something that would prompt action by the Government in this matter.
LORD MERTHYR: My Lords, may I ask the noble Lord whether he is aware that three years ago, when I asked a similar Question, I was told to wait one more year?
LORD STONHAM: My Lords, I am perfectly well aware of that because not only did the noble Lord ask the Question three years ago but I answered it. I think it was then excellent advice, although perhaps slightly too optimistic. But I will say to him again: please wait one more year. I hope that he will be there to ask the Question and that I shall be at this Box to answer it, and that I shall give him a favourable reply.
THE LORD BISHOP OF LEICESTER: My Lords, is the noble Lord aware that his answers give complete satisfaction to those of us who sit on these Benches, and that we consider tint he has shown a very exact knowledge of the present state of ecclesiastical opinion on this matter? Secondly, is he aware that there would be very considerable reluctance in Christian circles in England to embark on a fixed Easter which took them out of step with other Christian countries in Western Europe?
LORD STONHAM: My Lords, I am much obliged to the right reverend Prelate for confirming what I understood to be the situation in the British Council of Churches.

COLLEGES OF EDUCATION: STUDENTS' PLACES
LORD ABERDARE: 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 how many students offered places at colleges of education in the years 1966, 1967 and 1968 failed to take them up.]
BARONESS PHILLIPS: My Lords, full information is not available, but the Annual Report of the Central Register and Clearing House for 1967 contains statistics about the number of applicants accepted by colleges of education who also applied for entry to university. The number of such applicants who did not take up their college places was 2,696 in 1967 and 2,311 in 1966. I understand that the corresponding figure for 1968 is expected to be about 2,650.
LORD ABERDARE: My Lords, I am grateful to the noble Baroness for those figures. Would she agree that these are very high figures and show a considerable hesitation among those who otherwise were going into teaching, which indicates that they are not quite sure of their future career possibilities in teaching? Has not this situation been aggravated recently by the Government restrictions on local authority expenditure, which have led to real fears of unemployment among teachers and students for teaching?
BARONESS PHILLIPS: My Lords, I am not sure that the noble Lord can read into my Answer what he appears to, because upon discussion one finds that many of the candidates—I would guess the majority of them—prefer to have a university place. This appears to be the way the Clearing House system works. The colleges themselves, incidentally, have more than their accepted intake already waiting to go in.
LORD HEYCOCK: My Lords, would it be perfectly true to say that people who apply for a place in a college of education normally are sitting their "A" level examinations in the year and, subject to passing "A" level examinations, would go to university? If a closer analysis of that were taken it would be
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found that most of those people invariably take a specialised subject in university, as distinct from taking the general subjects in a college of education.
BARONESS PHILLIPS: My Lords, I thank the noble Lord, whose knowledge in this field we of course bow to. I certainly agree that, while it is almost impossible to obtain a detailed analysis, what he has suggested is borne out by the train of events the noble Lord has mentioned.
LORD PEDDIE: My Lords, may I ask my noble friend whether the figures quoted include those who failed to survive the course?
BARONESS PHILLIPS: No, my Lords. These figures are quite specifically what I said. They are the numbers of applicants who were accepted for colleges of education and who had also applied for entry to university. In other words, they are people who enter for both. I think the noble Lord was referring to those students who had in fact started a course and failed halfway.
LORD LEATHERLAND: My Lords, would not my noble friend agree that at the present time there are far more students who are potential teachers in these colleges of education than ever were under the previous Government?
BARONESS PHILLIPS: My Lords, that is so.
LORD ABERDARE: My Lords, the noble Baroness has not really answered my Question exactly as I wanted. I was not asking for figures of those who subsequently went to university; I was more concerned with those who applied for and were offered teacher-training vacancies in colleges of education and then did not take them up because, for one reason or another, they did not go into teaching. I quite understand that these figures may not be available.
BARONESS PHILLIPS: My Lords, I am not sure that they would be completely available, inasmuch as they would cover every possible entrant; but I will see whether I can obtain some other figures for the noble Lord. I attempted to answer the Question as put originally, but the amplification throws a slightly different light on it.
LORD TREFGARNE: My Lords, can the noble Baroness say what happens to these vacancies? Do they remain vacant or are they subsequently offered to other students?
BARONESS PHILLIPS: My Lords, I am happy to tell the noble Lord that the vacancies are filled.

YOUTH SERVICES AND THE SEEBOHM REPORT
LORD BEAUMONT OF WHITLEY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what steps the Department of Education and Science is taking to discuss with members of local education authorities and voluntary bodies dealing with Youth Services the proposals of the Seebohm Report.]
BARONESS PHILLIPS: My Lords, general consultations on the Seebohm Report are being conducted by my right honourable friend the Secretary of State for the Social Services. The Seebohm Committee did not report on the Youth Service itself. In so far as their recommendations may affect the situation in which the Youth Service operates, these are already being taken into account by the Youth Service Development Council, which is conducting its own review of the future scope and pattern of the Youth Service and is expected to present its recommendations to the Secretary of State for Education and Science in the spring of next year. When the Council's advice is received, the local education authorities and the voluntary youth organisations would be among those consulted.
LORD BEAUMONT OF WHITLEY: My Lords, I thank the noble Baroness for that satisfactory reply.

FALKLAND ISLANDS AND ARGENTINA
3.20 p.m.
LORD OAKSHOTT: My Lords, in begging leave to ask the Question which stands in my name on the Order Paper, may I be permitted to express to the
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noble Lord, Lord Chalfont, my most sincere good wishes on his birthday and to say how much I, for one, envy his youthfulness.
[The Question was as follows:
To ask Her Majesty's Government (i) whether they have yet received from Her Majesty's Ambassador in the Argentine confirmation of the reported statement of the Foreign Minister regarding the Falkland Islands; and (ii) if the statement has been confirmed, whether they will now remove from the agenda of the talks all discussion of sovereignty of the Islands.]
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD CHALFONT): My Lords, I am really most grateful for that introduction, especially to this Question.
Her Majesty's Ambassador has confirmed that the Foreign Minister said in reply to journalists' questions that an agreement with Britain on the Falkland Hands would be signed only if it conformed to Argentine national interests and if it included recognition of Argentine's sovereignty. So far as the second part of the Question is concerned, there exists no formal agenda of the type which the noble Lord seems to have in mind. The talks are taking place because there is a dispute about sovereignty; therefore the subject of sovereignty can hardly be excluded from them. May I suggest that the noble Lord should now await the Statement which my right honourable friend will make next week in another place and which I hope to repeat in your Lordships' House?
LORD OAKSHOTT: My Lords, I am very much obliged to the noble Lord for that Answer, which I think takes us rather further than the Answer which he was able to give yesterday to my noble Leader. But is it not the case that what the Foreign Minister has said—and there was a further sentence in the quotation which the noble Lord has given, in which the Foreign Minister said it (that is the future of the Islands) should not now be subject to the will of the Islanders—is so completely contrary to the policy of Her Majesty's Government which has so often, and so rightly, peen represented in this House, and to the assurances which the noble Lord has

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given, that any question of sovereignty as part of the discussion ought to be discontinued at once?
LORD CHALFONT: My Lords, I think I have answered this question on more than one occasion in your Lordships' House and there is no profit in repeating what I have already said. The official Record is there for everyone to consult, and I suggest that any further information must await the return of my right honourable friend.
EARL JELLICOE: My Lords, while congratulating the noble Lord on being even younger than I am, albeit only marginally so, may I put two supplementary questions to him? Can he tell us what effect a transfer of sovereignty over the Falkland Islands would have on the Falkland Islands Dependencies? Would the surrender of sovereignty over the one imply a surrender over South Georgia and the other Islands? Secondly, can the noble Lord assure us that the defence implications of a possible transfer of sovereignty have in fact been fully examined, especially in the light of the world-wide expansion of Soviet maritime power?
LORD CHALFONT: My Lords, the Falkland Islands Dependencies, namely, South Georgia and the South Sandwich Islands, have not been included in the scope of the discussions between this Government and the Argentine Government. So far as the defence implications are concerned, these, like all other implications of this matter, have been in the minds of Her Majesty's Government throughout these discussions, and will remain so.
LORD WIGG: My Lords, will my noble friend agree that the exchanges today are of a most agreeable character, and would it not be a good thing that, in both Houses, we should aim to get such subjects as the Falkland Islands or defence, discussed on the same basis, rather than in the rather tendentious manner in which they have been discussed in the Press and in other places—perhaps even in this House over the last few days?
LORD CHALFONT: My Lords, I am most grateful to my noble friend for that intervention. I agree with him that
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the calmer the exchanges on this subject can be, the more it will be in the interests of everybody, and especially the Falkland Islanders themselves.
EARL JELLICOE: My Lords, I am sorry to trouble the noble Lord again but I should like to be quite clear on this. He said that the possible transfer of sovereignty over the Dependencies has not been brought within the scope of the present discussions. Does that mean that, from the standpoint of International Law, if sovereignty were to be transferred in regard to the Falkland Islands that would involve no change of status for the Dependencies?
LORD CHALFONT: My Lords, there is a crucial hypothesis there, and I am afraid I cannot answer as to what would take place in these hypothetical circumstances. I can simply confirm that the Dependencies were not mentioned in the United Nations resolution, in pursuance of which the talks are being held, and that therefore these Dependencies have not been included in the discussions. I can go no further than that.

THE CHRISTMAS RECESS
LORD BESWICK: My Lords, subject to the progress of Business, it is hoped that the House will rise for the Christmas Recess on Wednesday, December 18, and return on Tuesday, January 21, 1969.
EARL ST. ALDWYN: My Lords, I am grateful to the noble Lord for giving that information to the House, but it disturbs me a little because there was some discussion, when we sat rather longer than another place in the summer, that there should be some small compensation. In this announcement I do not see any sign of such compensation.
LORD BESWICK: My Lords, I am sorry that the noble Earl should be thinking in terms of more time off when we are calling for extra productivity elsewhere. In fact, the dates which I have mentioned do give us three more days off than another place. Although previously I said something about compensation, I did not necessarily relate it to the Christmas Recess, and I still have hopes for a little later on.

CUSTOMS (IMPORT DEPOSITS) BILL
Brought from the Commons, earlier this day, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911, and printed (pursuant to Standing Order No. 45); read 1ª.
ADVOCATES' WIDOWS' AND ORPHANS' FUND ORDER CONFIRMATION BILL
Brought from the Commons; read 1ª, and (pursuant to the Private Legislation Procedure (Scotland) Act 1936) deemed to have been read 2ª and reported from the Committee.

BUSINESS OF THE HOUSE
THE LORD PRIVY SEAL (LORD SHACKLETON): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That Standing Order No. 41 (No two stages of a Bill to be taken on one day) be dispensed with for the purpose of enabling the Customs (Import Duties) Bill to be taken through all its stages this day.—(Lord Shackleton.)
On Question, Motion agreed to.

CUSTOMS (IMPORT DEPOSITS) BILL
3.28 p.m.
LORD BESWICK: My Lords, I beg to move that the Bill be now read a second time. First may I thank the noble Lords opposite for agreeing to the proposal that this Supply Bill should go through all its stages to-day. There are good administrative reasons for this and we are all grateful for the co-operation extended by the House. The Bill embodies the Import Deposits Scheme announced by my right honourable friend on November 22. It fulfils the outline he then gave of the coverage of the Scheme; the 50 per cent. rate of deposit, which may be reduced but not increased by Treasury order; the repayment period of 180 days; and the twelve months maximum life of the Scheme, which again may be reduced, but not increased, by Treasury order. The
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Bill will have the immediate effect of contracting liquidity generally, and of importers particularly. It will also produce an immediate, if marginal, effect on the total of our imports. It is not suggested that this Bill of itself is an answer to the problems which beset us now, but together with the use of the regulator, and with the other measures taken, and in the context of the overall strategy which has been pursued since devaluation, it ought to enable us as a nation to get out of the red into the black and towards that £500 million surplus for which we are working.
I accept that there will be difficulties created by this Deposits Scheme—difficulties for individual companies, both here and overseas; and obviously there are certain problems which, given the preference, it would be much better to avoid in our relations with friendly countries elsewhere. But of course those difficulties and problems will be as nothing to the blight which will fall upon us, and others, if we do not pt our balance-of-payments position once and for all on a sound basis. Since we cannot amend the Bill, I do not think it would be profitable for me to go into great detail, although naturally my noble friend Lord Shackleton, who will wind up, will be glad to try to answer any specific question that is raised. What I think is the wish of the House is that we should examine, calmly and constructively, the wider economic background against which these measures have been brought forward. There has been a frantic effort elsewhere to make Party political capital out of recent events, and this House, I suggest, will be serving its own best traditions and the interests of the country, if we endeavour to identify and examine the truth, if any, in some of the charges that have been made. If we could agree on facts it would then be more profitable to face judgments and make proposals.
Let us look first at the charge that the steps taken by Her Majesty's Government have always been too little and usually too late. There are some who say this of devaluation itself, but I shall not waste time on that. The furore caused when we did take the step seems to me sufficient answer to the complaint that we should have taken the step sooner. To that primary action of devaluation

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there were added supporting measures. There were many in this House, and notably I recall the noble Lord, Lord Byers, who said that we should have done more at the end of last year and the beginning of this to damp down consumer spending. I have been looking again at the answers I then gave him. Of course, with hindsight, one can always say that it would have been better to have done more in December and January 10 or 11 months ago.
But the arguments against that course, which led the Chancellor to wait until his Budget, are still valid. The spending then was on commodities which would never have gone into the export market. Much of the consumer durables came from development areas. There was slack to be taken up. And in any case there were major arguments in favour of waiting until action could be taken which manifestly would match the size of the problem which would face the Chancellor when export demand, as we hoped, would begin to put pressure on the economy. Action, when it came on Budget Day, was hailed on all sides as courageous. No responsible spokesman, to my knowledge, then argued that the £923 million taken out of the economy was inadequate. Indeed, many who give their advice so readily in newspaper columns were soon saying that we should reflate, and there were many anxious observers on both sides of this House, and in another place, who looked at the rising unemployment figures and argued that we were overdoing restraint; that the Chancellor was taking his responsibilities for sterling too conscientiously; and the word "overkill" was commonly heard.
A favourite line of criticism which developed through the year and was voiced again in our November debate was that the rate of saving was too low. There was this rush, so everyone said, from money to goods. But again the facts do not suggest that extreme criticism is called for. I gave some figures in savings in the November debate. There had been a fall at the beginning of this year but a subsequent increase in the second quarter of this year to the highest known saving percentage of disposable income that we had had. Taking the first three-quarters of this year there is
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the basis for an argument that we should do more to provide an incentive to saving, but there is no argument for the charge that estimates have been wildly out or that private savings in present conditions are impossible. Increased spending, which there has been subsequently, has not come out of savings. There is more of a case, as I shall say later, for saying that it has come from increased earnings.
This charge about penalising private savings is usually made together with sweeping criticisms about the overwhelming burden of taxation. I have taken the trouble to get some facts which may be of interest to the House. They do not show that this country is staggering under a unique burden of taxation. The O.E.C.D. and National Statistical Office show in their examination that total current taxation and contributions—including, of course, all social service and insurance contributions—as a percentage of the gross national product at factor cost in 1966, were 46·9 per cent. in Sweden; 45·8 per cent. in France, 40·2 per cent. in Germany, where initiative presumably is so uninhibited; 39·5 per cent. in the Netherlands; whilst the United Kingdom, fifth in a list of ten, had 36·2 per cent. There is no case here for saying that initiative is stifled by taxation.
Incidentally, there are some who say that it is not the total of taxation but its imposition which ought to be changed. They argue that more should be collected indirectly as taxes on expenditure and less directly on income. Even here the argument is not supported by facts: 47·5 per cent. of our total tax and contributions is collected, not on income, but on expenditure. This admittedly surprised me when I was given the figures but I am advised that this is the case. In fact the United Kingdom raises more of its revenue in indirect taxation than any other country in the O.E.C.D. table, except Canada. One truth, therefore, we can establish is that up to the Summer Recess the charge of too little and too late just would not stick.
By the time we debated these matters in November on the Queen's Speech the situation was changing somewhat. Consumption was rising. Unemployment showed signs of falling. Unfilled vacancies were increasing. One feature worth

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noting, incidentally, is that all these relevant margins were very narrow. Consumption, for example, has not fallen back in recent months below the level of the second half of last year, as was expected and intended at the time of the Budget, but instead has been moving at around the same level.
It was at this point that we had the trouble with the under-valued mark and the over-valued franc. The scene was set for the speculator. It was an ideal situation for those who neither toil nor spin but seem to do very well out of the difficulties of those who do the real work of the world. Britain, inevitably, suffered in the scramble across the exchanges. It is not a matter of making an excuse of an international monetary crisis for our national misfortunes. Nor is it fair or accurate to say that the crisis proved our policies to be muddled, incompetent or wildly wrong. The crisis showed not that we were sick, but that our recovery from sickness to complete fitness was not proceeding fast enough. The truth is that we are convalescing and any convalescent caught in a bleak wind is certain to suffer. This Bill and the other measures are intended to hasten recovery.
The occasion of this Bill and the other measures has been used not so much to attack the import deposits as such, but against policy generally. It is said that instead of hitting the poor consumer we should be cutting down on public expenditure. It is worth trying to get at the truth of this. First of all, is it true to say that we are "clobbering" the consumer? Are we really doing a service to the British people when we work upon their prejudices and whip up complaints about how harshly they are being treated? The figures I gave earlier about comparative rates of taxation and the present level of savings do not suggest that the consumer is being hit as hard as political Party or some Cross-Bench propaganda makes out. In any case, critics in the Party opposite contradict themselves on this point when they then go on to argue that the Chancellor's failing has been his inability to get down consumption below his forecast 2 per cent.
Of course there is poverty in this country, as the debate in this House yesterday showed only too clearly, and we need to
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end it, but we shall make quicker progress in eliminating that poverty if these economic measures prove successful and if we stop whining every time an essential effort is called for. The steps taken in this Bill and in the regulator, and on the hire-purchase changes, and in the Chancellor's Budget, do not hit the really poor and do not justify the whining we have heard in the last few days. The figures show that consumption is running at the rate of £500 million more than at this time a year ago. That does not highlight a poverty-stricken consumer. The latest consumption figures show that since 1962 expenditure on motor cars and motor cycles has increased practically 70 per cent. by value and nearly 80 per cent. by volume. Expenditure on beer has gone up over 40 per cent. by value though, I am interested to note, only by something over 10 per cent. by volume. Consumption of wines and spirits has gone up by around 25 per cent. in volume. What deprived com timers we all are!
The current Opposition cry, and the unfailing Conservative cry down the ages, faithfully echoed one notes by the bankers, is that public expenditure should be cut. I am not sure that the bankers have been more successful than was the Leader of Her Majesty's loyal Opposition the other day in explaining precisely where the cuts in expenditure should be made. The official Conservative reply, the House will recall, is that public support for agriculture should be cut and that the consumer should pay the necessary increased prices.
What a comic proposal, in the context of the present argument, that the private consumer should be helped by deliberately putting up the price of rent and essential foodstuffs. Of course there are some consumers—one suspects more than at any time before—who could pay more for food. There are the consumers who could respond to that now quite famous advertisement in The Times the other day of the crocodile brief case, lined in pigskin, and retailing at £315. I noticed that just by was another advertisement for a personal electric shoe-polisher, now available from the better stores for £15 4s. 4d. What a wonderful world we are living in, when over 60 per cent. are living below the poverty

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line, and almost every day we see newspaper photographs of starving children with distended bellies, whilst here in the Western World, the Free World, some of the cleverest engineering resources we have are devoted to the production of personal electric shoe-polishers at £15 4s. 4d. a time! That sum is as much as many human beings in Africa and Asia have to live on for the whole of one year. And this is the time when the Opposition are saying that we should cut public expenditure because the consumer is unable to "take it" any longer.
The level of public expenditure was fixed at the beginning of this year on the basis of the Chancellor's intended Budget policy. Expenditure is now running at the planned rate. To keep us to this planned rate economies have been made. Every time an essential cut has been announced we have had a howl of protest. It is always the same. Cuts are agreed in general but none in particular. Her Majesty's Government say that as a civilised nation the present allocation to public expenditure is about right. If it were not for the quite scandalously extravagant bases in the Far East, not built in our time, further economies would be possible, but though savings there are to be made, they cannot come this year.
My Lords, I want to say something about prices and incomes. The latest provisional figures show that to the year to the end of August earnings have risen by 8·1 per cent. and prices by 5·6 per cent. One of the quite fantastic elements in the whole economic and political controversy is that this present Government are criticised for increased prices at a time when some economists say our present problem is partly caused by prices failing to rise as much as calculated.
I go round, I suppose as much as anyone on my side of the House, to local Labour Parties and to trade union branches, and I always hear this continual cry about increased prices. Yet the truth here is that earnings have risen more than prices. One school of thought suggests that total demand could be curbed by allowing prices to rise. So it could, in theory at any rate, although higher prices would almost inevitably precipitate wage demands, would increase costs, and would damage our competitive position
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in the export markets. One lesson which it seems to me still has to be learned, especially by some of my own friends, is that we can achieve maximum utilisation of our productive capacity, which is another way of saying full employment, only if we agree to a planned, effective and, of course, fair control on the expansion of incomes. But how much easier it would be to implement an effective prices and incomes policy if we could cut out some of the Party bickering and sectional selfishness and really try to understand the problem that has beset this nation since it did its best in two World Wars!
I am ready to admit that, as a Government, we have not adequately succeeded in getting understanding and acceptance of a planned incomes policy. To succeed in this would be something quite unique in a free society. Certainly I see absolutely no sign of Mr. Heath and his friends succeeding where we have yet to achieve success. Somehow, we have to create a climate of opinion in this free society, with the undoubted right of free people to withhold their labour, within which sectional interests do not grab more than their share of resources, at the expense of others in the short-run and at the expense of themselves in the longer run.
In our last debate I wound up by saying that one of the depressing features of our affairs was that every item of policy designed to redress our balance of payments, attracted automatic opposition. This time, in the Bill before us, we have a measure which, repeatedly, Opposition speakers have called for. Yet the reflex action of criticism still has been seen. I am glad to think that so far in this House, at any rate, I have been able to thank noble Lords opposite for their co-operation in seeing this Bill through in one day. My Lords, I beg to move.
Moved, That the Bill be now read 2ª.—(Lord Beswick.)
3.49 p.m.
THE EARL OF DUNDEE: My Lords, I do not think that your Lordships would have wished to have a full discussion on this Bill if we had not agreed to use the occasion for a general review of the present economic position. The levying of a forced loan on certain classes of

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imports is one of those plans which have always been kept in reserve by the Economic Departments as a possible corrective to an adverse trade balance. Whether it will reduce imports for the next six months may depend, I think, on whether the banks are able to advance money to the importers to cover their deposits which I think that they will probably contrive to do, but the bank overdraft interest will, of course, slightly increase the price. Since the plan is only for twelve months and the loan for six months I think that it is more likely to reduce imports about next autumn, because importers may then prefer to postpone purchases until the necessity for the deposit has expired. Then in the following winter there will quite possibly be a sudden large increase in imports, and this, together with the repayment of deposits, may perhaps trigger off our next economic crisis but two.
I am always anxious to respond to the kind of appeal which the noble Lord, Lord Beswick, made, that in this debate, as in others, we should avoid Party controversy—although I must also add that his speech rather appeared to me to be what I might call a "controversial defence" against the hypothetical "controversial attack" which he evidently expected to be made by somebody. In your Lordships' House I very strongly approve of the tradition that we do not always think it necessary to engage in Party polemics. We more often prefer counsel to controversy, and in our economic debates I have always tried, humbly but hopefully, to offer constructive advice to Her Majesty's Government, and although none of it has ever been accepted I shall still go on trying to be helpful.
LORD BOOTHBY: My Lords, may I interrupt the noble Earl for one moment to say that he is not alone in that fate?
THE EARL OF DUNDEE: I know the noble Lord, Lord Boothby, has been at it much longer than I have.
LORD BOOTHBY: We have never been accepted; that is the trouble.
THE EARL OF DUNDEE: My Lords, I hope the noble Lord will still keep on trying, as I shall. As the years roll on and as the Government's policy steadily unfolds and progresses from one "economic miracle" to another, it becomes
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awfully difficult to conceal the fact that they have not done quite so well as they think they have. Last week the noble Lord, Lord Shepherd, was kind enough to tell me that I had a good memory, which, of course, is not the case. I am extremely forgetful and absent-minded, and until I looked it up this morning I had forgotten that three and a hall years ago we were still posting letters with 3d. stamps for delivery the next day. I do not want to go further back for the purpose of this debate than the last General Election, when we were told that there would be no increase in taxes and no compulsory wage control; and it is reasonable to keep these things in perspective and remember what was said at the time.
At the beginning of July, Mr. Callaghan said that no special measures were needed. A week or two later there was the emergency crisis Budget which took £500 million out of the economy, the Prices and Incomes Bill, and a six months' wage freeze, during which I think wages went up by more than they have ever done in any other six months—or at least in any other six months of freeze—and another six months of what was called "severe restraint". I remember when this period of severe restraint ended; that was on June 30 last year. The bank rate had already gone down from 7 per cent. to 5½ per cent. in May, and we thought the green light was at last shining. Then in October there was another "economic miracle"; bank rate went up to 6½ per cent. to protect the parity of the pound, which was never to be devalued. In November the pound was devalued. The Government promised the International Monetary Fund that they would deflate; the raising of the school-leaving age to 16 was postponed; the school building programme and the road construction programme were cut down; emergency measures were taken to shift £500 million from home consumption to export, and the new Chancellor announced that private consumpton—if I may use the word which was used by the noble Lord, Lord Beswick, just now, was going to be heavily "clobbered", but not until the Budget in March.
We on this side of the House most earnestly pressed the Government to apply the regulator at once, but the Chancellor insisted that he must wait four months because he thought there was too

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much slack in the economy. In my view this was a grave miscalculation which severely diminished the benefits of devaluation. Then we had the March Budget, "clobbering" the taxpayer by £923 million, including what I think was a most immoral retrospective repeal of tax relief on life insurance policies which thousands of people had been induced to take out in the belief that Parliament would keep its word. Had that been done by a private individual it would have got him 14 years' penal servitude. As things are, the Government, of course, have a legal right to do it, if Parliament agrees, but it has greatly lowered the public confidence in the integrity of British finance and in the British financial system.
My Lords, the Budget was designed to reduce consumption by 2 per cent., but consumption went on rising. As for the balance-of-trade figures, the forecast of £575 million trading deficit for this year has now, I am told, been raised to £656 million, and according to the last month's review of the National Institute of Economic Research—I shall be very glad if the Government are able to give a different view on this—the £250 million surplus which was forecast for 1969 has now been reduced to zero. We all hope that this new estimate may turn out to be too low, and I would never blame the Government for being as optimistic as they always are if only they would make some rational plans a little further ahead than they ever do.
When I was in another place I remember I had a constituent, an old lady, whose pipes froze up one very hard winter. She sent for the plumber, who was a blunt old Scotsman and who told her that when the thaw came the pipes would probably burst. She asked what she was supposed to do about it in the meantime, and he shook his head and said, "You must hope for the best and prepare for the burst". The Government never seem able to combine these two virtues, the virtue of hope and the virtue of prudence, at the same time.
In the new economic measures announced after the Bonn meeting the Chancellor has added £250 million tax on a limited range of goods which are very heavily taxed already, including
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Scotch whisky, which we do not import, which makes a total tax increase for this year, including the Budget "clobbering", of £1,173 million, and a total increase of about £2.250 million since the Government took office. Now the Chancellor has refused to reduce public expenditure because he says that it is running in accordance with his estimate. If that is so, we must congratulate him on getting at least one guess right. But he said that expenditure in the private sector has exceeded his estimate. I know from my own experience how trying it is to be told, "You must reduce expenditure in general", by opponents who at the same time object to some of the individual economies which you find you are able to propose; but I think that it is not expenditure in the private sector of our economy which is causing inflation and imbalance but public expenditure, which has risen from £12.000 million in four years to £19,000 million.
I will give my reason for thinking this. Most private individuals in Britain are living within their means—probably not most of your Lordships, but taking the country as a whole probably most of our fellow citizens are living within their means and, on the whole, are still saving. They are not saving so much as we should like them to do—we all regret the decline in national savings—and I think that the reason is that their confidence in the future is declining. But, as a whole, they are spending less than their income and saving a considerable part of it, whereas the public sector, whose expenditure ought to be covered by revenue plus money borrowed in the open market from those who are willing to lend their own money to the Government, is supplemented by further borrowing, not from real savings but from new credit money created by the Bank under Government authority for the Treasury borrowing requirement. However much you try to stop inflation by taking money away from the private sector, you will not succeed if at the same time you create a whole lot of new Government money and put it back into the economy where it has got to be spent by somebody. I do not think that we shall ever have stable growth until inflationary public borrowing either is stopped or is brought into a strict relationship to actual achieved economic growth.

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When last Session we debated the National Loans Bill my noble friend Lord Aberdare gave figures which I do not think have been questioned. This is not a Party question since it covers the last six years, 1961 to 1966 inclusive. The figures show that in those six years there was a surplus of £3,813 million on income and expenditure account, but long-term loans of £5,653 million, which converted that surplus into a deficit of £1,840 million. This represented a greater infusion of new money into the economy than could be absorbed within inflation.
LORD BESWICK: My Lords, would the noble Earl allow me to interrupt for one moment? I know that he is very interested in this subject, as I am, and I made inquiries about this matter beforehand. I am told that although there was this infusion of new money at the beginning of the year, since July the reverse trend has set in, and now the amount of new money has increased almost exactly the same as the increase in the gross national product. Would the noble Earl bear that in mind, together with the fact that not all private spenders spend within their incomes and that there is at present an increasing amount, something over £1,000 million, in hire purchase instalments?
THE EARL OF DUNDEE: My Lords, I was just going to ask the noble Lord whether the National Loans Act, which we discussed last Session, had in his view made any difference to the situation. I had thought that perhaps the noble Lord the Leader of the House might manage to say something about it in his reply; I did not think that the noble Lord, Lord Beswick would be willing to reply immediately. But I should be glad to know whether that Act has made any difference.
I think that it is worth quoting what Lord Cromer, as Governor of the Bank of England, said in May, 1966:
"We unfortunately have a system under which Exchequer finance can and does lead to the creation of money quasi-automatically to the extent that the requirements of the Exchequer are not met by genuine savings or taxation."
When the Government say that public expenditure is in accordance with their estimates I should like it to be confirmed (perhaps the noble Lord has already
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given all the answers that can be given) whether these estimates of public expenditure referred to by the Chancellor include a large proportion of new money which is not derived from tax or open-market borrowing. If they do, then all the good done by the regulator will be undone by inflationary public expenditure. If we want to reduce public expenditure to the limits imposed by revenue and real borrowing, it can be done. When we on this side propose that we should do what the Common Market does—that is, pay for agricultural support by levy instead of by subsidy—we are told that the people in this country will have to pay instead of the Government and that it therefore comes to the same thing. But even if that were true—and I believe that it is only partly true—it would not have the same effect on the value of the currency.
We also believe that a change of policy in non-contributory social services, with a greater emphasis on need, could reduce real hardship and save inflationary expenditure. If, in particular, we could reorganise our housing subsidies more in relation to need, and if we were to encourage local authorities to sell more houses to those who are willing to buy them, instead of forbidding them to do so, we should not only save public money but immensely encourage private saving, for there is no purpose for which most families are more willing to save and curb inessential expenditure of their own accord than becoming owners of their own homes.
My Lords, I should like to conclude with one word of non-criticism of the Government, because it is not a matter for which they are responsible. I should be grateful if the noble Lord who is to reply could say whether anything has happened yet about activating the Special Drawing Rights in the International Monetary Fund agreed to at Stockholm a few months ago. In our debate in July I gave some figures which I got from the International Financial Statistics published by the International Monetary Fund. This is the most boring subject but it is most important to all of us, especially to a great trading country like ours. Those figures show that in 1938 the total reserves out of which national trade would be financed—that is to say, international credit money

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—were more than the total amount of world imports; whereas in 1964 they were only about 45 per cent.—something like 70,000 million dollars out of 160,000 million dollars of world imports. That is the reason for the continual monetary crises, not only in this country but in other countries as well—crises which hold back the economic growth of the Free World.
It would never have happened if Lord Keynes had got what he wanted to get at Bretton Woods. He described what he wanted as a quantum of international credit which was not determined by any unpredictable or irrelevant factor, like gold production; and the amount of the bancors which he wanted to establish then, when world trade was much less than it is now, was 25,000 million dollars. I have worked out—I may be wrong, and I shall be very glad if I am—that the amount of additional credit which we are to get out of these Special Drawing Rights for the whole world may not be more than 5,000 million or 6,000 million dollars. But in order to get to the amount of credit which modern international trade needs to carry on without these continual crises and troubles, it would now have to be something of the order of 50,000 million dollars of extra international credit.
There are many noble Lords who have other very good plans for solving the problem. Some want gold to be revalued. But the noble Lord, Lord Beswick, said in the debate on the Address that he thought it was stupid to spend a lot of time digging up gold out of one hole and then putting it into another. Most people would agree that it is, but if you cannot get anything more sensible, and if everybody else insists on using gold, why not make the best use of it you can by freeing it and letting it find its natural price? The most sensible course is to accept whatever instrument lies to hand, and if this Special Drawing Rights Agreement can be expanded into something better then let us go all out for that, and do not let us be modest or half-hearted about it. Let us be thoroughly tough with every other country, because I think you find that most international bankers are really very conservative and very short-sighted about this kind of thing.
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If I may just say one word to the Government from the diplomatic angle, it is, in the words of Noel Coward's song during the war:
"Don't let's be beastly to the Germans."
I think the Germans were wrong in not revaluing the Deutschmark, but they have been much more reasonable about most things than anybody else. They have not tried to upset the whole monetary system of the Free World, as General de Gaulle has done, and they have had more sense than was shown in some ways by Mr. Harry Dexter White, who defeated Lord Keynes's plans at Bretton Woods. I think it would have been better if we had not antagonised the Germans at the last conference at Bonn, if we had accepted what they wanted to do, even though we thought it was not so good as what we wanted them to do.
I hope the noble Lord, Lord Shackleton, will believe that I have made all these suggestions in good faith and with the best intentions. I honestly believe that if the Government were to accept them and act on them, they might just pull off the economic miracle by the end of 1970. If they do not, then I hope they will be replaced by someone who will.
LORD SHACKLETON: My Lords, before the noble Earl sits down, perhaps I may reply to one rather important point now so that it does not colour the rest of the debate. I entirely agree with his principle of,
"Don't let's be beastly to the Germans."
But I must state categorically that there is no evidence that I have seen—and I have seen all the reports on this matter —that anybody was beastly to the Germans in the way that has been reported in the Press; indeed, there have now been denials from the German Ambassador to that effect.
THE EARL OF DUNDEE: My Lords, I am grateful to the noble Lord for stating that.
4.15 p.m.
LORD GLADWYN: My Lords, I believe, from what the noble Lord, Lord Beswick, said, that we are now in order in discussing the wider economic background to the measure under consideration, so I shall, with your Lordships' permission, make a very few remarks of a general nature which I trust will be found

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at least partially relevant. In the circumstances in which we found ourselves a fortnight ago it is difficult to see how the Government could have acted, broadly speaking—and I repeat "broadly speaking"—in any other way than they did. It is obvious that the flight from the franc was largely induced by the excessive strength of the mark. It is clear that our own interests would best have been served if the German Government had agreed to increase the value of its currency and if the French had agreed not to devalue theirs—as they have.
There was no reason—and here I agree very much with what the noble Earl, Lord Dundee, said—why the German Government should have resented such suggestions on our part; all the more so since they were also vigorously pressed by the great majority of the Group of Ten. But it may be thought that sending for the German Ambassador in the middle of the night, and talking to him in what appeared to have been rather cryptic and admonitory terms, was hardly the best way to advance our cause. I have no doubt that this is a matter of internal politics, and possibly the German Government did not wish, for pretty evident reasons, to accuse the French or United States Governments of having brought any pressure to bear on them. They therefore, not unnaturally perhaps, proceeded to vent a certain amount of indignation on the easiest victim; namely, ourselves. But it is fortunate that they have agreed to take certain measures—the effect of which should not be minimised—to counter the effects of their vast favourable balance of payments. And it is satisfactory, subject, naturally, to the precise effect of the measures which are about to be taken by the French, that there will apparently be little adverse effect on our export trade with France, nor any increase in French competitiveness in world markets.
In any case, it was surely inevitable, given the dreadful British trade figures for October—which have not yet been mentioned in this debate—to say nothing of the general nervousness regarding the future of all currencies, save the French franc and the Deutschmark, that the Government should introduce further draconian measures to strengthen the position of the pound. What would the
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Conservative Opposition have said if the Government had just let things rip, and there had been another devaluation involving, no doubt, heavy additional unemployment and general misery? If the Conservative Party had been in power a fortnight ago I suggest that their own reaction, by the very force of things, might not have been very dissimilar from that of the Government.
They can, of course, say—and I think they do say—that the present "spending spree", as it is called, might have gone merrily on, and that it would have been better to make the necessary economies in the public sphere. But what economies? They are committed to increasing, rather than reducing, military expenditure. Would they, therefore, have wrecked the road or housing programmes? Would they really have closed down hospitals, abolished free medicine, reduced grants for the universities and subsidies for education generally, changed over to a levy system of protection for our farmers and made the railways or the Post Office pay by introducing economic charges? And what would have been the consequential effect on our general efficiency as a nation, or on the prospects of holding wages and thus avoiding inflation, if they had done anything of the kind?
No doubt some sections of the Welfare State might be demobilised without undue pain. That is possible. Perhaps if we go on failing to pay our way some even should be. I will admit that. Indeed, it may quite legitimately be said that if we cannot balance our accounts the whole Welfare State will be endangered, more particularly, I suppose, housing and education. But, my Lords, these grim possibilities do not imply that we should be well advised to demobilise it now. If the Government tried to do it they would fall, and I think it very probable that a subsequent Tory Government would disappear also. Apart from this, some of the Government's latest measures can be disputed in detail, but hardly their necessity, taken as a whole. Thus, the tough measures which they have taken to reduce imports, which we are debating specifically to-day, regrettable Clough they are in themselves, as we must all acknowledge, are surely greatly preferable to any system of direct control of imports which would get us into terribly hot water in the foreign sphere. We have

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already had, not unnaturally, some difficulty with our EFTA partners, but it seems that the formalities have been observed; and, in any case, I believe there were reasonable precedents for our action.
Having said that, what can be criticised—and what, anyhow, we criticise—is the general policy that the Government have pursued since 1964. I do not say that we were all right on this point, but it can now be seen, in the light of hindsight, that the original decision not to devalue in face of the frightening adverse balance of payments bequeathed to them by the Tory Government (which, after all, was the beginning of the trouble) was a mistake. If when they had come into power the Government had decided to cut our military commitments East of Suez; if they had reformed and simplified our fiscal system, notably by imposing an added value and a payroll tax, which they have not done yet; and if, as we continue to think, in spite of what the noble Lord, Lord Beswick, said, they had, by favouring even more indirect rather than direct taxation, arranged for some funding of part of the sterling balances; insisted, above all, upon T.U.C. reform; gone slow on some of their projects for increased welfare, and shortly then applied for membership of the Common Market on the basis of a strong currency, there is little doubt that our position to-day would have been far better than it is.
But, my Lords, all this is past history it is water over the dam. If the Conservative Party had been in power I do not believe that they for their part would have done many of these desirable things that I have read out, although, to do them justice, I think that probably they would have applied the regulator after the last devaluation—a failure on the part of the Government to do which can only be deplored. At any rate, the Labour Government, as we think, have done some good things. Let us therefore concentrate just for a moment on the position as it now is and consider whether there are any hopeful initiatives which might be taken by the Government, over and above the ones they have taken, with a view to the ultimate restoration of an increasingly menacing situation.
First, there is the scheme of Mr. Enoch Powell (that ever hopeful champion of causes condemned by his own Leader),
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which again has not been mentioned up to now in this debate, for a floating pound. Liberals have always found some merit in this conception, and I think a number of experts are beginning to favour what is called a "crawling peg", which, although it has only recently come into prominence and fame, was originally advocated by the Liberals in 1966; namely, a very slight weekly increase or decrease in exchange rates over a period of time. But this is a system which I think I am right in saying could be introduced only with international agreement. And even if we just decided to let the pound float, even if it were simply left to find its own level from day to day, though no doubt it would have some advantages, how exactly should we be able to meet our present short-term debt of (what is it?) £3,000 million? That is not particularly evident. I suppose that if by any chance the pound floated to the level of the dollar, most of this debt would be repudiated. I know that Lord Keynes, whose great authority has been invoked to-day and will no doubt be invoked by other speakers in this debate, is supposed to have said that "civilisation progresses on a series of gigantic debt repudiations", but I am by no means sure, nor can any of us be sure, that this would be true of our present British civilisation.
Speaking, therefore, for my colleagues on these Benches I would say that while we would, in principle, favour such a solution as a "crawling peg", and should certainly hope that the present measures would in fact suffice to maintain the existing parity of the pound, we feel that much the most hopeful line would be to try to profit by the continuing crisis in order to make progress in the general creation of European unity. Everybody hopes that the severe measures imposed by the French Government will have a success equal to our own in maintaining the parity of their currency; but nobody can really hope for a definite solution of the difficulties which now confront ourselves, the French and, yes, the Germans and the Italians, too, unless we can devise some new machinery for arriving at common decisions on what are, after all, common problems. The necessity to create, if possible, some European monetary authority was recently advocated in the Press by no less a person than the noble Earl, Lord Cromer.

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As we see it, events will demonstrate more and more conclusively the sheer necessity for the Western European democracies, if they are to avoid general misery and the possible emergence of (let us face it) semi-Fascist regimes, to combine to assert the voice of free Europe in the world. But if they are to do this, then they must all agree to accept some system which, after all the democratic procedures laid down have been followed, will not include the ultimate right of individual, national veto. We therefore sincerely hope that the Government are at least preparing concrete schemes for achieving these ends in all the spheres not covered by the Treaty of Rome, including the monetary sphere; and also that at what seems the right moment, and no doubt after suitable soundings have been made, they will produce these schemes and suggest that they and any others should be considered at a conference of all qualified European States that may be interested—perhaps next spring. We, for our part, retain our faith in a democratic European Community, and we are confident that the sheer absurdity of the present "nationalist" system will before very long result in the younger generation sweeping it away. Anyhow, Liberals of all ages will rally with enthusiasm behind any Government which has the firm and expressed intention to do so.
4.28 p.m.
LORD CROWTHER: My Lords, I am told that a maiden speech should be both brief and uncontroversial. The former injunction I shall attempt to obey. As to the latter, I am not quite so sure because, having, through my own fault, neglected opportunities to break my silence on less weighty occasions, I now find myself addressing your Lordships' House on a subject on which it is hardly possible to say anything significant without its seeming to some of your Lordships to be contentious. If, therefore, I seem to be keeping only half my side of the bargain, I hope that I may nevertheless rely on a full measure of that indulgence which your Lordships' House traditionally extends to those who address it for the first time.
The Bill that is before the House at the moment is only the pinnacle of the iceberg that is visible above the sur
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face; and underneath there is the grim, cold, enormous reality of a national economy that is not yet paying its way and is beginning to lose the confidence, not only of the outside world but of our own people. Of the tip of the iceberg that is visible, I have very little to say. I should like to dwell for just a moment on an aspect of the Bill which I do not think has been mentioned in this debate, nor, so far as my reading of the proceedings goes, in another place; that is, to regard the Bill, not as a piece of economic policy—which I can swallow without too much difficulty—but as a deplorable example of the relations between the State and its citizens.
Here you have a class of people, many of them, it is true, limited companies, but many of them also family businesses and personal traders, going about their legitimate business, doing nothing wrong. The Financial Secretary, in introducing this Bill in another place last week, went out of his way to repudiate the doctrine that there was anything wrong about importing—as well he might, since we live by it. Here are these people. The only complaint that can be made against them is not that their business is wrong, but that perhaps they have been doing a little too much of ii—and even so they have only been filling the orders of their customers. Then suddenly, without warning, with a minimum of discussion, without right of appeal or recourse, they have imposed upon them a gigantic fine. How large that fine may be is not perhaps immediately apparent to your Lordships or to the public. But if we assume that a trader normally makes a profit of, say, 10 per cent. on his turnover, then the amount of money he has to find and put down can easily be more than two years' profits. And he has to find this money at a time when it is almost impassible to borrow it from the banks.
My Lords, this is not the way in which the State should treat any of its innocent citizens who, without fault on their part, suddenly have these swingeing penalties imposed on them. The Constitution of the United States contains a provision against "cruel and unusual punishments". I could forgive any importer in this country regretting at the moment that he did not live under that jurisdiction, rather than under our own. We

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are told that this is an inescapable necessity; and the Bill has been supported, or at least not opposed, by the representatives of the three Parties. Perhaps it is. But what a lurid light it sheds on the state that we have come to if the Government are compelled by necessity to do things of this kind to innocent classes of citizens! It is a desperate remedy and it is desperately unfair.
My primary concern, however, as with previous speakers in this debate, is with the great mass of the iceberg only just below the surface. I want to give expression to two convictions that have grown on me with more strength with each recurrence of this endemic crisis. The first of them is that a régime of fixed exchange rates is impossible in the world we live in; and the second is that the attempt to maintain it, like all attempts to maintain the impossible, has now reached the stage where it is doing far more harm than good. Your Lordships will observe that I am not arguing the theoretical case for stability or for fluctuation. I am perfectly ready to accept that, in an abstract way, stability may be greatly preferable to fluctuation. My point is that in the world we live in it will not work. Indeed, I have for many years—and I underline the words "many years" because I am not one of the new converts to flexibility whom I see appearing in such large numbers; in this matter I am a heretic of very long standing—I have been astonished that anybody could believe that fixity of exchange rates could occur in the world we live in.
We have a multiplicity of national economies, each of them managed by separate Governments (and in nothing are Governments more jealous of their independence than in their economic powers) each Government responding to different political pressures, each proceeding with greater or less skill, each using different methods, serving sometimes conflicting objectives and operating in widely varying conditions. In these circumstances, how could it be expected that stability of relationship would be possible between the values of the different national currencies? The theory, I know, is that if the values of currencies diverge then they can be brought back into accordance by various
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methods of control—it being implicit in the argument that there are methods of adjustment that are both acceptable and effective. But, my Lords, we know perfectly well that it will not work.
We have had the spectacle, for several years past—not only in this country but in many others—of the most powerful Governments in the world, with the most sophisticated methods of economic control, doing everything they can think of to bring the real values of their currencies back to their stated parities—and failing. They have distorted trade in the effort; they have restricted the fruitful flow of international capital; they have interfered beyond a tolerable extent with one of the basic human freedoms—the freedom to come and go. And still it will not work! Not only can it not be done by an occasional "touch on the tiller"; even the most brutal yanks on the rudder do not seem to produce an adequate response.
My Lords, I think the real choice is not, as it is often presented, one between stability of exchange rates and fluctuation. The real choice is between two different methods of achieving fluctuation. On the one hand, under the moderating influence of official intervention, you can permit day-to-day fluctuation in the exchange rates without any commitment on the authorities to maintain any particular figure. Or, on the other hand, you can wait until the reserves are exhausted, until confidence is eroded, until the squeeze has been pushed until the pips squeak, and then, in some great international cataclysm, you can have a massive devaluation. That, I am convinced, is the real choice; and although I say this with regret, I doubt very much whether any of the compromise solutions that are now being so actively canvassed will work.
One of them was mentioned by the noble Lord, Lord Gladwyn. Special Drawing Rights are a means of buying more time without any assurance whatever that, in the bought time, the adjustment will be achieved; whereas the "floating peg", as it is now fashionable to call it, is at any one time a commitment on the monetary authorities to maintain a given rate of exchange which could just as easily be overwhelmed by the tidal flows of payments as the fixed

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rates to which we have become accustomed.
No, my Lords: I think the real choice is between a daily fluctuation and periodic, cataclysmic, confidence-destroying devaluations. And if that is the choice, then I have no doubt that the former is the preferable. To repeat, I am not advocating this as being good in itself, only as being preferable, and I think by now obviously preferable to the alternative. I recognise that in the present circumstances of this country, in the state of poverty and weakness to which we have been reduced and with the enormous short-term debts expressed in other people's currencies, we may have to assume that it would be rash to be the first to cut our exchange rate free. Possibly we have no alternative but to stick it out. But we ought to be clear what it is we are waiting for and hoping for—and that is that the world will rapidly come (as I believe it will) to a realistic acceptance of the facts as they are and to a more flexible system of international exchange. There would, of course, be dangers in this. The chief of them is the familiar one that if you remove the fixity of exchange rates you also remove the main restraining influence on the profligacy of Governments. Indeed, if we do get to a more flexible system it will be more than ever necessary that we achieve realism in our economic policies at home.
That leads me to the second conviction that I want to put before your Lordships. It is this. We shall not win back to a state of economic health internally in this country until there is a very sizeable reduction in the level of Government expenditure and taxes. Some of your Lordships may think that I have finally departed from the uncontroversial role in saying something that echoes so closely words that fell from the noble Earl, Lord Dundee, speaking for the Opposition. Even though I can hardly claim that what I have just said is not contentious, I would assert that it is intended to be non-partisan. Indeed, if the level of Government expenditure is too large, then the largest share of responsibility for that fact must rest with the Party that has enjoyed power for the greater period of the last two decades. I am not concerned with arguing the doctrinal thesis;
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indeed, in the great argument of whether the State should do more or should do less I count myself in principle a neutral. Nor shall I follow the noble Lord, Lord Beswick, in the interesting ethical excursions he made into the crocodile or pigskin on which private individuals spend their money; or perhaps—as he might have mentioned—the "white elephants" that are more appropriate for the expenditure of Government Departments. I am concerned once again with the practical question as to what will work and what will not work.
My Lords, it is common form that we, as a nation, are spending more than we earn and that we must restrict our expenditure somehow. I have the growing conviction that we cannot go any further along the road of restricting expenditure in the private sector—not, at least, by methods that would be acceptable to Parliament or to public opinion. If you restriet—as we discover—expenditure in one area, it breaks out in another. If you intensify control of credit, the things that tend to suffer are the wrong ones, like productive capital investment and the growth of the increasing returns industries; while the two great politically untouchable categories of expenditure which have very large import content—food and clothing—tend positively to gain when expenditure in other directions is cut down. If you increase taxation, people simply take it out of their savings. There are, I suggest to your Lordships, distressing symptoms visible in the economy to-day of a flight from currency not only on the part of the sophisticated commercial classes, who pay enormous prices on the Stock Exchange for any security with a dollar content, but even among the ordinary working people of this country, who are increasingly showing a tendency to spend their money while they have it, rather than to try to save it.
I am totally unconvinced when the Chancellor of the Exchequer says that there is no need to cut public expenditure, because it is running according to plan. I think I can claim to be as familiar as the next man with the techniques of macro-economic planning by which these things are arrived at, with so many hunderd millions allowed for this and so many more hundred millions for that. I was in at the birth of that art and I have been a practitioner of it for more years

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than I care to remember. But I have always thought that there is an invisible fourth dimension in even the most sophisticated numerical economic model, and that fourth dimension is confidence. When confidence is gone, all calculations come out wrong and all plans go awry.
That, to a distressing extent, is what is happening to us to-day. When calculations let you down, my Lords, judgment must take their place, and I can only express my conviction that we can go no further down the road of managing the economy by manipulating the private sector alone. That ship is no longer responding to the helm. If the whole economy is to be brought back under control, as it must be, then it must be done very largely in the public sector. I have great difficulty in believing that there is any noble Lord anywhere in the House who does not, in his heart, know that that is true.
4.44 p.m.
LORD SAINSBURY: My Lords, it gives me very great pleasure to be the first in your Lordships' House to congratulate the noble Lord, Lord Crowther, on a very notable maiden speech. If he has strayed into contention, I am sure he will be forgiven. The pleasure that I have in congratulating him arises from my meeting him some 35 years ago. He will not remember that. I was asked by Sir Walter Layton to go to the Economist newspaper office, and there I met a young man who was known as Layton's brilliant assistant. Since those days the noble Lord, Lord Crowther, has achieved fame and success in many fields. Though I do not agree—I am not an expert, as he is—with what he says about public expenditure, I think that we can all agree that he will be a very distinguished addition to the Cross-Benches.
I rise to support the Customs (Import Deposits) Bill as a temporary but necessary measure to bring about an immediate impact on imports and bank liquidity. The need for Government action has been ably stated by my noble friend Lord Beswick. During the course of the debate eminent economists and international monetary experts will give us the benefit of their views. I shall not attempt to enter into the rarefied atmosphere occupied by those experts, but I wish to break away from the restraint
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placed upon me on the last occasion when I addressed your Lordships' House and concentrate for a brief moment on the inconsistencies in the Opposition's case.
Never, in my view, have the Conservative Party shown themselves more negative in their attitude than by making public expenditure the dominant thing in their attacks on the Government. My Lords, I find this campaign against public expenditure cynical, irresponsible and irrelevant. It is cynical and irresponsible because it is aimed at conjuring up a vision of the taxpayers' money being squandered by thousands of unnecessary civil servants wasting their time—
SEVERAL NOBLE LORDS: Hear, hear!
LORD SAINSBURY:—in bureaucratic offices—
LORD ST. OSWALD: Very well put!
LORD SAINSBURY:—when the truth is that public or communal spending is as much a part of the standard of living and wellbeing of the people of this country as private consumption. Do not the Tories realise that public expenditure is the hospital to which the mother goes when she is ill or having a baby? That it is the school which takes her children every morning? That it is the road on which her husband drives the family car? That it is the weights and measures inspector who protects the housewife against fraud? That it is the old-age pension? To suggest that private expenditure is the ultimate good and that public spending is the cause of all our difficulties is, in my opinion, absolute nonsense. It is another bogyman that the Tories and their friends in the City have conjured up to hide their lack of constructive proposals.
My Lords, I should like to refer to a speech made a few days ago by the present Governor of the Bank of England. He suggested that it was private consumption rather than public spending which had failed to meet the target. He said:
"It is only fair to say that since the Budget, public expenditure has been kept in close control and well in line with the target".
The Tory campaign is also irrelevant because a cut in public expenditure could not be implemented from one day to another, and is not, therefore, a suitable instrument of policy where an immediate

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impact is required. Surely the Opposition have not forgotten this. After all, five years ago they were still in office.
Take, for instance, that much publicised Tory plan that has already been referred to, to replace agricultural deficiency payments with import levies, a plan that has been repeatedly presented as one that could play a substantial part in solving our current problems. The truth is that, whatever its merits—and I believe it has many demerits—a system of import levies is irrelevant as a short-term solution.
LORD ST. OSWALD: My Lords, would the noble Lord suggest that it is irrelevant to our joining the Common Market?
LORD SAINSBURY: My Lords, I said as a short-term measure. I know that the noble Lord has had experience in the Ministry of Agriculture. It would involve prolonged and difficult negotiations, not only with the representatives of our own farmers and farm workers but also with our EFTA and Commonwealth partners.
To-day, the whole international monetary system is under great strain, and that, because we are still a major trading nation, is bound to make our own position more difficult. In such times we are entitled to expect constructive criticism from the Opposition. Instead, we get constant and inconsistent attacks on public spending and an equivocal attitude to the prices and incomes policy. If the task of a responsible Opposition is not only to oppose but also to offer constructive and realistic alternative policies, the Conservative Party, in my opinion, has failed dismally.
4.54 p.m.
VISCOUNT COLVILLE OF CULROSS: My Lords, having listened to the speeches of the noble Lords, Lord Sainsbury and Lord Crowther, I am not altogether certain whether they were consistent in their approach to this matter. If not, I have a strong suspicion whose version I should prefer. I would join in congratulating the noble Lord, Lord Crowther, from these Benches on a remarkable contribution to this debate.
It is not on economics that I wish to talk this afternoon but upon the Bill. The noble Lord, Lord Beswick, invited us to put specific questions if we had
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any. I apologise for boring your Lordships with a short speech on legal points but there is to be no Committee stage worth speaking of or any other stages, and if I do not raise these points now I shall not be able to raise them at all. I also apologise if this matter his been dealt with in another place, but since that part of the Bill with which I am concerned was not reached until after the OFFICIAL REPORT of another place stopped publication last night, I have no idea whatever of what was said there and whether the matter was explained. I regret having to deal with complicated technical matter in these circumstances, but there it is.
I have two questions to ask. Your Lordships will have observed Schedule I to the Bill and realise that it refers to the Customs Tariff 1959. This is a remarkable document. It consists of about 325 pages in the book of Statutory Instruments and about the same in the loose leaf version one gets from the Customs and Excise. It is by reference to certain of the descriptions in the headings of that tariff that the exemptions in Schedule I are set out.
It has already been said by the noble Lord, Lord Beswick, that under Clause 2(4) the Treasury may by Statutory Instrument change Schedule I by adding exemptions, but they may not take exemptions away. What I want to ask is this. The Customs Tariff is a document which is enacted by Statutory Instrument from time to time under the Import Duties Act 1958. It is not always the same one nor are the headings in it always the same. For instance, in tile 1966 version we have certain items which come out in the 1968 version (Statutory Instrument 679 of that year). The Explanatory Notes at the back tell us that certain of the sub-headings have been changed, that some have been amalgamated and that other changes in the text of the relevant part of the Tariff itself have been made. This is probably a silly illustration, but it so happens that under heading 13.02, whereas before there was no mention of the substance "gum euphorbium" after the reference to "gum asafetida" we now have that referred to, and as a result of that change made in May of this year that substance will be exempt whereas previously it would not.

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If the Customs and Excise can change the tariff under the Import Duties Act 1958, what is the point of having subsection (4) of Clause 2, which says that there will be no alterations or additions to the headings of the Tariff, when it can be done by an entirely different method? So far as I can make out, it can be done in a way that would avoid the restriction on which the noble Lord relied. Are the Government prepared to guarantee that there will be no changes during the term of this Bill which will, by a side door, make alterations in these exceptions in the opposite direction from that in which the Bill is intended to operate? This seems to be an important point, which is not covered in any way in the substance of the Bill.
My second question is on interpretation. At the end of Schedule I there are two interpretative provisions. The first deals with the point I have just made and makes it abundantly clear that the references in the Schedule are to the Customs Tariff as it is for the time being in force, which indicates that it can be changed. The second deals with what one is to take account of when trying to understand which goods are exempted. The brief answer is that you do not take any account of what is on the right-hand side of the page, only of what is on the left; and so far as the Bill is concerned that is all there is.
But it is not all there is, because in the Brussels Nomenclature, from which the Customs Tariff is derived and which no doubt originally was in French, there are interpretative rules. These rules are reproduced in the Statutory Instrument which applies the Customs Tariff under the Import Duties Act 1958. No doubt these, too, can be altered, for all I know, without Parliament knowing anything about it. I should like to ask the noble Lord, Lord Beswick, whether the Government have considered whether these rules are suitable for this purpose. It is all very well to have interpretative rules—and perhaps it would be as well to put them in the Bill, if we are going to use them for the interpretation of an Act of Parliament—but if they are going to be used, they should be used consistently. What is being done in this case is to pick out certain headings in the Customs Tariff on a selective basis
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to give exemption for a certain limited purpose.
This Bill has to be construed with the Customs and Excise Act 1952, and under that Act there are methods by which you can appeal against the decision of Customs and Excise. Under Section 260, for instance—and I think this is the one that would usually apply—you can go to the High Court to ask them for a declaration whether a duty is payable. Mind you, you have to pay your deposit first; but after that you can go to the High Court, and they may then order that the Customs and Excise should pay it back to you. They will be concerned, as I suspect, with the interpretation of our selective items in Schedule 1 of Statutory Instruments 1968 and the rules which apparently are to govern.
These are some of the rules. Rule 3 says:
"When for any reason, goods are, prima facie classifiable under two or more headings"—
because, if I may put in one word of interpretation, the Brussels Nomenclature tries to set out the tariff in such a way that no goods can possibly appear in more than one place: this plainly will not always be successful—
"classification shall be effected as follows"—
and your Lordships will, I think, be interested in this—

"(a) The heading which provides the most specific description shall be preferred to headings providing a more general description (sub-headings being disregarded).

(b) Mixtures and composite goods which consist of different materials or are made up of different components and which cannot be classified by reference to (a) shall be classified as if they consisted of the material or component which gives the goods their essential character, in so far as this criterion is applicable."

That, I should have thought, is a subject-matter for considerable argument if there is a dispute. But what about paragraph (c)?
"When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which involves the highest rate of duty."
If that is the right way to discriminate for the purposes of exemption under this Bill when you are dealing with goods which may or may not fall within a heading that brings exemption, do you look

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at the, entirely irrelevant for these purposes, duties that are otherwise payable, and say: "It so happens that this one is chargeable at 8½ per cent., but under the other heading it is 7½ per cent. It will, therefore, fall under the 8½ per cent., which by chance is not one of those covered in the Schedule"? Is that the right way, for the purposes of this sort of Bill, to classify goods so as to give them exemption?
Rule 4 then refers to the notes to the sections and the chapters. It is quite unnecessary, and I think impossible, for me to tell your Lordships what these are, because they are voluminous beyond description. They precede every chapter and they give instances of things that might at first sight appear to be in this chapter, or, indeed, in this section, but to that extent they are to appear somewhere else. Among these are some of the matters which are exempted in the Schedule; and among them, indeed, appear matters which are set out in the Schedule, but do not comprehend the whole list of items under some of the sub-headings. For instance, under reference 58.01 and 58.02, only some of the handmade knotted carpets, carpeting and rugs and coir mats and mattings are exempt. There are other things under those sub-headings in the Customs Tariff, and it is according to what is said in the heading, as interpreted by the notes on the Chapters and on the sections, that one sees whether or not the goods in fact are exempt.
Then here is the final classic—and this is what Parliament is saying is the right test in order to govern whether or not exemption shall be given under this Bill. Rule 5 says:
"Goods not falling within any heading of the Schedule shall be classified under the heading appropriate to the goods to which they are most akin."
That is the rule of law to which we are committing ourselves and all the people who will be concerned with this Bill, if it is passed in the form that we have it this afternoon. I do not believe that the House knew that; I do not believe that many people in the country knew it. I believe that if these matters get to the courts we shall have precisely the same criticisms as the courts have already issued in dealing with the Selective Employment Payments Act. Exactly the same formula
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was used there. Reference was made to some extraneous document which was found to have its own rules of interpretation which had never been before Parliament. The courts found the greatest difficulty in interpreting it, particularly as it was used on a selective basis. I do not claim too much, but I do say this: it was only a month ago that I asked the Government, in the speech that I made on the humble Address—never to do this again. They have done it in this Bill, and I condemn it roundly.
5.5 p.m.
LORD SHAWCROSS: My Lords, I wish I could follow the noble Viscount who has just sat down in his comments on this further piece of slipshod legislation—which is typical of the legislation that we have seen in this country, not only in the last few years but during a great many years past, constantly infringing on the rights and liberties of the private subject. However, I intend on this occasion to forget altogether that I once practised the law, and to refer to what is the more general subject of your Lordships' debate to-day; that is, the state of our economy.
Before I commence on that task, I should like to join in the congratulations which have been offered to the noble Lord, Lord Crowther, on his exceedingly able maiden speech. With his great knowledge and experience he will be able to make contributions of the moss valuable kind to your Lordships' discussions, and I hope that he will do so on many occasions. I am the more glad to be able to congratulate the noble Lord on this occasion because in one respect, at least, I am intending to follow a theme which he himself developed.
In the last few days, while abroad, I have had the opportunity of talking about our economic position to quite a number of people of good will towards this country—people of experience in banking and industry, in the United States and on the Continent—and yesterday and the day before I was looking at things in the Midlands, the great centre of British industry. The more I see, and the more I talk about these matters, the more convinced I am that what this country needs most at this time is (if your Lordships will forgive the alliteration) confidence, capital and co-operation. I mean, of

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course, confidence in the Government of the country, and confidence in the future of the country; capital to be invested in massive amounts in the re-equipment and modernisation of British industry (I believe the present position in regard to capital investment to be one of the most serious ills from which the country is suffering), and, finally, co-operation between both sides of industry in securing the full employment of the capital that is invested right round the clock, and in the efficient utilisation of not only our machinery but our labour, as well.
If these three things existed in this country at this time, I myself should expect that the measures which have recently been taken by Her Majesty's Government might have a reasonable chance of success, although I should be surprised if the surplus which may be achieved next year exceeds the considerable amount required to service the enormous foreign indebtedness which this country has incurred. Perhaps the noble Lord when he comes to reply will tell us what that amount is, in addition to the repayment of debt which has to take place next year out of whatever surplus may be earned.
LORD SHACKLETON: My Lords, may I ask the noble Lord, which particular bit of indebtedness? I am not trying to be funny, but is he referring to the credits over a recent period, or to what?
LORD SHAWCROSS: My Lords, I am referring to the total indebtedness which has to be serviced by the Government of this country out of any surplus which we may achieve; and it is a substantial amount. I venture to suggest that our surplus will not next year much exceed it: I hope it may.
My Lords, unfortunately these three things—confidence, capital investment and co-operation in industry—are very sadly lacking. I want to say something about each of them, and first I will refer to the lack of confidence, because I believe that our other troubles very largely flow from this. I want to say at once that, in commenting on these matters and on the state of our economy, I am not intending to criticise particular Ministers; least of all the Chancellor of the Exchequer, of whose ability and sincerity there is not the slightest doubt, or the Financial Secretary to the Treasury, to whose great
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energy and success I warmly pay tribute. He is one of the very few members of Her Majesty's Government who have any knowledge or practical experience of the international monetary system and of the City. But the fact is that the Treasury Ministers are no longer in control of the economic policy of the country, and still less, of course, are they in control of the country's economy itself. The Governmental machinery for the control of our economy seems to me to have gone all wrong.
It is now quite a long time since the Prime Minister asserted a personal responsibility for the conduct of the economy over and above that which would normally come to him as Head of the Government. And the Prime Minister, who well knows the advantages of a smaller Cabinet (did he not himself suggest that the ideal number was 15?), has in fact, and for reasons which appear to be of a domestic, Party character, built up one of the largest Cabinets this country has ever had in time of peace. And not only that: he has set up a system of administration on the economic side which is of unexampled complication—I will not add "clumsiness". There are, of course, the Treasury and the Board of Trade. But then there is the Department of Economic Affairs, with functions of complete obscurity but a manifest accretion of staff; there is the Ministry of Technology, which does not perhaps do a great deal that could not have been done by other existing Ministries but which does it with a very noisy appearance of busying itself in other people's affairs. There is the Ministry of Employment and Productivity—a new "gimmick" name which causes hollow laughter among those who have to deal with the Ministry. There are half a dozen other minor Ministries poking meddlesome fingers into the economic pie. Then you add to that the Prices and Incomes Board, the N.E.D.C., the I.R.C., and "Uncle Tom Cobbleigh and all", and in the end you have set up for dealing with our economy a system which simply cannot get things done and does not get things done.
It is said that nothing succeeds like success, but it is also, I am afraid, bitterly true that nothing fails like failure. What has destroyed confidence in this Administration, which I venture to think came to office in 1964 with an immense amount

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of good will from the country at large, has been the dismal cycle, the repeated, the constant assurance, that measures were being taken which would put things right, followed only a few months later by things going ever more wrong. The noble Lord, Lord Beswick, referred in his speech to the overall strategy. But the complaint is, of course, that while that is a favourite phrase constantly alluded to in Ministers' speeches and sounding grand, there is no appearance of any overall strategy in the measures which time and again the Government feel themselves forced to take.
I am not going at length into the history of all this, but one must remember the original measures taken in 1964, painful enough, but measures which we all hoped at that time would meet with the success which was promised for them. Then there was the euphoric programme put before the country in the Election in 1966, with the assurance that there would be no general increase in taxation, followed of course in these years by increases in taxation greater and more burdensome than had ever been imposed on this country before in time of peace. It really is no good the noble Lord, Lord Beswick, making tendentious references to selected statistics from certain other countries. A great deal of work has been done on this. He might have addressed your Lordships' House on the incidence of marginal rates. That is what is proving the great disincentive in this country at this time.
LORD BESWICK: My Lords, would the noble Lord be good enough to say in what particular those figures which I gave are inaccurate?
LORD SHAWCROSS: My Lords, I did not say that the figures were inaccurate. If the noble Lord listened to me he would know I said that it was no good his making tendentious references to selected figures from particular countries; that the important question is not the volume of taxation, not indeed, although the Chancellor of the Exchequer once rather suggested otherwise, whether it is direct taxation or indirect, but the marginal rates and where at particular levels of income those taxes fall.
LORD BESWICK: My Lords, would the noble Lord be good enough to accept
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that the figures were neither tendentious nor selective. I read them out from the list produced by the O.E.C.D.
LORD SHAWCROSS: My Lords, the noble Lord selected certain figures from the report by the O.E.C.D.; I regarded the selection as tendentious. What the noble Lord will, I think, not be able to deny or quibble about is that at the Election the country was promised that there would be no general increase in taxation, and in fact taxation has been increased to a level far higher than it has ever been before in time of peace. That is the point the noble Lord ought really to face up to in this matter.
Then we went on, after the euphoric Election, to the so-called package deal in July (I think it was) of 1966. That again was to put everything right. It was apparently hastily concocted. It was neither a package nor a deal. Then, we came on all too quickly to the measures that had to be taken in 1967, culminating in the devaluation. That was the time, of course, of that remarkable speech by the Prime Minister. I want to be fair about that speech, and I think that sometimes people have not been fair about it. I have so often said extremely foolish things in speeches myself, generally ex-improviso, and that speech was not that I would certainly not condemn that speech because it contained a phrase that the devaluation was not going to affect the pound in our pockets or in the banks, or whatever the phrase was. It is perfectly true that the Prime Minister went on to say that imports would cost more, as indeed was obvious, and that "this would mean that some prices would over a period go up." True that that was ten paragraphs later on. It was rather like the small print in an insurance policy, and of course devaluation was no insurance policy.
But the real criticism, the basic criticism, of the Government's policy and their presentation of their policy at that time, was in my view not possibly ill-considered words that may have been included in that speech—that can happen, perhaps, to any of us—but in the misleading of the public as to the causes and the consequences of the devaluation. Not once, but seven times in that short speech the Prime Minister referred to

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"speculators"; five times he referred to a "wave or tide of speculators". My Lords, an alleged alibi does not become credible merely because of its constant reiteration, and later on the banking authorities had to make it clear that the wicked speculators were not the cause of the trouble. The cause was, of course, the basic imbalance on our earning abroad and our spending abroad.
As for the consequences, one must remember that this was the speech in which is was said that we were getting out of a straitjacket. Are we in it still? That was the speech in which it was said that it was a tremendous opportunity for us; that production would go up—it did not. That was the speech in which it was said that there would be more work—there was not. And finally the Prime Minister said, "We are out on our own now". Perhaps the noble Lord who is to reply will tell us how much we have borrowed from foreign bankers since that time when we were "out on our own".
Inflation continued, and then came the Budget measures, disagreeable enough, then more euphoria and then the Basle Agreement—a great success for the Government and the Financial Secretary and the Treasury who initiated it—
LORD BOOTHBY: But nobody else.
LORD SHAWCROSS: As the noble Lord says, perhaps rightly, for nobody else. What was it?—2,000 million dollars more to safeguard our reserves. But that agreement was followed by a governmental euphoria and self congratulation which led the Economist to observe that to rejoice over this transaction was like rejoicing when, in the middle of a fight to ward off a grave fever, one is able to secure a very expensive medicine to counter the revival of a persistent attack of arthritis.
Only a month ago the Prime Minister was referring—and not for the first time—to "miracles". This time it was to the miracle of British industry. My Lords, there has been no miracle of British industry. As one who is involved in some sections of industry I only wish there had been. What has happened is that there has been a tremendous expansion of world trade—it has nearly doubled since 1964—but the British share
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of that world trade has sadly gone down during the period of the present Administration, and of course—
LORD BALOGH: My Lords, will the noble Lord perhaps quote the figures from 1951 onwards? Will he say how much our share in the world trade has gone down between 1951 and 1964, and then between 1964 and 1968?
LORD SHAWCROSS: My Lords, if the noble Lord is going to say that things were just as bad before, he may be right; but whether that makes—
LORD BALOGH: My Lords, I am not saying that; I merely thought that the noble Lord was protesting against the giving of selected statistics.
LORD SHAWCROSS: My Lords, I have the statistics here, and I will lend them to the noble Lord, if he does not have them in his mind, and he will no doubt be able to make the point he wishes to make. I am seeking to make the point that there has been no miracle in British industry; that exports to-day are little better, in dollar terms, than they were 24 months ago, and that in fact our percentage share of this vastly expanding world export trade market (which has been a great blessing to us) has in fact been going down. We have not even maintained our precentage.
LORD SHACKLETON: My Lords, may I interrupt the noble Lord? He made some quite serious accusations against my noble friend Lord Beswick, that he was being tendentious and selective. I really think he ought now to indicate to the House whether or not he has been selective in giving the figures for which my noble friend Lord Balogh asked. I feel he ought to be fair in this.
LORD SHAWCROSS: My Lords, perhaps the noble Lord will say in what respect it is unfair to give the figures relating to the period of this Administration and why he would like me to give the figures for an earlier period.
LORD SHACKLETON: My Lords, because I suspect that the noble Lord has in fact selected tendentiously, and indeed until he meets the challenge—
SEVERAL NOBLE LORDS: Oh!
LORD SHACKLETON: The noble Lord has been accusing my noble friend of being tendentious, whereas now it is being suggested that he is selecting figures. It is no good the noble Lord's saying that he will give me the figures afterwards: let him prove that straight away.
LORD SHAWCROSS: My Lords, that is a curious form of advocacy and one in which I do not propose to follow the noble Lord. The figures are there; I am dealing with the reasons why confidence in this Government has gone. What happened under the previous Government I do not know. The country lost confidence in the previous Government, too, and I am not here to defend them.
There is no doubt that world trade has expanded—nearly doubled; there is no doubt that our share of it has gone down in these four years. There is nothing selective about that. It is a great misfortune.
LORD BESWICK: Will the noble Lord—
LORD SHAWCROSS: My Lords, I am not going to give way again unless the noble Lord has something really significant to say. There is nothing really tendentious about this. I was merely saying—
LORD BESWICK: My Lords, I was merely going to give the noble Lord an opportunity of being a little more gracious and to say that I was merely giving figures which showed that we were not so badly off as others in matters of taxation.
LORD SHAWCROSS: My Lords, certainly I do not want to be thought to have said anything which was discourteous to the noble Lord. I do not want to have to go into the comparative taxation systems in this country and others. If one wanted to do that, one would have to look at the United States of America, would one not? Did the noble Lord? One would have to look much more carefully at marginal rates in Germany. Germany was quoted by the noble Lord but there was no mention of marginal rates. But if the noble Lord feels in the slightest degree offended by my suggestion that he had made a selection or was being tendentious, I gladly withdraw it. I merely say now that the figures he gave were not ones which would help
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the House to decide whether taxation in this country was having a disincentive effect, as I suggest it is and as everybody who knows anything about the conduct of industry here knows that it is.
Let me go back to the four years of this Government—because that is what we are here to consider. This is a Government which, as the noble Lord has pointed out, has, by every fiscal and restrictive device, limited the increase in personal expenditure (and I am taking the figure, the estimated figure, given by Lord Sainsbury for this year and including it in the period from 1964) to an increase of 19 per cent. Of course that increase in personal expenditure, notwithstanding the restriction, is too high, although in volume it is less, because one must take into account that is a figure at constant prices and the purchasing power of the pound has come down in that period by— what is it?—just over 10 per cent. But I venture to suggest that it is not true that that increase in personal expenditure is not in part coming from money which ought to have go le into savings.
The noble Lord, Lord Beswick, should consult with the Chairman of the National Savings movement. I would venture to have a bet with the noble Lord that very soon we shall have a new National Savings scheme—and I hope we shall— which is designed to counter the serious situation that has been arising in National Savings recently, and to attract more money in that direction. One of the worrying things about the situation today, as the noble Lord, Lord Crowther, said, is that people are increasingly flying from money and putting their pounds into pictures, into shares, into consumer goods of one kind or another, aid not, as they should do if the economy of the country is to be helped, into savings.
I was a little surprised at the position which was taken up in regard to public expenditure by the noble Lord, Lord Sainsbury. I am, thank heavens! no economist, and the noble Lord said that he, too, was not an economist. I do not pretend to know much about these matters. But what surprised me in Lord Sainsbury's observations was that he did not appear to agree that the choice at this time is not really a choice between personal expenditure—private expenditure— and expenditure in the public

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sector. I have always understood (I may be totally wrong about this) that both forms of expenditure, if they are excessive and greatly in excess of the gross domestic product, are inflationary; and that is what is happening in this country, whether it is caused by excessive personal expenditure or excessive public expenditure.
What do we see? Personal expenditure up by just under 20 per cent.; public expenditure, the expenditure which is directly controlled by the Government—this Government which was promising to cut public expenditure down, or at least restrict its growth—up by 50 per cent. in the same period. The unhappy fact—and it is an unhappy fact —is that the performance of this Government has led to a dangerous disillusion, not, I am afraid, with this Government only but with politics and politicians generally; to an uncertainty, an anxiety about the whole future of this country which has led many fine people to go abroad. The fact is that there is little confidence in the Government abroad and little trust in it at home.
My Lords, I pass from that to what I think is the immediate consequence of it and perhaps the most important single thing in our industrial situation to-day. One of the major factors in the great economic recovery in Germany, the great economic success of Germany, has been the fact that she was forced largely to re-equip her industry with new and modern and often automatic machinery. The worrying thing—I think the most worrying thing—about the situation here to-day has been the gravely depressed level of capital investment in private industry. Much of our industrial plant is obsolescent, inefficient. We are not keeping up in our equipment with Germany, with the United States or with Japan. But, my Lords, how can one expect industrial concerns to invest their shareholders' money in new equipment when no confidence exists in the Government's economic policy, and no assurance exists against the fresh imposts or restrictions or interferences that may take place? There is no knowing from day to day what new penal devices in taxation may be introduced. I believe that this lack of capital investment in industry is more important even than the
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problem of labour relations, important though that is. If we could get capital investment right, this country might then be moving forward, not to an economic miracle but to real economic recovery.
I pass to that last factor, the question of co-operation in industry. One factor beyond that of capital investment in equipment which has led to a great many of the economic advances in Germany, the United States and Japan, has been their efficient use of labour. I do not mean that people in this country should work harder or longer—in fact, in Germany the working hours are as short as in this country. But in the hours that they do work in Germany—and I have seen this—everything is geared to high efficiency and productivity. How can we in this country expect costly capital investment in new plant when industry has no assurance that the plant will be used right round the clock, as expensive capital ought to be used, if it is to earn its keep, and no assurance against restrictive practices, against strikes, against freely negotiated agreements being broken?
My Lords, those are the reasons why, in my belief, the economy of this country is still in the gravely serious position it is to-day, and they are responsible for the fact that it still takes something like three men in this country to make what is produced by one man and modern machinery in the United States of America. While these conditions continue, this country will remain at the mercy of events, staggering from one disaster to another.
5.36 p.m.
LORD BALOGH: My Lords, may I join the previous speakers in congratulating the noble Lord, Lord Crowther, on what was in more respects than one a notable maiden speech. I was expecting a most thoughtful and vigorously controversial contribution, for I have known the noble Lord for a long time, and in the more distant past, at any rate, our opinions sometimes coincided. Those days are, of course, past. In those days even the Economist was still edited by economists, indeed remarkable economists, and the noble Lord added his name to the illustrious role of people who passed that chair.
Turning to the topic of the debate today, I cannot believe that I am the only

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one who feels somewhat a sense of anticlimax, despite the previous speakers' efforts. After the desperate battles of the night undertaken to prevent the slight stimulus to domestic industry and the slight check on imports which this Bill demands, we have not seen the great matadors of the City arranged in close phalanx to denounce the Government for their misdemeanors. That is apart from the noble Lord, Lord Shawcross. Of course, he makes up for numbers, for the convictions of the converted are almost always more stringently held than others, especially it buttressed by experience in that citadel of free enterprise, the Board of Trade. We have had very un-neutral speeches from the Cross Benches to-day, but I greet that. The noble Lord's contribution would read well in the gossip columns of the more popular Press, and I hope to read of him in those papers more than we have in the past, because it was most entertaining.
I think that my noble friend Lord Beswick has answered most if not all the arguments before they were uttered. I shall, therefore, concentrate on the needs of the future rather than the immediate past. I think I must say that in this particular debate the tender care, the solicitous anxiety of the Opposition, expressed with such urgency, for foreign exporters, and particularly EFTA, strikes me as somewhat peculiar. In the days when the present Leader of the Opposition was in charge of the Brussels negotiations his tone to the Commonwealth and EFTA was rather reminiscent of Disraeli's description of Peel's treatment of the Tory Party:
"The right honourable gentleman sends down his valet who says in the gentlest manner: We can have no whining here".
The picture is correct, though I doubt whether even right honourable gentlemen now have valets.
It is perhaps in this debate the afternoon of the morning after. We have had from the noble Earl, Lord Dundee, a very interesting rehash of the non-facts and non-arguments displayed with so much ferocity in the other place. Unfortunately, it is difficult to perceive what exactly the Opposition is in favour of. They attacked the incomes policy and now complain that it does not work. They attacked the bad spending spree by the Government, when expenditure has
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been on the whole curtailed. Most of the increase in spending has been from an increase in incomes and not, as they complain, from a decrease in savings. Indeed, for a time this year savings were running at a higher level than ever before.
This certainly does not support the wild charge that there is a complete loss of confidence such as even the noble Lord, Lord Crowther, has put so moderately. They have complained in the same breath that the import deposit will be wildly damaging to small firms and that it will not work. Even on the one item on which they have been consistent, their complaints about public spending, they have demanded an increase in expenditure abroad, which is of course most damaging to our balance of payments. It is also most futile, as it is in that part of the world in which we can no longer affect the balance of power—indeed, in which even the United States, with her vast outpourings of treasure and blood, has not been able to resolve it.
They complain bitterly of the high prices, and then not merely want to change the agricultural support policy which would put food prices up appreciably, by some 10 per cent., but also want to introduce a value added tax, which is not only difficult and costly to collect, but which would of course hit the poor families more and would increase costs by another 10 per cent. They are at one and the same time claiming that this would reduce imports and then claiming that the consumer would no longer tolerate any cuts in his expenditure.
The noble Earl, to boot, has been stumbling into the field of banking statistics which, had he had the pleasure of being my pupil at Balliol, which I am sorry he missed, he would have been aware of. Real savings cannot be distinguished in the market if the savings entering the market as a result of inflation are just as inflationary as the original bank credit. The bank credit is not inflationary if it has been compensated by contraction elsewhere. The noble Earl ought to remark that bank deposits have not changed in the past year.
The only thing which is interesting is that, fortunately, better sense prevailed abroad than here, and an attempt to get an intervention against the Government

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by EFTA seems to have failed. Perhaps I may be permitted therefore to continue with a quotation, the same quotation of Disraeli:
"For me there remains this, as least, the opportunity of expressing publicly my belief that a Conservative Government is an organised hypocrisy."
With the slight but significant emandation, putting "Opposition" rather than "Government", I incline to concur with Disraeli's opinion.
My Lords, the City has great traditions. It has played a splendid part in establishing the world economic system as we now know it. It financed almost everything from rubber plantations to copper mines, from roads to railways, from Timbuctoo to the Cape, and from Istanbul to Calcutta, or perhaps even Bangkok. The one thing which, at any rate until 1931, they did not finance is the development of new British industry. It is a great satisfaction that they have now begun to do so—none too soon; and even now there is no doubt that the establishment of the I.R.C., which has been so much criticised by the same people who have been now complaining about the Government's every intention, has done a great deal to expedite the business which ought to have been done and has been done by banks in America, and in Germany as well as in France, much earlier, not to mention Italy, where industrial reorganisation has been primarily accomplished by a State organisation which recently brought the best part of the chemical industry under public control without any disaster.
I think I have written more than most noble Lords opposite on the need to strengthen the British industrial system by increasing investment, and I am most surprised by the noble Lord, Lord Shaw-cross, not mentioning the fact that British business at the moment is a net lender to the State rather than a net borrower. They have not been able to use their savings in productive investment, not that they have not had money to invest. I think this is quite a significant fact which has also been omitted.
LORD SHAWCROSS: My Lords, I think the noble Lord misunderstood me. I did not say that British industry had not money to invest. What I said was that it had no confidence to invest its
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shareholders' money because of the lack of any confidence in the policy of the Government of which the noble Lord was so long an adviser.
LORD BALOGH: My Lords, the noble Lord must remember that this was always the case, that British industry always held a financial surplus and never invested fully its own resources. It invested it in liquid finance, perhaps quite rightly so. Certainly there has been no change in the policy of the British corporations since this Government came into power. On the contrary, I think it is not unjust to claim that this Government have done more than any other Government to facilitate and stimulate investment in modern equipment and to reorganise industry into more competitive, large size units capable of undertaking the sort of modern research which has been so much neglected in this country in contrast to the excellent work done on theoretical questions.
I must say that I feel a sort of dry amusement at noble Lords opposite and their right honourable and honourable friends in another place standing up for EFTA when the French have just decreed yet another 4½ per cent. border tax. That holds, of course, for the noble Lord who mentioned the Rome Treaty in connection with our deposit scheme. It appears that the Rome Treaty, to which we are not signatories, should forbid us to do the things which the French who are signatories are doing. This is a sort of inverted Palmerstonian attitude which I am extremely surprised to hear coming from the Benches opposite. The import deposit scheme merely discriminates against credit to importers by making them provide cash. What less could we do in the situation that we are in? To stimulate foreigners to protest against this slight measure of stimulation of home industry is, to say the least, not a proof of patriotism; nor is the encouragement of foreigners to withdraw their capital. I suppose it is a case of, "It is prejudicial to the pound, but it makes sense". This is something which we heard in the Bank Rate Inquiry.
How do we stand after the recent crisis and the measures taken? The French measures, which imitate our much attacked S.E.T., together with their abatement of the turnover tax on exported goods, will reduce French export costs by probably 2½ to 3 per cent., possibly

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somewhat more, it is certainly the most balatant compliment ever paid to the authors of S.E.T. in this country by a hard-bitten financial team which knows as well as anybody how to protect its export interests, and which ought to be taken note of by those in this country who are hoping to abolish S.E.T. which is one of the most interesting and flexible instruments of economic planning and policy, though of course it could be improved in administrative details. The shift in ambit of the actual or potential export industries from a wage tax to a turnover tax which is rebatable, the increase in the turnover tax and therefore in the border taxes, means a de facto devaluation of the franc for visible trade transactions of, roughly speaking, 3 to 4 per cent.
The operation of the increase in border taxes on German exports, which is the obverse operation practised in the Common Market, against, as I said, the Rome Treaties, and giving actual subsidy to those not liable to tariffs, represents, therefore, a 7 or 8 per cent. change in the relationship between France and Germany. This may not suffice to right the French/German imbalance, and it does not contribute much to righting the basic unbalance which besets the German mark, but it would have demanded superhuman wisdom and courage for a coalition government, having an early election to face, to have deliberately hurt German industry.
The real difference between the present British and French packages is on a different point: it is on the point of the evaluation of the role of incomes policy in this fiscal package. While a great deal of lip service is paid to the cardinal importance of their incomes and prices policy (and here I must declare an interest, as I have been advising the National Board for Prices and Incomes) there has been very little education drive in this country to make its real nature and function in a democratic policy for full employment understood by everybody. The present package still seems to be a reflection of the illusion that demand management can elastically deal with the matter. I sympathise with people who desperately hope that more detailed and drastically direct measures to control incomes can be avoided. An incomes policy, in the end, and dealing with rogue
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elephants, is a disagreeable type o: intervention which might result in misguided but well-meaning people being punished.
We know very well what spa of measures are planned on the opposite side to clothe this process of compulsion with a cloak of respectability, legality and impartiality before the law. Unfortunately, there is no solid relationship between demand management, unemployment, and the movement of wages. The wages movement depends not only on the level of unemployment but on the general political situation affecting the feeling about unemployment. Therefore it cannot be used to manage the economy. The enormously powerful large-scale organisations on the side of both labour and capital must consciously co-ordinate their policy and use of power if we are to have full employment and democratic control of our destiny.
In France, the General has no illusions about the need for an incomes policy. He decreed a wage standstill, and stated flatly that steps would be taken to implement it. In this case, also, there was no educative process, but on the basis of his immense majority in Parliament, achieved as a result of the fears aroused by a e disturbances last May, the General believes that he can implement such a policy by fear. We shall see. I, for one, do not believe that it is either possible or desirable to implement an incomes policy on that basis. It seems to me that voluntary consent by a large majority is the, only way by which our incomes policy can be instituted and implemented. There should be, however, no illusions on this point.
The world has, as a result of the process of trade liberalisation, become a very small place indeed. Not only has it become a very small place, but the rich countries have grown very much like each other. They have very similar industries. They buy and sell to each other very similar products. Whether this represents a real gain in satisfaction or a pseudo-gain, a gain in social status by purchasing a German car, however ugly it is, or a gain in gourmandise by buying Roquefort instead of Stilton, I must leave to the psychologists. The fact is that our imports and exports have become more similar than they were in the last century, a process which has escaped

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the notice of a great many of my economist colleagues. Instead of importing tropical produce, or those raw materials which a bountiful Nature bestowed on other parts of the world, and exporting manufactures to the primary producers, the interdependence of the industrialised countries has become overwhelming.
From this it follows that if very much the same sort of policy is followed in all major countries disturbances will occur in the relationship of these countries to one another. If the German worker is able to produce more, and relative to his productivity demands less than the British worker, then there will be difficulties. These difficulties, I beg the noble Lord, Lord Crowther, to believe me, will not be eliminated; they will only take a different form if there is a fluctuating rate of exchange, or a crawling peg or a fixed exchange. Those of my colleagues who, with abandon, hope that equilibrium can now be established painlessly—a view expressed here tonight —would be badly undeceived if their advice were taken.
The British problem, then, is to win free consent, by an educative process, to the sort of measures which General de Gaulle has imposed by fiat. So far as our own problems are concerned, a happy solution depends first of all on the correct analysis of the causes of our present disabilities and, secondly, on the peaceful acceptance and consent of the various vested interests—especially industrial management and the trade unions—of the institutional and rather functional changes required, on the one hand, by the technological development and, on the other, by the change of our position in the world as such. Our present disabilities stem from the lack of acceptance that the profound changes in the economic system, the concentration of economic power on the side both of industrial management and of the trade unions needs to be matched by a change in institutional framework. We have not had a wild inflationary excess resulting from a loss of confidence. What we have had is a persistent and slow, but infintely more insidious, erosion of the value of money under all Governments.
Massive British capital exports, undertaken at the time when the balance of
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payments was either barely balanced or showing an increasing deficit, created a situation of illiquidity which compromised our role as a reserve currency. It was the inept management of sterling as a reserve currency ever since the end of the war which created our present difficulties. The noble Lord, Lord Shawcross, asks how much the credits are which we hold. I do not know who is "we" in this particular instance. However, as it is asked, he should read the statistics of sterling balances which were inherited from the war and which have not changed very much in quantity since.
I now turn to the longer-term problem. Ever since 1952 at each peak of domestic employment and acceleration in the increase of output we had a heavier deficit in the balance of payments, and at each nadir of domestic activity, at each recession or retrenchment, whatever you want to call it, a smaller surplus than the previous one, or even a deficit. Ever since 1950 there has been a consistent and unvarying trend of loss in the share of world markets for manufacturers. A number of explanations have been put forward to excuse this dismal performance, but I think that this uncompetitiveness has been due partly to sluggish increase in productivity here, more sluggish than elsewhere, and partly to successful trade union pressures for higher wages, despite productivity failing to rise accordingly. While the Germans at times have surpassed the United States in the export of manufactures, and the Japanese have just caught up with us, the French and Italians have not lost their markets as we have. In no country, morever, is the relationship of imports to exports subject to so unfavourable a change as in Britain. Here, again, it is hardly possible to read a natural law into this loss. It is surely due to a complete failure to implement an incomes policy in due time and with common consent.
We must all sympathise with the trade unions in their predicament, but I must say I cannot comprehend the terms of Mr. Woodcock's recent wholly negative speech, if indeed he was correctly reported. If trade unions do not recognise that their rise to power also involves responsibility to the community if they are to meet truly their responsibility to their own members, and if, in consequence, the competitiveness of British industry is once

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more undermined, we shall indubitably drift into yet another crisis. It is in that sort of crisis, a crisis which would involve a large part of the population's savings, that a situation could arise in which we might have extreme views accepted by an increasing number of people. In that atmosphere repressive legislation, cloaking impulsion into the sanctity of contracts, might well be passed. The rise of hostile public opinion should be a warning to trade unionists which they would do well to heed.
6.0 p.m.
LORD BOOTHBY: My Lords, I should like to add my congratulations to the many which have been so deservedly showered upon the noble Lord, Lord Crowther, on his admirable maiden speech. It was quite clear from that speech that he ought to have been addressing us almost incessantly since he came into the House. He has remained silent until to-day, and I can only hope that his intervention this afternoon signifies a change of life on his part, because we could do with a great many more speeches of that character.
I am tempted to say for the last time "This is where I came in", because the Bill which we are now discussing is the direct and inescapable consequence of the international monetary crisis. That is the iceberg to which the noble Lord, Lord Crowther, referred. The Bretton Woods are burned down, and the international monetary system planted there in 1945 is no more than a charred and unsung relic. Why? Because, as I have said over and again to both Houses of Parliament, non-discriminatory multilateral trade, fixed exchanges, uncoordinated national monetary policies, and a gold price fixed in 1934 at a level which bears no relation at all to reality or to the price of any other commodity, cannot be made to mix or work. Fixed parities have proved to be no safeguard against the whole international system being infected by inflation or deflation from time to time.
With their obsession about freedom for international capital movements, the central bankers have intensified "hot" money activity over the last ten years, and above all in the last two years; and finally have been driven to the desperate expedient of speculating themselves
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against the speculators. Disequilibrium has been allowed to grow until the run on a currency has become so great that the central bankers have been driven to band themselves together to buy that currency, thus forcing the county concerned into even deeper debt; and, as often as not, failing to prevent a severe devaluation. The Basle Agreements, of which the bankers pretended to be so proud, merely changed one debt for another and even heavier one, as the Governor of the Bank of England ruefully remarked. Instead of attempting to control the "hot" money flow, the I bankers have let it rip round the Free World until, in the last few weeks, they have been "as near as a toucher" to being overwhelmed by it.
The central bankers may not unjustifiably be compared to an international fire brigade that does not go into action until long after the alarm has sounded; and then, when it arrives, starts making conditions about the terms on which it will fight the fire. That is what happened in France the other day, and it is why President de Gaulle was quite right not to accept the conditions, and to refuse to devalue the franc. It could have led only to an aggravation of the crisis, driving us all further into devaluation and debt. As it is, he has forced the pace for a radical revision of the whole international monetary system, which is what he and his advisers want, and which has now become an imperative necessity.
If I may say so, as against what was said by the noble Lord, Lord Sham cross, I should like to congratulate the noble Lord, Lord Beswick, on an exceedingly able and convincing speech. I have no complaint to make about the Chancellor's recent curbs on consumer spending in this country, or about the deposit scheme on imports. I have long advocated a ceiling on unnecessary imports, unless and until we can get our balance of payments in surplus, if necessary by direct physical controls. This method may well be the better way. Obviously it has been carefully considered. But, despite what the noble Lord, Lord Beswick has said, I cannot help asking myself, why it was not put into operation when we devalued. That surely was the moment to do it; and had it been done we should have been in a better position

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to-day. Further curbs on consumer spending and imports were inevitable so long as the monetary chaos persisted. Now we have to face them a little later than we might have done.
But, my Lords, how tragic it is that trade should be restricted and productive investment cut down, even temporarily, in the Western World simply because of the monetary chaos! It is a real tragedy, and my plea this afternoon is quite simple. It is that an International Monetary Conference should be held, as soon as possible after Mr. Nixon takes over in the United States, to devise an international monetary system that will meet the requirements of the modern world. I do not care where it is held—Washington, London, even Paris; but I think that Her Majesty's Government might well take the initiative, and take it now. In this alone lies the hope of an international system which will work, and which will be based on truth and not (as Enoch Powell correctly put it) on the systemisation of a lie—the lie that the relative values of gold and of respective paper and credit currencies are constant; because they are not. That is why I agree so much with the noble Lord, Lord Crowther, that these fixed exchange rates will never work, and must be got rid of.
What has to be done? I will not detain your Lordships for long, but I should like to say that perhaps the most important thing is to decide the future role and price of gold. There is a shortage of liquid reserves for the Free World, to which I drew the attention of your Lordships in a Motion which I moved in March, 1961. In the course of my speech I then advocated an International Monetary Conference. But such a conference has never been held. The attempt by Mr. Henry Fowler, the United States Secretary to the Treasury, first to discredit and then to demonetise gold, with a view to its ultimate replacement by an inconvertible dollar, foundered at Washington last September, in face of the implacable opposition of the Continental European countries; and a stern warning from Mr. Schweitzer, the head of the International Monetary Fund, with the clear implication that gold is a traditional means of net settlement and a point of reference for the values of all national currencies. Mr.
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Schweitzer went on to point out that the proposal to introduce Special Drawing Rights as a means of increasing international liquidity was not intended to replace gold and foreign exchange but only to supplement them. The same applied to Keynes's proposal at the Bretton Woods Conference, for an international currency to be called "Bancor"—a proposal which was killed by Mr. Vinson and Mr. Harry Dexter White, not by the British Treasury.
The truth is, my Lords, that the world is not yet ready to abandon its faith in gold as the basic unit of international monetary reserves. There are inhibitions about it on both sides, psychological as well as political—there is the South African situation, for example. But the inhibitions in favour of gold far exceed those against it. The Special Drawing Rights scheme has not yet got off the ground. Why? Everybody praises it, but it has not got off the ground because it is still not clear that these rights are convertible into gold, on account of the American attempt to impose a solution on gold purchases which is contrary to the spirit and letter of the I.M.F. Charter. Faced with a choice between gold and drawing rights in their vaults, the countries of the Free World will choose gold; and we may as well face that fact.
If we accept the fact that the demonetisation of gold and its replacement by the dollar is a non-starter, an increase in the price of gold is the only practical method of increasing international liquidity without delay. That is why I put a realistic price for gold at the top of my list of the economic problems which demand a quick international solution. The present two-tier gold market is only a truce between South Africa and the United States. The future role of gold and the future price for monetary reserve gold remains to be agreed upon, and there is every indication that Mr. Nixon has an open mind on this question.
We have been through all this before. The years of industrial stagnation after the Franco-Prussian war were caused by the refusal of Britain to raise the sterling price of gold after Germany and other European countries had decided to adopt the gold standard. The years of industrial stagnation and massive unemployment after the First World War were

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caused by the decision of Britain to return to the gold standard in 1925 at the pre-war parity of exchange. Those years culminated in the greatest economic crisis the world has ever known. From this President Roosevelt saved us all by raising the dollar price of gold, in the teeth of orthodox world economic opinion, in 1934. But it was then too late to prevent Hitler's rise to power on the backs of 6 million German unemployed.
I put next a basic realignment of currencies by general agreement, as a starting point. The reasons for this are obvious. Thirdly, I follow the noble Lord, Lord Crowther, and ask for a greater flexibility in exchange rates. This I have been advocating for over twenty years. I used to call it "wider margins". Now it has suddenly become fashionable to call it the "crawling peg". I think that mine is the prettier phrase. But I do not really care what it is called, provided that it is done. The main requirement of an international monetary system is that it should provide an effective means of adjustment between the different and varying competitive strengths of a number of national economies, without imposing intolerable deflationary stresses upon some of them.
I should have thought that a margin of 5 per cent. would be sufficient, provided that central banks of the various countries kept a sharp eye on any threatened disequilibrium and acted accordingly and at once—provided, in fact, that when they heard the alarm they rushed out immediately to deal with the fire. On the other hand, the noble Lord, Lord Crowther, may be right, that even a margin as wide as 5 per cent. would be insufficient to do the job. In that case, we should have to go back to a daily floating rate, such as we had before the war, supported by an Exchange Equalisation Fund. On this I do not want to dogmatise. I only say that greater flexibility of exchange rates, by one method or another, is not only essential but inevitable.
Finally, my Lords, I put the conversion of the international Monetary Fund into a World Central Bank, with hard assets supplied by the principal gold and exchange earning countries; in other words, a Central Bank for central banks,
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equipped like them with Powers of credit creation or contraction; and with its own unit of account, free to accept deposit liabilities or to extend overdraft facilities to the central banks of member countries. What objectives have we got here? The automatic use of an increasing portion of persistent creditor balances for long-term investment in under-developed areas, and the transformation of the two Bretton Woods institutions into an effective force to stabilise economic growth in the non-Soviet orbit. Those words may have a familiar ring to the noble Lord, Lord Balogh, because they ate his; and I agree with all of them.
This will require, of course, a certain amount of "supra-nationalism", which will involve some surrender of national economic sovereignty. Why not? We need to internationalise the floating supply of liquid reserves on which both international investment and trade depend. We need an international banking system that can expand fast enough to finance an increasing volume of world production and trade, and bring to an end the old basis on which one country's deficit undoes every other country's accomplishment. We therefore need to put an expanded supply of monetary gold behind a World Central Bank. This seems to me to be the only solution. I see no other way.
My Lords, do not let us pretend any longer that all is well with the present international monetary system—or lack of it. Mr. Harold Lever is far too intelligent to believe what he seemed to be saying on television the other night: that everything in the monetary garden is fine and dandy; and that the central bankers of the world are the most intelligent people in it. I do not believe Mr. Lever thinks that, and I certainly do not think it. In his first message to the Congress, on February 6, 1961, President Kennedy said:
"Increasing international monetary reserves will he required to support the ever-growing volume of trade, services and capital movements among the countries of the Free World … We must now, in co-operation with other lending countries, begin to consider ways in which international monetary institutions—especially the International Monetary Fund—can be strengthened and more effectively utilised, both in furnishing needed increases in reserves, and in providing the flexibility required to support a healthy and growing world economy."

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Fine words, my Lords! Were they followed by any action? Not at all. And that was in 1961, since when things in this field have gone steadily from bad to worse.
The Prime Minister has, since that statement was made, called attention in no uncertain terms, and on more than one occasion, to the need for a reform of the international monetary system and for an international conference to achieve it. The Prime Minister knows what it is all about. Let him act now. The fate of his Government most certainly depends upon it—perhaps, also, the fate of this country and of the Free World as we know it to-day. There is not much time to lose. The thunder of the falls ahead of us is already in our ears. I ask Her Majesty's Government to take the lead in steering for the bank, in both senses of that term, before we all go over the falls.
6.18 p.m.
LORD HAWKE: My Lords, I count myself privileged to have heard the maiden speech of the noble Lord, Lord Crowther, and I shall later refer to something which he said with which I profoundly agree. Also, I should like from personal knowledge to endorse one aspect of the speech of the noble Lord, Lord Shawcross. He referred to the proliferation of Ministries and Government agencies in Whitehall. Twenty-two years ago, I made a maiden speech on that very subject, and if I remember aright the burden of it was that I had found from experience that the difficulty of business in Whitehall increases in geometrical proportion to the number of Ministries and agencies which have to be brought in on every matter. I believe that one of the things that has gone wrong in recent years, whereby the Government of this country appear to be at sixes and sevens, is this tremendous proliferation of Ministries.
I often find myself speaking immediately after the noble Lord, Lord Boothby, and I can always say that I agree with almost everything that he says. I think I have heard him make that speech before.
LORD BOOTHBY: You have!
LORD HAWKE: One is inured and resigned to errors of judgment and omission in trying to run the British economy,
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which is an extremely difficult task, but one hopes that one can avoid the major blunders. This Government, in my opinion, have made three blunders of the first magnitude. The first and greatest was, on obtaining power, to run round crying "stinking fish" at the top of their voices. Now when banks come under new management, the one thing the new managers must not do is to run round and say how bad the old managers were, because every depositor then begins to think of the security of his deposit—and that is precisely what happened. I think the pound was doomed from the moment of that bout of irresponsibility.
Next, when the pound had to be devalued, there was much talk about the terrible taxes and restrictions that would have to be imposed, but for months nothing happened. The public, quite naturally, went ahead while the going was good and spent merrily, and in so doing, of course, they used up a great deal of our more cheaply-bought pre-devaluation stocks. Then, when the taxes and restrictions did appear, they were to my mind not wholly relevant to the situation. I know that the Press hailed Mr. Jenkins's Budget as a masterpiece of planning, but I am on record with my friends as saying that I thought it was "phoney". Assuming that the object of the exercise was to reduce consumption, and particularly imports, through a reduction in spending power, the first mistake was to rely so much on a heavy tax on capital to be paid nearly a year ahead, and particularly to include that in the calculation of how much would he taken out of the economy. Naturally, this led to further lack of confidence in money and a flight into other things.
Then S.E.T. was relied upon to produce a large cut in consumption. This could come about only if the tax was passed on to the consumer immediately, and this was obviously the intention of the Chancellor. In fact, he said so in so many words. But by aiming at a price rise created in this roundabout manner, he made it perfectly possible, and indeed plausible, through lack of co-ordination in Whitehall, for his colleagues to go round denouncing people for raising prices—in fact, doing precisely what he wanted them to do. That showed lack of co-ordination. The Chancellor's aim was obviously to put up prices immediately

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and as quickly as possible to reduce consumption. What happened, of course, is that before long the general public had achieved salary and wage increases more than sufficient to set off the long-delayed rise in costs, and the only people who suffered a reduction in their consumption were those on fixed incomes.
My Lords, I think it is time we started to question the validity of some of the calculations of the economists. Once upon a time I believed in them, but for a number of years now, as a very amateur economist, I have been looking with increasing doubt at the pundits arguing to the nearest £50 million what was the precise amount that needed to be taken out of the economy to produce a given result—and this is an economy which is spending very nearly £30,000 million a year. If all our population were on the bread-line spending every penny they had, and with no reserves of savings or capital—what one is sometimes tempted to believe might be the economists' dream world—then it is possible that price rises created directly by taxes of the same amount would in fact create a reduction in spending power of precisely the same amount. But in our present situation psychology is much more important than arithmetic, and if people think prices are going up perpetually they will scratch the money together and buy, even if it is at the expense of capital and savings—and this was the point dealt with by the noble Lord, Lord Crowther, in a masterly manner. However, in the vast number of cases it was unnecessary for them to call on their savings as they found that their incomes rose to meet the prices.
No, my Lords; I believe that in the situation to which we have been reduced to-day all these attempts to control the economy through curtailing the purchasing power of the public are "old hat". By the time taxes bite through price increases the public already have income increases to match; and, meanwhile, taxes do not have their full, intended effect owing both to the delay in bringing them in and to the popular demand that retailers' old stocks are, sold at the old prices. Meanwhile, the public have been given notice to buy while they can. Not very far from
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where I am standing to-day there is a large department store, and in every window there is a notice saying,
"There will be no price increases so long as our stocks last."
To my mind that is naturally what the general public want, but the Chancellor of the Exchequer must regard that as sabotaging his policy. He wants prices to go up, yet everybody is conspiring to keep them down.
I am afraid that the Government will have to resign themselves to the fact that the only expenditure which they can control is their own expenditure. I admit that the field here is limited if one wants to avoid long-term damage. This is not a debate on Government expenditure; otherwise, I could suggest some very useful ways to save a great many millions of pounds which would not cause long-term damage. I spoke of cutting down in order to reduce expenditure on imports, but there is another side. After all, there is nothing inherently wicked in importing. The world would be much the poorer if Britain had to cut down heavily on imports. Therefore, by far the most painless method of balancing our overseas accounts is to earn more by visible and invisible exports. I do not want to trespass on Lord Aldington's debate next week, which unfortunately I cannot attend, but let me give one small example. We are cramping the scope of some of the world's finest investment experts by insisting that any stock they sell in the United States should carry what is, in effect, a heavy tax of one-quarter of the dollar premium handed over to the Exchequer here.
LORD BALOGH: My Lords, would not the noble Lord agree that thi3 has now been dealt with by permitting investment trusts to borrow in America and to use that borrowing for adjusting their portfolio?
LORD HAWKE: My Lords, I should have thought that that was a very limited extent. I am sorry; I should have liked to comment on what I am sure was the very brilliant speech of the noble Lord, but quite frankly I could hear only one quarter of each sentence.
I do not want to go in detail into how to increase our exports, because really that would be the subject of a debate in itself. I hope, however, that this House

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will have a debate on that particular subject, for I feel sure that some new ideas will emerge. But perhaps I can put forward one idea of my own. I do not think that, as a nation, we are nearly professional enough in this idea of exporting, and one of the reasons is that, as a nation, we are very bad at languages compared with the Continentals, many of whom speak three or four languages. It would be so easy to ensure that we had more linguists among British youth—or young people with even a working knowledge of one or two foreign languages—if we were prepared to recast the syllabus of some of the honours degrees conferred in our universities. I would make a reasonable oral knowledge of a European language a qualification to go to the university on a public grant and to read for an arts degree. And I would make it necessary for the student, in order to get his honours degree, to offer a second, perhaps non-European, language, with an oral knowledge only. I would let off the scientists; they have to work so hard already.
If this came to pass we should have in a few years' time a number of young men and women with less knowledge of history, economics or English literature than they would have had—a knowledge that could be gained by the reading of books in their spare time—but, on the other hand, we should have a larger number qualified at least by languages to play some part in the exports field should they go into industry. That is only one way of getting our old ideas of life more geared to exports. There are others. It is vital that we should do more. If my thesis is correct—and I am borne out by what the noble Lord, Lord Crowther, said—now that the British people have rejected the idea of cutting down their standard of living in order to save imports, the only alternative to bankruptcy is to earn more overseas both on visibles and invisibles. That should be our task.
6.32 p.m.
LORD HANKEY: My Lords, I should like to join those who have congratulated the noble Lord, Lord Crowther, on his most intersting speech. We have followed the noble Lord's career with great interest for many years and I think that we are extremely lucky to have the
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value of his advice in this House. I hope that we shall hear him often.
I shall be glad to support the present Bill; but I think it lamentable that it should be necessary to discourage imports in this way twice in four years. I hope that the real effects of this highly original measure have been correctly calculated: for it seems to me quite difficult to calculate what those effects will be. It is true that this measure—if my memory serves me aright—has been applied both in Japan and in Italy; but the British economy is different from that of either of those countries and the reaction of our trading community should, I think, also be different.
This measure is a great disappointment to our partners in EFTA and in the Commonwealth. While there is no question but that we are obliged to do something drastic in the present state of our economy, I think it essential to realise that this can be only a temporary measure while we put our economy in better order—and in this I agree with the noble Lord, Lord Crowther. I think that the Government have been incredibly dilatory, staggering from one crisis to another, while one major export industry after another is disorganised by unofficial strikes and disorder regardless of the agreed procedures on terms and conditions—to say nothing of the trouble we have had on the railways and the docks and even in the shipping industry, all essential to our exports. Is it any wonder that we are losing out on devaluation? By the chaos that we have allowed to go on our industries have been prevented from taking their opportunities. We ought not to be in a position which necessitates this Bill. I know that the Government are going to take action about this situation, so I shall say no more.
The discouragement of imports involved by this Bill will increase the relative pressure of home demand, and in my opinion the Government had no alternative but to impose a further squeeze as they did. The proper solution would be the expansion of industry for the home markets and also for exports. But this is precisely what we have failed to do hitherto; so clearly we must take our medicine and face the squeeze—but I cannot see any sugar on the pill.

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Equally, I agree that the Government had to restrict credit by measures such as those taken with the banks. We have to learn by what happened in 1964 and 1965. I was then the British delegate at O.E.C.D. We were constantly telling our partners, on instructions from London, that we had reduced home demand, first by about £260 million and then by £600 million. But in the following summer of 1965 it transpired that credit had in the same period been expanded by about £1,100 million. So even taking the larger figure, that had been more than negatived and credit had been expanded by almost the same amount in the opposite direction. So I agree that the Draconian credit restrictions and other measures taken by the Government are necessary in the present circumstances if we are not again to be in Queer Street.
My Lords, I agree with what has been said in this debate, that it is essential that the Government should show more discipline than they have done hitherto about public expenditure. What, I want to know, are the Government going to do with the money collected in extra taxes and in Customs deposits? Are they going to spend it? Every pound spent in this country, either by the Government or by anyone else, demands on average to be met by something like 30 per cent. of its value in imports. If the Government spend that money they will again upset the apple-cart, as they have done before during their term of office. We need a period of real economy in the public sector to balance the economies which we are imposing on the private sector. We need a time of iron restraint until well after—and I repeat "well after"—our economy has recovered. Make no mistake, in the way we are going now, that will be a very long, hard, strait and narrow road. In retrospect, and speaking strictly from these Benches, what a great Chancellor of the Exchequer the noble Lord, Lord Thorneycroft, is seen to have been! What a pity that his urgent and firm advice that we should not increase public expenditure by even £50 million was not followed at that time, and that he had to resign.
I agree that it is clearly necessary to have a firm incomes policy which will restrict the rise of incomes of all sorts to the rise in productivity. The Govern
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ment have been most courageous in this; but I think they should explain the real need even more clearly and cogently than they do. If they showed even half the courage in knocking down the ridiculous, and sometimes scandalous, obstacles that prevent our economy from advancing and waste our skilled labour and capital resources, then I think we should not be where we are now—for it is there that we have to break the vicious circle.
I wish to urge on the Government that they may not have too much time in order to deal with these fundamental issues. Incomes policies are incredibly unpopular. People up and down the country are really fed up and fed that they are being mucked about too much. I have previously said that a severe incomes policy combined with a squeeze that discourages productivity from increasing may be good economics but that it is really very bad politics. The present squeeze, by raising prices, must increase wage demands and make all this more difficult.
My experience in O.E.C.D. has led me to think that we ought to study the experience of some of our partners there. I recall that the Dutch economy more or less exploded in September, 1963. The employers and the workers all greed suddenly that in spite of Government policy wages should rise by an average of well over 10 per cent. A good deal of this, naturally, had to be taken out in inflation, and the Dutch were lucky that other countries, too, had inflation at that time. The French economy also, after a prolonged squeeze, exploded last May, with wage rises of more like 16 per cent.; and frankly, we saw the result in last month's financial crisis.
I urge the Government to ponder over these sad precedents. A too prolonged and severe squeeze can turn out to be self-defeating. Of course, we have no alternative but to have a squeeze until we break out of our vicious circle, but in the end I believe it is far safer and certainly much more profitable, to use the steam in the economic boiler for industrial investment, and ultimately for expansion, rather than to sit too long on the safety valve. This would really necessitate early and effective legislation on industrial relations and the knocking away of the obstacles to progress which I have mentioned. Then the Government's

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measures to encourage investment would be far more effective. Meanwhile, public investment, which has been referred to, must, I think, now be directed to what will give the biggest physical return, and public expenditure ought to be orientated in the same direction with a strict regard for cost effectiveness.
My Lords, insistence on cost effectiveness is unpleasantly earthy advice, and I realise that it is not easy for a Socialist Government to accept it. But I press the Government most urgently and sincerely to agree that this would be better than having the boiler blow up, as the French boiler did, or sinking the ship under the waves of inflation. The Government will not be forgiven if the pound is not maintained at its new parity, as I am convinced it can be if sensible and radical measures are taken in time, and if the enormous genius of our people is allowed to function properly.
Finally, my Lords, I wish to draw attention to the fact that following last month's financial crisis a concealed alteration of the conditions of trade, virtually equivalent to a change of exchange rate for current trade, has been achieved by France and Germany by altering their respective rates of value-added tax. The Germans have reduced this turnover tax —for that is what it is—and the associated import border tax. The German people are thus able to buy their imports more cheaply and are given cheaper goods generally at home. The tax rebate to exporters is of course also reduced. I apologise for repeating some of what was said by the noble Lord, Lord Balogh, but this is important to understand. This all tends to correct the tremendous export surplus and help to keep the Deutschmark down at its official parity. The effect is very like a change in the exchange rate, except that it does not affect capital movements, and thus the speculators derive no advantage from their frantic buying of marks before the crisis. Moreover, this is a flexible system which can easily be readjusted.
The French have, among other measures, done the opposite, by raising their value-added tax and damping down their over-heated economy, with exactly opposite effects. I think we should look again at this value-added tax, though I
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quite see that the Department of Inland Revenue has enough on its hands. This value-added tax is a far more subtle and flexible system than our purchase tax. It definitely encourages exports, as exporters actually receive a rebate, whereas with our purchase tax it makes no great difference to the exporter whether he sells at home or abroad. If the home purchaser pays purchase tax, it is no business of the manufacturer. It seems to be commonly agreed that direct taxation here is running at a level that seriously discourages the initiative which we need so much in our economy. A switch to indirect taxation of this sort could, of course only be part of a major tax reform; and again I realise that it is not altogether easy for a Socialist Government to adopt it. But I venture to ask the Government to look again at the value-added tax because they are adopting the extremely unconventional measures contained in this Bill, and it is quite clear that they do not have absolutely set ideas.
My Lords, I have spoken mainly about the British economy because this is a British Bill, but I want, in conclusion, to mention briefly some of the major international questions that were touched on in the earlier parts of this debate. The capacity of the international monetary system to accommodate the enormous movement of short-term funds which are liable to take place if anything gets out of balance is really a matter of grave concern. The amount of these funds in circulation has been increasing enormously in recent years, as the world gets richer, and as more and more countries adopt the more or less full convertibility required by Article 8 of the I.M.F. Agreement. It is a sobering thought that the payments system broke down in the principal European centres the week before last and that payments essential to trade had to be suspended for several days.
I believe it is time to recognise that this a most dangerous disequilibriating tendency which is developing, which is bound to go on getting worse; and to which it is essential to find an early answer. I do not think that, in face of this danger, any member country of O.E.C.D. will feel it can safely introduce "crawling pegs" or any other form of floating exchange rates. In my capacity as Chairman of the Economic Policy Committee O.E.C.D., I have had a good deal to

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do with central bankers of many countries, and their opinions and their fears on this particular subject are very real and very strong. I should however like to ask the Government whether the system of Special Drawing Rights, supplemented by central bank credits and swap facilities is likely to prove adequate in the foreseeable future and whether the Special Drawing Rights system might now perhaps, be extended with French co-operation, in view of the crisis which France has suffered.
My Lords, I do not agree with the noble Lord, Lord Boothby, that any solution is to be found by calling an early International Monetary Conference. In 1933 we saw the disastrous effects of calling a vast conference with inadequate preparation. That conference agreed upon nothing: it made the situation worse. Before anything like that is done, it is essential to get the competent officials together in bodies like O.E.C.D. and the I.M.F. to work out quietly and sensibly, and in a practical way, what is possible; to compare notes with the central bankers and the Bank of International Settlement and in other fora where they get together; and not to have any conference until agreement is in sight and it is certain that agreement will be reached at the conference. I should have thought that the difficulty we have had in agreeing on a system of Special Drawing Rights, which was opposed by very few countries, should have been a lesson to anybody who was thinking in terms of sudden conferences.
I also hope that, whatever is done, we shall not go back to a system based on gold. The noble Lord, Lord Boothby, spoke of a system whereby a World Central Bank would be able to increase liquidity as needed. A system based on gold is unable to do that. As soon as you say, "Gold", you fix the system, and therefore one barrel of Lord Boothby's proposal was inconsistent with the other barrel. Secondly, if we increase the price of gold, or if we have a sliding price for gold, we must realise that most countries will not want to be paid in anything else; because they will always hope that if they can sit on enough gold the price of gold will go up and their central bank will rake in some money. In fact, an increase in the price of gold is feared by many central bankers as likely to be
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dynamite to the existing system. As it would not be very flexible, it might make things worse instead of better.
I urge that we regard these problems, in the light of past experience, with very great caution. On the other hand, I suggest that a careful inquiry should be started, either by the O.E.C.D. Working Party No. 3 or by the Group of Ten on behalf of the I.M.F., into the possibility of drawing some distinction between movements of funds in furtherance of current trade and payments and other short-term movements of a more speculative order. That would be quite an important distinction. It has always been said that this distinction was impossible to define, but the O.E.C.D. co le of capital movements already draws a number of distinctions, and I wonder f this problem should not be looked at again.
LORD HAWKE: My Lords, fro n his experience, the noble Lord must know that this prohibition of capital movements already applies to an enormous number of countries, yet these capital movements seem to go on. Can we effectively stop capital movements?
LORD HANKEY: My Lords, this is exactly the question I am raising. I warmly agree with the noble Lord. I do not want to stop capital movements. I believe that they are essential for the proper financing of trade and payments. What I am suggesting is that it may even now be possible to draw some distinction between capital movements in furtherance of current trade and payments and capital movements which are of a more speculative order. It has been said that this is not possible, but I believe that the situation ought to be looked at again. If something like this is not done, I am afraid that we may ultimately be faced with another real breakdown of the system, with perhaps more lasting consequences than we had to face last week. What is needed is a sort of internationally accepted system of baffle plates, which would prevent all this money moving at once. It should not prevent it moving, but it might prevent it all moving at once.
To sum up, my Lords, I support this Bill, but strictly only as a temporary measure.
6.53 p.m.
LORD GRANVILLE OF EYE: My Lords, I always listen to speeches of the noble Lord, Lord Hankey, with' the greatest interest. I agree with him in his criticism of the suggestion about calling together another international conference. As he said, the experience of the 1933 Conference, which was destroyed overnight by a telegram from President Roosevelt, makes Ministers hesitate to initiate such a conference at the present time. I do not agree with the noble Lord with regard to his value-added tax. This is a complicated and difficult problem. I notice that it is being studied carefully by Mr. Nixon's experts in the United States of America, but I doubt very much whether we can expect that sort of thing to happen in the next Budget in this country.
This Customs Bill has produced a wide-ranging economic debate, as would be expected, and I have listened to most of the speeches. I should particularly like to congratulate my noble friend Lord Beswick, who spoke from the Front Bench, on what I thought was a first-class speech, which brought a gust of fresh air into the study of the dull and musty subject of economics. It was a hard-hitting but a fair speech and my noble friend said many things that required to be said. I listened with great interest to the speech of my noble friend Lord Sainsbury, and I would join in the congratulations to my noble friend Lord Crowther for his maiden speech.
These measures were necessary. They had to be put into operation. Any return to the old "Stop-Go" policy of the previous Government was unthinkable. The only alternative I have heard advanced in this debate, in the Press and in week-end speeches is a reduction in Government spending or, more popularly, a general criticism of the Government's policy. But I think that the Bill has several anomalies. I gather from Press reports that foreign exporters are already giving extended credit to importers in this country, from six to nine months, and from a currency point of view this might help in the immediate future, but I gather that the Treasury and the Bank do not like postponing their commitments. In the long-term I do not think that these extended credits will materially help the situation. Devaluation has made imports
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dearer to purchase under whatever terms of credit our importers are now being offered from the Continent and elsewhere.
The Schedule of exemptions in the Bill is a long one and I have no doubt that the Board of Trade will find that there are several anomalies. For instance, sawn timber is excluded but plywood is not. That is the sort of thing which can increase the cost of production to some manufacturers for export, and surely that is not what the Government are trying to do. I hope very much that my right honourable friend the President of the Board of Trade will be able to look again at the details of the Schedule. In considering the economic measures which were announced, I am not sure about the timing of the purchase tax increases. This certainly hits some essentials, which is not what the Government are particularly anxious to do. I believe that in the consumer trade the downward trend in many goods has already begum. Of course, as one noble Lord opposite said, the Christmas stocks were already in the shops, the shelves were already loaded. In all these measures, timing is an important factor and I think that this is a case in point.
My noble friend Lord Beswick dealt with criticism of the Government on their governmental or national expenditure. It is clear that by the very nature of world movements, all countries have had to increase their governmental or national expenditures. As I understand it, the First Secretary to the Treasury has a special responsibility for this subject. I hope he is going to function very much as a Minister for Economy and Minister for Efficiency, and that he will look at all these items of national expenditure r most carefully from the point of view of ' the efficiency of the national machine, as well as from others. We are, I believe, spending £515 million on research. This research may be important and vital to industry and the export trade, to armaments production and the rest, but we have to be sure that we are spending this very large sum of money on the things that are right for Government policy, right for industry and right for the export trade.
I think we must try to learn some lessons in this respect from the past. In too many cases a great deal of research

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and technical development has gone on in this country only to see the end product of that research and technical development go abroad to the larger industrial countries. I hope that my right honourable friend the Chief Secretary to the Treasury will look carefully at items such as these, because they represent a very large expenditure. We must see that the results of this research, with all the power of the Government behind it, go to the right industries where they can help the export trade and the national economy.
As the noble Lord, Lord Boothby, said in his speech, we have had this balance of payments problem for twenty years. It is nothing new to this country. We have been living on a razor's edge. We are still not producing enough for export, and we are still importing too many of the wrong goods. As so many noble Lords have said to-day, we are still consuming more than we earn. I regret to say that the climate of public opinion for an all-out effort to try to get out of our difficulties is still sadly lacking in this country; and in the end this may be the real key to our recovery. This climate of public opinion to which I refer is certainly not a healthy market to which a successful appeal can be made by -Sir Miles Thomas on behalf of the National Savings Movement. This free-for-all bonanza is the child of the '50s. Of course, it is a very ready market for weekend speeches, on a so-called silent consumers' revolution, or for knocking the Government. But anyone who tells this bonanza, this section of public opinion, in weekend speeches and in headlines in the Press, that it can have what it wants in this country to-day irrespective of the priorities of the production effort and the export requirement is rendering a poor service to this country.
As my noble friend Lord Beswick said in his speech, as well as by implication, unfortunately the facts of the situation and the measures of the Government to deal with it are just not getting over to the public, to the so-called man in the street. I often think that in some ways what we need is an Economic Grand Committee of both Houses of Parliament, to meet and discuss these questions with the Ministers concerned; to listen to the facts and to ask questions. And if that were successful, perhaps later
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it could be televised. This might get over the problem.
This Government has no Press at all. This Party, as the noble Lord, Lord Shawcross, knows from when he w as in office, has no Press, whereas the Opposition has all the Press. It is the headlines in the Press to-day which are quoted abroad at a time of economic crisis and when the pound is being knocked.
LORD SHAWCROSS: I am loth to interrupt the noble Lord, and I should not do so but for the fact that he appealed to me. I am connected with at least one national newspaper, The Times, and I do not think he can fairy say that the Opposition has The Times. I am surprised to hear him say that the sun is on the Opposition side. Is that what I understood?
LORD GRANVILLE OF EYE: I am saying that in general the whole weight of the Press of this country is on the side of the Opposition, and not on the side of the Government. It is one thing to govern this country in the present situation and to take measures which may be unpopular and unpalatable, but it is another thing to get it over to everybody concerned that without their co-operation and support no Government policy can succeed. This is one of the problems of our free democracy to-day. The Press, television and other means of communication owe a public duty to put these facts clearly, fairly and constructively, and to devote to them as much space and time as they can so that the people of this country can understand something more than the ordinary headlines that are to be read in the national Press to-day.
I think the Government measures are right and that they are deserving of support from all Members of your Lordships' House. I certainly support I hem. I think the Government have shown great courage in the present economic position of this country. I believe that they will have their reward and that these measures will be successful next year. I am sure that next year there is every chance that this 20-year-old balance-of-payments problem will be favourable to this country. It is up to everybody in what they say and do to try to give this Government the support they need to see that this is achieved.
7.8 p.m.
LORD ERROLL OF HALE: My Lords, I should like to pay my tribute to the noble Lord, Lord Crowther, on a most admirable maiden speech which held us all entranced. The only comment I would add is that one noble Lord I met outside was sorry he had missed it, because he had heard so many tributes in the Lobbies and corridors about the excellence of the speech. There was a breath of common sense from an essentially non-Party organ, the Economist, of which the noble Lord, Lord Crowther, was a distinguished editor for many years.
In passing, I would refer to the remarks of the last speaker, the noble Lord, Lord Granville of Eye, who was, I thought, rather unfair about the Press. After all, the Press is interested in news, and I am glad to say, as a member of Her Majesty's Opposition, that I think the Government get far more space in newspapers than our weekend speeches. Indeed, when I spoke in your Lordships' House last week on the serious problems of the North-West, the report of the debate by the distinguished newspaper of which the noble Lord, Lord Shawcross, is a director, merely said: "Their Lordships discussed the North-West", and my brilliant speech went entirely unrecorded, at least in the London edition, though it may have been featured in the earlier North-West editions. Perhaps the noble Lord, Lord Granville of Eye, will recollect that the Daily Mirror is not normally considered to be on the side of the Conservative Party and normally gives the benefit of the doubt to the Government when it feels it conscientiously can do so.
My Lords, we have had a very interesting and instructive debate to-day, led off by the noble Lord, Lord Beswick, who made I would say a good, fighting, defensive speech. It was of course entirely statesmanlike and injected no element of Party controversy into the subject matter at all; and I thought he made a very good story out of an extremely bad case. I should like to congratulate him strictly on that basis. He also was brief, and therefore if I do not say all that I should like to say it is because I wish to maintain the standard of your Lordships' House this
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afternoon in a number of speeches which were not so very long.
I should like to start with the subject matter of this debate, the Customs (Import Deposits) Bill. While I agree that we should not wish to involve ourselves in great detail, it is a very important measure and marks a very definite change in Britain's commercial policy. Although it is only a temporary Bill, the fact remains that it is a very embarrassing Bill for a large number of people. Here I should perhaps just mention to your Lordships my interest as chairman of a company which imports electrical engineering products from Sweden. So I was personally involved. But I have not come to this Dispatch Box to-night to plead for the interests of my particular company because, although we had a busy day on Monday, by the end of the day we had the whole thing sorted out, and everything is proceeding on the basis of a larger turnover in 1969 than we succeeded in having in 1968—because, of course, the British want these excellent Swedish products. Because of their technical superiority they usually sell above the general market price—though here I must be careful not to advertise in any way. But, for the reasons I have given, I have followed this new development with particularly close and very practical interest.
I should like to endorse therefore what the noble Lord, Lord Crowther, said, about the suddenness of the impact on a number of importers who were carrying on their business in a perfectly reasonable and honourable way and who learnt on Friday evening that all their plans would have to be reshaped. This does not do a lot of good in this island. It means that yet another section of the British industrial and commercial community are upset and distracted by an arbitrary Government action. I realise that by the very nature of the measure it would have been impossible to have much in the way of prior consultations, because the details would have leaked—although in fact there was a good deal of leaking into the Press in August and September, so it was quite clear that something of this sort was afoot. This is just one more measure which makes businessmen affected

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say, "Ah! it is the Government again. They are not on our side."
But, of course, what is much more serious is the effect abroad. It is not just that some countries may say, "They are hitting at our exports", but the fact that we shall have shown the rest of the world that we have been able to create and put into operation a very important weapon to discriminate against imports. And as we are the world's largest exporter, we are far more vulnerable than any other country to retaliatory action. All we have really done by this temporary measure is to show the rest of the world how to do it on a more permanent basis, with possibly dangerous repercussions on the level of our exports. I think it is most important that we should get away from this idea that our exports are fine but any imports from other countries are wrong. The noble Lord, Lord Beswick, referred —not necessarily as an import—to a pigskin suitcase. Well, why should not somebody buy a pigskin suitcase if he wants to? I think that his personal electric shoe polisher was an import and not domestically manufactured.
LORD SHACKLETON: Swedish.
LORD ERROLL OF HALE: Not Swedish in this particular case. But, as I was saying, we want to be very careful before we say rude things about imports, because one country's exports are another country's imports.
In the missions I have had the honour to lead for the London Chamber of Commerce we have always taken one or two importers, and not just a team of exporters, to show that Britain is interested in two-way trade. While I appreciate the current difficulties which face and beset Her Majesty's Government, I hope that we shall not get into a state of mind where we are always running down imports, because we shall only do our own trading position a great deal of harm in the long term.
LORD SAINSBURY: My Lords, I do not want to interrupt the noble Lord, but he no doubt, as a former Member of the other place, occasionally reads Hansard, and he will have noticed that Mr. Harold Lever laid particular stress on that point—using almost identical words—in saying that our long-term in
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terest was in the freest possible movement of trade both ways.
LORD ERROLL OF HALE: My Lords, I am very glad that there is nothing between us on that matter. But the fact remains that our actions are looked at with an increasing degree of sour scepticism by our European friends ant those further afield. Indeed, it has been said to me many times—and here I am not speaking in connection with Sweden, but of other countries, and through my contacts with the London Chamber of Commerce—"Oh well, the Government say that it is only for a year, but they will do something else when the year is up". People remember the temporary surcharge on imports: it was to be only temporary, but it lasted a very long time. They say, "And now we have something else". This, to my mind, is one of the most damaging things to the British economy: that we are not really trusted in the same way as we were in the old days. People say, "Well, it is only for a year but—".
What is also bad on the domestic; side is that this measure is to be effective not just for a year, but for one year and eight days. I will give the Government credit for this being an honest slip, but it was announced to be for one year, yet the Bill, if we pass it to-night, will in fact be in operation for one year and eight days. Those final eight days, of course, will be very important days. There has been no publicity given to this, so far as I have been able to see. Obviously a number of people who are engaged in importing over a long term—or where the item concerned could be delivered in eleven or twelve months—are going to wait until the day after the Act ceases to have any operation in order to avoid the deposit. Many of them, however, are going to work it out on the basis of, "It came into operation on November 27, 1968, and it ceases on November 27, 1969". But it does not. If one reads the Bill, as I am sure noble Lords will have done, it will be seen that it is in force for one year from the date of the Royal Assent, which I understand it is the hope of the Government to obtain tonight.
It is, just those little things, little bits of carelessness—it may not be any more I than that—which all help to add to the

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sense of sourness and distrust of the intentions of Her Majesty's Government. Those eight days, being the last eight days, are going to be very important, and a number of people may be caught unless the Government make it quite clear, not just nearer the time but now, if necessary, that this measure is running in fact for a year and eight days.
We have heard a good deal about confidence in the Government and also about people going on shopping sprees, whether it was to buy expensive pictures at Sotheby's or to buy domestic appliances for their own homes. Surely part of the reason for this is their knowledge that if they do not buy now it will be more expensive next year. This is one of the dilemmas for the Government: everything is always getting more expensive, so if one can possibly raise the money one buys a fridge, or a motor-car, or whatever the item may be, now, rather than next year. One of the difficulties experienced by the Conservative Administration of which I was a member was that people tended to hold off buying, certainly before a Budget. Because they confidently and rightly expected that there would be a reduction in taxation, they waited until after the Budget. Now the great thing is to beat the Budget; to go to that store which my noble friend Lord Hawke referred to where they are going to sell everything at old prices until new stocks come in. I must say that, although I admire that store, equally with my noble friend, I think they are pursuing a very foolish policy, because in fact they are giving away part of their working capital to the public and they will find themselves short of capital to finance their stocks at new, higher prices. But that is by the way.
The real thing is that the public no longer trusts the Government in their pronouncements. The Government have of course had an element of bad luck over the last four years. Governments do have periods of bad luck. But what is necessary for the Government is somehow to re-establish confidence. If they are going to say, "No more tax increases", then they really must not have any more tax increases. But the real danger is, as we all know, that there will be another round of tax increases of one sort or another. Moreover, while one
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can argue a great deal about the level of taxation, the fact is that the tax on whisky and cigarettes, for example, has reached such a dangerously high level that a small degree of switching could have effects very different from those the Government expect, because the money so released would then be spent on goods which have a far higher import content than whisky and cigarettes. So the Government may well find that the import bill goes up because of a far greater importation of raw materials for, say, furniture and other articles which will be bought, in preference to cigarettes and whisky at their new absurdly high prices.
This Government still feel themselves to be a new Government, a Government of relatively new boys after those 13 terrible years of Tory misrule. But, as we all know, the Government have been in power for four years, and that small imbalance in 1964 about which they made so much fuss pales into insignificance when compared with what has been done in the last four years. The total increase in taxation since 1964 now runs at the rate of £2,280 million—an annual burden of tax over that in 1964 which is equivalent to nearly £3 a week for every family. The total increase in taxation on the British public for this year alone amounts, on a full year's yield, to £1,100 million—an equivalent of about 30s. a week for every family. While it is possible to have interesting debates as to whether France is more heavily taxed than Britain, or whether Sweden's arrangements are better or worse than ours, the fact is that the proportion of the gross national product taken up by total taxes, rates and contributions has risen by just over a quarter by this year compared with our last year in office: from 32 per cent. in 1964 to just over 40 per cent. in 1968. The figures I have given so far relate only to changes, but the actual yield has increased most remarkably. The total tax revenue has risen from £6,600 million in 1963–64 to approximately a little over £12,000 million in 1968–69, so the yield of taxation, in the short space of four years, has doubled.
What are the Government doing with all this money? Why was it necessary for them to raise so much? Is it unreasonable for noble Lords to urge, as so many of them have done when they

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see these figures, that there should be some curb on Government expenditure? I think it was Professor Parkinson who said that expenditure always rises to meet income. That is very true in our own domestic affairs, as well as in the affairs of big companies. Will the Government have the willpower to put all this additional revenue which they claim they must take out of the economy this year into a stocking under the bed and avoid spending it for the next year? They say that as far as public expenditure is concerned they are on target. Yes, they are—the target contained in the National Plan of 1965, which postulated a 25 per cent. increase in national productivity over the ensuing six years. The Plan has been buried and the productivity increase has not been achieved because the economy is running steady and not increasing. We are on the spending target all right, without the increase in the national productivity to balance it.
We are lucky: we have two Cabinet Ministers in our Chamber to-night, and while they are a small minority of the present Cabinet because, as the noble Lord, Lord Shawcross, pointed out, we now have the biggest Cabinet in peacetime history, I would ask those two Cabinet Ministers to urge on their colleagues in the Cabinet, if they can get a few moments of their attention, our most serious and considered conclusion that it is the turn of the Government to do a bit of cutting down. It is no good going on any longer and cutting down on the private sector, whether it is the public or commerce or other forms of expenditure. It is the Government's turn now, and if only they can reduce their expenditure they may begin to restore some confidence. I urge them to do this.
So often I have found in these debates (and it is particularly noticeable in another place) that the Opposition of the day is told, "It is no use criticising the Government; what would you do?". As my noble friend Lord Dundee and my noble friend Lord Boothby both pointed out, they have given advice repeatedly and it has never been taken. A year ago I myself offered a five-point programme to the Government, not one item of which has been accepted. Yet again to-night I suppose I shall be told that my speech was full of windy criticism and contained no constructive suggestions. Why must
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I, every six months, have to rethink the whole of the policy for the Government, for every scrape they get into? On this occasion I am in open revolt. I will offer no constructive alternatives to the Government except for the obvious advice which should be mentioned only in another place, namely, that it is time for a change of Government.
7.26 p.m.
LORD SHACKLETON: My Lords, first, I should like again to express my gratitude to your Lordships in regard to the way in which this Bill has been handled and for the general co-operation of your Lordships, with which we are so happily familiar—and may it long continue. I should also like to say, right at the beginning, how much we all enjoyed the maiden speech of the noble Lord, Lord Crowther. I will say two things to him. First, his speech was entirely consistent with him as a man. It was eloquent, it was lucid and it was particularly consistent with what he has been saying for a long time. I am sure, too, that if he were in control of our economic affairs we should not have to suffer some of the more tedious forms of jargon which spatter the textbooks and even find their way into politicians' speeches; and I am sure that he would disown any responsibility for the "crawling peg", especially since he is in fact a fundamental "floater". However, I must say that I was a little surprised when he called the Import Deposits Bill a "cruel and unnatural punishment". I think this could be applied to all forms of taxation. In my view he was indulging in a little hyperbole, but none the less he added greatly to the vivacity and energy of a debate which has been marked quite exceptionally by the vitality of the speeches.
One of the most vital speeches came from the noble Lord, Lord Shawcross, with whom I disagreed the most and to whom I shall have to say some things which I hope he will not find to be unkind but which are, I think, merited as a result of some of his remarks. None the less this has been a debate of vitality, and also one in which there has been a large number of serious and constructive speeches. With perhaps one exception we have not descended to some of the Party slanging which has gone on in another place, and I should like to express my appreciation to the noble

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Earl, Lord Dundee, and to the noble Lord, Lord Erroll of Hale, and to say to the latter that he should not be of so little faith. He should continue to advise the Government; there have even been occasional remarks of his which we have noted and even considered doing something about, and one day we might do something about them. I am also grateful for the speeches which have been made by my noble friend Lord Granville of Eye, my noble friend Lord Sainsbury, and others who have supported the Government. I shall deal with those speeches later on.
I should like to deal very quickly at the beginning with the one substantial point that was raised in relation to the Bill that is formally before us. This was raised by the noble Viscount, Lord Colville of Culross, who has expressed his apologies for not being here now and is, I must say, generally a very good attender and not somebody who runs out (like some Members of your Lordships' House) from the winding-up speeches. I cannot accept what the noble Viscount said, which was to the effect that the courts would be critical about the use of the Customs Tariffs in the Schedule. I think he himself said that the tariff is embodied in the Import Duties (General) (No. 4) Order 1968, and therefore it has a firm statutory basis. I would also say to him that there can be no fear that the tariff can be amended by administrative action. Amendments can be made only by another Order. The effect of any future such Order on the Import Deposits Scheme will of course be taken into account in drafting such Orders.
The noble Lord quoted from the Customs Tariff. It may have seemed esoteric to us, but it is not esoteric to those who have to deal with it; importers are well versed in its use, as it is used for the assessment of all duty charges already in existence. I can see that for the layman and amateur importers in the future it may be useful to render some of the language in it into allegorisms or something like that. But all this is part of the expertise which importers, those engaged in trade, particularly internationally, have to face, and it is only rarely, in about one case a year, that importers find they need to have recourse to the courts to settle a dispute about tariff classification.
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So the courts have experience of the tariff, and it may not be unreasonable to suggest that when the Bill was discussed in another place the format of Schedule I was appreciated. Many Amendments of the Schedule were considered then, and most of those were phrased in the Customs Tariff classifications. By this means the items concerned were pinpointed so that those discussing it knew precisely the intended effect. I say to the noble Lord that we will study his speech in further detail when the OFFICIAL REPORT is available and will be prepared to get in touch with him on any outstanding points.
May I say straight away that I am grateful to the noble Earl, Lord Dundee, for his acceptance of my remark in reply to his statement about not being beastly to the Germans. I hope that unfortunate episode is over. I obviously do not wish to add to the difficulties by trying to apportion blame in this matter, but it is worth recalling that the German newspapers themselves have now carried a version, and Die Welt of November 27 under a headline specifically said that the midnight conversation contained no threat and the Prime Minister did not mention the Berlin question at all during his midnight conversation with the German Ambassador; nor was there any suggestion of changes in Great Britain's military presence in the Federal Republic. I would say, having gone into this subject closely again, that I am convinced that, however it came about, this was not in any way due to uncouthness—which was the unfortunate word used—on the part of the British. It has indeed been made clear that the atmosphere was friendly on that occasion and relations were friendly throughout the discussions.
Now I should like to turn seriously to the economic situation and the outlook. One noble Lord—I think it was the noble Earl, Lord Dundee—referred to the National Institute forecasts. May I attempt to restate what the Government's policy is? There is one central objective and, when we throw away the permissible Party political exchanges, this is an objective which I am sure all noble Lords share: it is to transform the balance of payments from the position of deficit in which it has been since as far back as 1963 into one of substantial and continuing surplus. The severe Budget of

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last March was also coupled with a number of pretty unpalatable public expenditure decisions.
I find a certain inconsistency all the time in the attitude of the Opposition. They continue saying "Cut public expenditure", and continually object when we do it. They know this as well as I do. Some unpleasant things have been done. There has been the statutory policy on prices and incomes. These things have all been quite clearly designed, and, if I dare use the word "strategy", they do represent a strategy. It is in connection with certain of the tactical aspects that the strategy does not always follow through as well as we should like. But, none the less, the objective is to exploit the opportunities, on the side both of export earnings and of import savings, conferred by devaluation.
Let us not underestimate that some real progress has been made towards bringing the balance of payments round. Exports have done well, better even than we expected at the time of the Budget. They showed an increase in volume in the latest three months for which we have figures, August to October, of as much as 15 per cent. over the pre-devaluation average of the second and third quarters of last year. I think it is fair to put this on the record. Invisible earnings have also improved, helped partly by devaluation and partly by the buoyant growth in world trade, and I fully acknowledge that in this respect the increase in world trade and buoyant markets generally have been a help. Capital movements have also been more favourable in recent months, though this may partly reflect improved confidence in the wake of the Basle agreement on the sterling balances.
The difficulty—we all recognise this—has been the rise in imports. There is no doubt that they did exceed our expectations. There is no doubt that in this respect the Government's forecasting —or the forecasting of its advisers, but it is the Government's responsibility—has not turned out as we expected. There has perhaps been some upward shift in the general propensity to import. But, whatever the reasons, it would obviously be too simple-minded to attribute a major share of responsibility directly to the excessive growth of personal consumption. I assure noble Lords that I am trying to
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put the situation as fairly as I cart. The effect has been to defer the improvement in the balance of payments so that it has not improved at the rate we hoped. We recorded a deficit in the first half of this year of the order of £500 million, and it is clear that while the position did improve in the third quarter, the balance on current account, which is what fundamentally matters, is still in considerable deficit.
The truth is that before the measures of November 22 it was unlikely that we should be earning a surplus on the balance of payments until well into next year. We must have a substantial surplus in 1969 if we are not to risk another collapse of international confidence in sterling and if we are to meet the heavy debt obligations to which noble Lords have referred and which will fall Sue in 1969. Therefore we have had accelerate the progress sharply. This is the underlying reason, the rationale of these further measures.
I would also say that it is quite wrong to assume that but for the international currency crisis, centring on the mark and the franc, we should not have needed to take strong action. That crisis served to make the action much more t urgent, and demanded much quicker action, and therefore created rather more of an atmosphere of crisis, because one was confronted with an international monetary crisis. I would not have suggested that the package demonstrated the failure of the existing policies. I shall come on to monetary matters in a moment. 'These policies were the only practical and realistic ones, and what has gone wrong is that they have not worked as fast as we hoped and intended, and, in particular, personal consumption has remained high instead of falling back sharply, as we forecast at the time of the Budget, by some 2 per cent.
It is not surprising when one is talking in such small percentages that error is possible. This 2 per cent. was between the second half of last year and the second half of this year. There is no doubt that noble Lords advised the Government to do something about this matter of the consumer boom last spring. There were reasons why the Government, in their best judgment, decided not to do so, on the grounds that there were unused resources and that doing so would

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not at that moment have led to a reduction of imports.
The recent high level of imports has been linked to the fact that the economy has been expanding strongly recently, at a rate at least equal to that foreseen in the Budget. Indicators suggest that demand has been pressing hard on the labour market, and there has been a marked change in unemployment. All this emphasises the delicacy and the difficulty in steering the economy against a background where there is always this threat, this precipice on one side which is inherent in the international monetary situation. It is so easy to veer to one side or the other, and therefore tugs on the rudder are obviously much more dangerous that a mere touch on the tiller —if I may switch my metaphor from walking along a precipice. There is a real danger.
I remember so well during the summer the arguments which were being put forward that the time had come, with the indicators of unemployment, when we should reflate again. Then there was this swing, and one suddenly saw the unemployment figures beginning to go down. The industrial survey conducted by the C.B.I. in October painted a picture of growing buoyancy in the economy and suggested that output was being limited to an increasing extent by shortage of capacity. The Government's judgment was that this rapid build-up in demand would have to be moderated if we were to speed up the necessary move into balance-of-payments surplus. We expect that the new measures will bring about an early and substantial improvement in the balance of payments and will bring it into surplus within a short time; and the regulator tax increases will reduce the amount in imports and also free resources for export production.
The import deposit scheme should result in a considerable additional saving in imports. At least, despite the skills of the noble Lord—I wish him luck in his Swedish business—there is a hope that there will be some reduction, because, after all, people will have to pay for the credit they get (I do not know what arrangements he will have made) and this will take a certain amount of credit
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out of the economy. I cannot put a figure on how much the saving will be. It may not be as much as we hope. But in any case, it contributes generally to the management of demand. As to the effect on home activity, we expect the measures to reduce the level of total output in 1969 by about one half of 1 per cent. below what it would otherwise have been; and since the economy was already on an expansionary course, even allowing for the recent hire-purchase restrictions, total output should show a significant rate of expansion over the coming year.
I would just say one word about the opinions of the National Institute of Economic and Social Research expressed in the Economic Review on November 28. It is not customary for Ministers or for the Government to comment substantively on forecasts of the many kinds which are made by many independent bodies or individuals, but there are two points I would make about the Institute's latest estimates. First of all, even before allowing for the Government's measures on November 22, the balance of payments Was, in their opinion, expected to be no more than in balance in 1969; whereas, in their immediately preceding forecast in August, the Institute was looking for a surplus next year of £250 million. But the Institute estimates that the measures
"should work unambiguously to improve the the balance of payments by at least £100 million, and perhaps by as much as £250 million, next year".
I do not think I should go further than that.
I should like to say something more about the timing. It has been suggested that the Government acted to adjust demand in November when they should not really have done so, since they had already done so on a massive scale in the Budget last March, and that this is somehow reprehensible—a sign of failure and incompetence. We can all use these words. We all know perfectly well the difficulties involved in managing the economy. The economy is in a constant state of change, and those who make these criticisms are really rather naive. It must be, I suspect, that those who make these criticisms have no understanding of the true nature of demand management. If any noble Lord wishes to brush up on this, I would recommend

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him to read Sir William Armstrong's extremely interesting lecture the other day on the history of demand management. The economy is always in a constant state of change, however much we may demand stability. The areas of change may seem small statistically and in terms of macro-economics (if I may dare use the phrase), but on the micro scale can be tedious indeed unless all firms have the skill of the managers of the Swedish firm with which the noble Lord is concerned.
LORD HAWKE: My Lords, before the noble Lord, leaves demand management, may I ask him whether he is prepared to do one thing? If he is prepared to make a Government pronouncement that taxes will be reduced in the next Budget, demand will fall. I will guarantee that.
LORD SHACKLETON: My Lords, I am fascinated with the noble Lord's idea, but I cannot anticipate my right honourable friend's Budget. We try to foresee the changes and to make the appropriate policy adjustments. I do not think it is really to be expected that the need for adjustment should arise only once a year, at the time when by tradition we happen to have a Budget. The economy needs to be managed and adjusted continuously. This has been recognised and acted upon by all Governments in this country since the war. Even in 1944 the White Paper on Employment Policy referred to that fact. It is quite fascinating that during the war people were already looking forward towards this problem of demand management. Given the fixity of the annual Budget and consequently of the timing of income tax changes they referred to the possibility of varying National Insurance contributions as a means of assisting in what, in present-day jargon, we now call "fine tuning". For all sorts of reasons, that really was not a runner.
Another criticism is that the Government demonstrated their loss of control over the situation by first initiating hire-purchase restrictions on November 1, and then only three weeks later coming forward in a panic against the background of the international monetary crisis with a full scale economic package, including of course the regulator.
I hope that what I have said has shown how these changes came about. The tightening of hire-purchase was an
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interim adjustment made necessary by the rebound of consumer spending in recent months after the post-Budget squeeze. There is no doubt that there were those in the Treasury and in the Government, and indeed outside the Government, who thought that further restriction was necessary. But the Government had not at that time—and I stress this point—come to a definite view. Certainly I was unaware of any specific proposals. The new measures are the outcome of a comprehensive review of the economic situation and prospects, both at home and abroad, and take account of the Treasury's newly completed autumn forecast. I would only say that the particular crisis with which we were confronted over the franc and the mark served to underline the urgent need for action to get our balance of payments into surplus promptly and decisively. I think it was the noble Lord, Lord Boothby, who said that it was not only the fate of the Government that was at stake, but that it was of profound importance to this country.
The noble Earl, Lord Dundee, referred to the figures of increased public expenditure given recently in another place, and he asked how far the increase has been, or will be, financed in an inflationary manner—that is, by the creation of new money, instead of from tax revenues or from the genuine saving of investors. I can assure the noble Earl that it is the Government's policy to reduce the so-called borrowing requirement. Indeed, I can tell him that we have been very successful so far in the current financial year while at the same time seeking to increase, to maximise, the sales of securities to the public, and thus lessen the Exchequer's dependence on the banking system.
My Lords, I could talk—though I will not do so at this time and hour—at some length on the subject of public expenditure. There is no doubt that public expenditure, like private consumption, is a very important factor, and if there is one thing I can say from my own experience as a member of the Government it is that, painful as it has been (and I am sure that the noble Lord, Lord Erroll of Hale, as a former President: of the Board of Trade will have had experience of arguing with Chief Secretaries and Chancellors) the Government really have taken

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a very strong line. And although it is fair to say that public expenditure might perhaps be cut back further, the fact is that there has been an increase, in real terms, of less than one per cent. This represents, I think, a very painful but necessary economy in this field.
By contrast—and I have made this point already—private consumption has continued to prove extremely resilient, and it is even now running at 2 per cent. above the level which the Government had expected following the Budget measures. I take the point, and I shall say a word at the end about the proposals of the noble Earl, Lord Dundee, who put forward certain suggestions. The noble Lord, Lord Erroll of Hale, on this occasion had the wisdom not to do so. In this connection, the noble Lord, Lord Hankey, asked what the Government propose to do with the money raised by the import deposit scheme, the new taxes. I can tell him this. It will not go in a trunk under the Chancellor of the Exchequer's bed; nor need he fear that it will in this sense be spent. The tax increases will, in fact, raise some £65 million in the remainder of the present financial year, and £250 million in a full year. Payments under the import deposit scheme will build up to around £600 million. This money will not just be spent (I am rather surprised that the noble Lord, Lord Hankey asked this, since he has been active in the economic world): it will be handled like any other form of funds and will be kept under very tight control. The figures of public expenditure are not necessarily affected in any way by the increased revenue. The Government's purpose has been to try to take some of the spending power out of the economy, and of course if it were merely used to increase public expenditure all the benefits that come from it would be lost.
Now may I turn to the international monetary question? I remember that the noble Lord, Lord Boothby, when he was in another place (I think it was in the summer of 1949, but it may have been 1950), almost alone but with one or two friends, proceeded to advise the House and to press the Government on the dangers of the economic situation. It was the time when Sir Stafford Cripps
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was Chancellor of the Exchequer. I must say to the noble Lord that he was right then. His concern and interest in the international monetary question has continued for a very long time. I have also had a personal interest in this matter, and I have for a long time regarded it as a matter of profound importance. A few years ago I was at a dance. I found myself dancing with a very beautiful girl, and her opening remarks to me were, to my surprise, "What do you think about international liquidity?". I said, "It is the most important thing in the world" —although I could qualify that. We have remained close friends ever since, on a purely academic basis. The noble Lord, Lord Boothby, is absolutely right to pursue this matter, but equally there is no easy solution. It is like having an international conference on poverty or peace; it is still necessary for the nations to agree.
Those who followed the sequence of events surrounding the currency crisis and the Group of Ten I think could reasonably say that there must be something badly wrong with the present international monetary set-up, and they may have noticed the recent remarks of the Chancellor of the Exchequer when he said that the time may be coming for a re-examination of the objectives and institutions of the present system. I think it was the noble Lord, Lord Hankey, who said that just to plunge into a conference at this moment would not achieve very much. I could not entirely accept that the recent crisis was due purely to a technical malfunctioning of the system and that the only issue now to be settled was the date of the next Bretton Woods Conference, when a schedule of the necessary repairs would be carried out.
The recent crisis has not changed the nature of the problem, and it has done nothing to remove the need for an early improvement in our own balance-of-payments situation. No international monetary system, however long and successfully it has proved its worth in practice, can be expected to last for ever. That is one awkward truth. Another is that the preparation of any top level international monetary conference is likely to be a slow and delicate operation, and a development such as the noble Lord, Lord Boothby, and others

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wish can come about only by a consensus among the many countries involved, all of whom are acutely and rightly conscious of the disruption which an unproductive meeting could cause.
LORD BOOTHBY: My Lords, may I ask my noble friend one question? Will he give an assurance that at least preparations will now be begun as quickly as possible?
LORD SHACKLETON: My Lords, this is not, in my personal opinion, a particularly favourable moment, and, without being drawn into details, I think one wants to wait for the new United States Administration to come into office. However, I entirely agree that there is really no difference between us, and it may well be that the Governments of the world will have to show more courage in this matter, although when one looks at some of the areas of disagreement at Bonn—and I must choose my words carefully—it does not suggest that it is going to be a pushover to reach agreement in the future. But I would say to the noble Lord who is asking about the Special Drawing Rights from the that the indications are—and I hope this answers the noble Earl, Lord Dundee—that ratification will he completed early in the New Year. The Special Drawing Rights Scheme is an important step forward, and it will provide the world for the first time with a means of adding very considerably, in a controlled and orderly fashion, to liquidity.
THE EARL OF DUNDEE: My Lords, has the noble Lord any estimate of the amount of additional liquidity which will be created by the activation?
LORD SHACKLETON: My Lords, I ought to know that, and perhaps before I have finished I can give the figures, if they are available. If they are not, I will give them to the noble Earl afterwards. It might be that my noble friend Lord Beswick knows the answer.
There are so many important points with which I should have liked to deal. The noble Lord, Lord Hankey, spoke about the value-added tax, in which I have always been interested. He obviously knows the Richardson Report as well as I do, which came down strongly against it. I think he will also know that a N.E.D.C. Committee, including
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representatives of the C.B.I. aid the T.U.C., is now reconsidering the Richardson Report; the views of industry have been taken, and the Government are awaiting their Report. There are arguments on both sides of the question, and I certainly should not like to make up my mind. On the specialised subjects I usually tend to be influenced by the last Report I have read.
The noble Lord, Lord Shawcross, asked me to state the total of our overseas indebtedness arising from the accumulated balance-of-payments deficit in recent years. I am not quite sure what he meant, but I am rather surprised that a noble Lord of his experience should believe that this is a figure which the Government could possibly give. Part of the debt arises from transactions between central banks and, as noble Lords with experience in these matters will know, such transactions are confidential. The noble Lord, Lord Shawcross, worried me, for I admire him as a man of tremendous talents. I still remember his great speech in the House of Commons on the Trade Disputes Act, when he said, "We are the masters now". The noble Lord, Lord Erroll, will remember this as a particular millstone around the neck of the Labour Party. I am sorry that Lord Shawcross does not lend his enormous talents to something more constructive. One of the things which is noticeable about speeches from noble Lords, even allowing for Lord Crowther's "cruel and unnatural punishment", has been an attempt to analyse the problem and to recognise that, in the last resort, we have all got to get together. The noble Lord, Lord Shawcross, referred to capital, confidence and co-operation. On the subject of confidence, he certainly does not add to the national feeling of confidence by his remarks. In regard to co-operation, I must say that this Government, however much we may at certain times have irritated certain sections of industry, have co-operated more closely with industry and with business, and have attempted a greater degree of open exchange of information and of seeking advice than have any previous Government. I am not trying to make a point against the previous Governments. They may have been a bit stuffier: but we have really tried.
LORD SHAWCROSS LORD SHAWCROSS My Lords, I am tempted to point out to the noble Lord

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that, although it is a very amusing method of argument, and one that I enjoy particularly, to put up cockshies which have not been raised and knock them down, I did not suggest that there was no cooperation between the Government and industry. If he had done me the honour to listen to what I said, he would know that I said that what was most important was to secure co-operation between both sides of industry in the use of modern equipment. As for the question of the debt, what I asked the noble Lord to say, and he has carefully avoided saying, while attacking me for something that I did not say, was whether he could tell us how much had been borrowed publicly since the Prime Minister said, "We are out on our own now" and what was the amount which we should have to find in addition to repayment of loans for servicing. These are public figures.
LORD SHACKLETON: My Lords, the noble Lord is taking advantage of the tolerance of this House, if he wants to ask me a question. No one is a better advocate than he is, and I do not wish to compete with him in advocacy, because I think that these talents can on occasion be misused. I was about to go on to say, both on the subject of confidence and co-operation, that I knew perfectly well that in relation to cooperation he was talking about the two sides of industry. I listened very carefully. I was only going to say that there was another side of co-operation which is progressing extremely well.
I do not know what lesson he drew. He pointed to the superiorities in Germany. He was very careful in this respect, since he did not put the blame on industry, management or trade union. I do not know which he was blaming. I agree that there is a need for their closer co-operation. But we shall not succeed in getting this co-operation anywhere in this country if we use the sort of language used by the noble Lord. Lord Shawcross. He referred to my noble friend Lord Beswick as producing selective and tendentious figures. I notice that he used the word "euphoric" on a large number of occasions. These are substitutes for thoughts. It was not fair of him to use figures, as he did, without giving the
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full facts which my noble friend Lord Balogh tried to extract from him.
The noble Lord spoke about the decline in the country's share of world trade since 1964. If this is the form of debate preferred by the noble Lord, I must give it to him. He could have gone on to make three further points. First, that our relative performance in world export markets has improved over the past year, thanks to the very strong efforts of our exporters, helped by devaluation. Second, that our share of world trade had been falling steadily throughout the 1950s and early 1960s. The noble Lord might also have recalled that our share of the world's markets has been on the decline from the beginning of this century—and, indeed, earlier. To this extent, for him to talk in the way he did in relation to the figures given by my noble friend about comparative rates of taxation meant that he was more guilty of tendentious arguing than was my noble friend.
LORD SHAWCROSS: My Lords, I am loth to interrupt the noble Lord again; but he must be not only fair but accurate. I do not mind his being unfair, but at the moment he is being quite inaccurate. The noble Lord failed to observe the point I made. I was saying that there had been no miracle in British industry, that in fact our share of world trade was falling, which is a misfortune. When the noble Lord, Lord Balogh, interrupted me and asked me to give the figures from 1951 onwards, I asked him why: was it merely to say that the previous situation was bad as well? Of course it was—it is all bad. As for the increase which the noble Lord says has taken place in the last year, the figures were 14·2 per cent. on a quarterly basis in 1964; this year, for the three quarters, they are 11·3, 11·1 and 11·2 per cent. So they are going up in the last two quarters, but they are still far too bad.
LORD SHACKLETON: My Lords, the noble Lord might have acknowledged that they were going up. It was he who picked the date 1964 in the context of his other remarks. I felt bound to say this to the noble Lord because I wish that he would join in and help in these matters. The Government—any Government—can be criticised, and noble Lords generally have done so. But there have

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been constructive speeches. Indeed, the noble Lord, Lord Gladwyn, made some very interesting remarks on which I should like to comment. There has, however, been a tendency on the part of the Opposition—not so marked to-day—just to criticise the Government's policy in a destructive manner.
LORD GLADWYN: My Lords, may I ask the noble Lord whether he could possibly make any remarks about the proposals put forward respectively by the noble Lord, Lord Crowther, and myself about a floating pound or a "crawling peg"? They were meant to be constructive suggestions.
LORD SHACKLETON: My Lords, I rather thought I had slipped neatly off them. One of the things which I find so fascinating in this subject is the degree of disagreement that exists. We know that the "crawling peg" has its advocates, and we know that there are a number of those who think that the pound should float. I can only say that there are a number of other people who do not think like that. But although their contributions add to the sum total of the very interesting controversy and discussion that goes on on this subject, I am certainly in no position at the moment to arbitrate on behalf of the Government. However, we have noted what noble Lords have said. It would be a mistake for me to end up on a note of too great optimism, but the degree of understanding which your Lordships have shown and the freedom from controversy that we have had in this House at least represents some encouragement.
On Question, Bill read 2a: Committee negatived.
Then, Standing Order No. 41 having been dispensed with (pursuant to Resolution), Bill read 3a, and passed.
LORD BESWICK: My Lords, the Customs (Import Deposits) Bill which we have been debating this afternoon is now ready for the Royal Assent. In order that certain formalities may be completed before the Royal Assent can be notified to the House, I beg to move that the House do now adjourn until 8.20 p.m.
Moved accordingly and, on Question, Motion agreed to.
House adjourned during pleasure.
House resumed.

ROYAL ASSENT
8.20 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:
Customs (Import Deposits) Act,
Royal Bank of Scotland Order Confirmation Act.
House adjourned at twenty-two minutes past eight o'clock.