Sitting of 13 May 1970

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS

  NORTH RIDING COUNTY COUNCIL BILL [Lords]
  WILLIAMS & GLYN'S BANK BILL
  Considered; to be read the Third time

  TEESSIDE CORPORATION (NO. 2) BILL [Lords]
  Read a Second time and committed.

  BRITISH TRANSPORT DOCKS ORDER CONFIRMATION BILL
  COATBRIDGE BURGH ORDER CONFIRMATION BILL
  Read the Third time and passed

ORAL ANSWERS TO QUESTIONS
  AGRICULTURE, FISHERIES AND FOOD

    Retail Food Prices
    Mr. Dempseyasked the Minister of Agriculture, Fisheries and Food if he will take steps to appoint a liaison unit with retail distribution with a view to preventing unjustifiable increases in prices; and if he will make a statement.
    The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy): We keep in close touch with food distribution through our Advisory Group on the Retail Food Trade. The trade also co-operates in
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    the Department's weekly survey of retail food prices which forms part of the arrangements for price surveillance.
    Mr. Dempsey: Is my right hon. Friend aware that, in spite of the good work he is doing, prices are being increased substantially day by day, in many cases most unjustifiably? Will he consider the possibility of taking some more effective control over such retail prices?
    Mr. Hoy: The fact to which my hon. Friend draws attention has not escaped our notice. My right hon. Friend is giving urgent attention to this matter.
    Mr. Evelyn King: Are not rapidly increasing prices, as well as the £11 million deficit announced a few hours ago, a direct and foreseeable result of Government policies designed not in the national interest but to win a snap General Election?
    Mr. Hoy: We are doing our very best to look after the interests of the consumer as well as those of the producer. The hon. Gentleman should have learned that lesson long ago.
    Mr. Godber: If the right hon. Gentleman is seeking to look after the interests of the producer and those of the consumer, will he explain why prices to the consumer are now rising faster than ever before—by 1s. 3d. in the £ in the last 12 months—although the producer is getting such an unsatisfactory yield that he is protesting by keeping stock from the market?
    Mr. Hoy: Last year, according to official figures, food prices rose by 5·5 per cent. while wage rates rose by 10·9 per cent.
    Mr. Joplingasked the Minister of Agriculture, Fisheries and Food from what organisations he has sought in the last year undertakings to stabilise prices for a stated period of time.
    The Minister of Agriculture, Fisheries and Food (Mr. Cledwyn Hughes): My Department is in regular contact with a wide range of organisations throughout the field for which I am responsible. Discussions concerning possible price increases are confidential, and I cannot, therefore, say which bodies or firms have been involved.
    Mr. Jopling: Why does the Minister evade answering the Question when he knows that the president of the feeding stuffs manufacturers' organisation made a speech in his presence in which he said that he did not see why that industry should be bullied into stabilising prices when most of the factors which were causing rising prices in that industry were the fault of the Government alone?
    Mr. Hughes: There was no reason why the feeding stuff manufacturers should not put that point of view to me. As their president said publicly, we had perfectly friendly discussions. They gave their opinions, but I took another view and we agreed to differ. At Question time on 15th April the hon. Gentleman made a dishonourable statement to the effect that the Government had sought to blackmail certain organisations. I then asked him to withdraw that statement. He was not sufficiently gracious to do so, and I no longer ask it of him.
    Mr. Arthur Lewis: Can my right hon. Friend say to what extent the British Food Manufacturers Association is being helpful in keeping down prices? Has it not refused to co-operate? Secondly, would he say to what extent the tea manufacturers, Brooke Bond, consulted him before they put up the prices of tea?
    Mr. Speaker: Order. There is a Question on the Order Paper about the second point.
    Mr. Hughes: There are two Questions on this subject later.

    Potatoes (Supplies)
    Mr. Joplingasked the Minister of Agriculture, Fisheries and Food whether in view of the shortage and high price of potatoes to the public, he will take steps to increase supplies from the 1970 crop.
    Mr. Hoy: The great bulk of planting for the 1970 crop has now been completed. I have no reason to suppose that supplies will not meet the demand.
    Mr. Jopling: Does not the right hon. Gentleman remember that over a year ago some of us on this side warned him about the danger of a shortage of potatoes this year, with consequent high prices, because his Government agreed to a quota acreage of 90 per cent. for last
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    year's crop, which has been partly responsible for the high prices? Are not these high prices partly the Government's fault?
    Mr. Hoy: No. The acreages are agreed in consultation with the Potato Marketing Board and the N.F.U. The hon. Gentleman will remember that at the period he was complaining about 36,000 acres were not taken up because of bad weather.

    Agricultural Support Policy
    Mr. William Hamiltonasked the Minister of Agriculture, Fisheries and Food what is his estimate of the increase in the cost of food per week for an average family of four consequent on the abolition of the present system of financial aid for agriculture.
    Mr. Hoy: The immediate abolition of all agricultural support would have such radical and unpredictable effects on the existing pattern of home production, supplies and prices, that it is impossible to assess what the increased cost of food might be.
    Mr. Hamilton: Is it not the case that the Tory Party policy is precisely this?
    Hon. Members: No.
    Mr. Hamilton: We should like to know the Tory Party policy very much. Is it not the case that if there was complete abolition of this kind of support, the average increase for a family of four would be in the region of 8s. a week? Is this the way to keep prices down?
    Mr. Hoy: I do not think that there is any doubt that if the support programme was abolished it would be bound to have a reaction which would mean very expensive food indeed.
    Mr. Godber: Would the hon. Gentleman explain to his hon. Friend that this is not what the Opposition are proposing and that they are proposing the elimination of deficiency payments, which is only one part of this, which is a very different matter, and which the Minister has said will put only between 4 per cent. and 7 per cent. on the price of food?
    Mr. Hoy: I do not think that it is for me to explain the policy of the party

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    opposite. As the right hon. Gentleman knows, a meeting in the constituency of Banffshire has a motion on the agenda asking the Tory Party to state its policy on this matter. Apparently it does not have one.

    Historic Sites (Protection)
    Mr. Peter M. Jacksonasked the Minister of Agriculture, Fisheries and Food whether he will liaise with the Minister of Public Building and Works to protect sites scheduled under the Historic Building and Ancient Monuments Act 1953 and the Ancient Monuments Act 1931 from the depredations of ploughing, particularly deep ploughing.
    The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie): Under longstanding arrangements, the Ministry of Public Building and Works notifies my Department of all scheduled ancient monuments situated on agricultural land and we take steps, in connection with any application for grant-aid, to remind the applicant of his obligations under the Ancient Monuments Acts.
    Mr. Jackson: While thanking my hon. Friend for that reply, may I draw his attention to the recent report by Sir David Walsh on his inquiry into the arrangements for the protection of ancient monuments and in particular to paragraphs 19 to 24 suggesting that many ancient monuments are coming under threat by new agricultural techniques? Will he ask members of the National Agricultural Advisory Service to advise owners of the fact that they are operating in areas where there are such monuments?
    Mr. Mackie: We have this arrangement as I explained, but I will look into the matter of the new techniques which my hon. Friend has mentioned.

    Dutch Elm Disease
    Mr. Peter M. Jacksonasked the Minister of Agriculture, Fisheries and Food whether, in view of the recent outbreaks of Dutch elm disease, he will instruct the Forestry Research Station at Alice Holt to undertake work on the pathology of Dutch elm disease.
    Mr. Mackie: As I believe my hon. Friend is aware, there has already been a great deal of research on Dutch elm disease both at home and abroad. The Forestry Commission is now concentrating on testing and selecting strains of elm which are resistant to the disease, since the planting of resistant strains appears to offer the most satisfactory solution to the problem in the long term.
    Mr. Jackson: May I congratulate my hon. Friend on that reply? May I ask him whether he will, when the survey has been undertaken—and I hope that it will be done with a sense of urgency—make the findings known to as many interested parties as possible?
    Mr. Mackie: I will see that that point is noted.
    Sir D. Renton: Is the hon. Gentleman aware that the strongest and most beautiful of all elm is the Huntingdon elm and that this is resistant to the Dutch elm disease? Will he invite the attention of all concerned to this fact?
    Mr. Mackie: Yes.

    Weedkiller 2,4,5-T
    Mr. Crouchasked the Minister of Agriculture, Fisheries and Food if he is satisfied that weedkillers containing 2,4,5-T present no hazard to human life; and whether he will ban the use of such products while doubt remains in scientific opinion regarding the side-effects of this chemical.
    Mr. Woodnuttasked the Minister of Agriculture, Fisheries and Food in view of the ban imposed by the Forestry Commission on the use of the weedkiller 2,4,5-T, if he will take steps to ban its distribution and use throughout the United Kingdom until the results of the investigations of his advisory committee on pesticides and other toxic chemicals are known.
    Mrs. Joyce Butlerasked the Minister of Agriculture, Fisheries and Food if he will ban the use of 2,4,5-T in weedkillers, pending results from the advisory committee's inquiry into its safety so far as human beings are concerned.
    Mr. Cledwyn Hughes: New evidence from the United States of America is

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    under consideration by the Advisory Committee. Preliminary study has not revealed anything to enable me to add to my reply of 22 April, but I will make a further statement very shortly when the committee has completed its consideration of the evidence.—[Vol. 800, c.113–4.]
    Mr. Crouch: I am grateful to the right hon. Gentleman for that careful answer. Would he bear in mind that there is a feeling in the country that the extensive use of weedkillers can lead to dangers, particularly to human life, and that there is the thought that 2,4,5-T may produce this danger? Will he ensure that manufacturers and users observe careful control of this dangerous chemical?
    Mr. Hughes: I appreciate what the hon. Gentleman has said and the concern of hon. and right hon. Gentlemen throughout the House about this. The House will agree that I have not been slow in taking action where I have had the evidence clearly before me. In this case, I feel that my committee should be enabled to look at the voluminous evidence coming from the United States, and I have asked it to report as quickly as possible.
    Mr. Woodnutt: As the Forestry Commission has seen fit to ban this chemical, and as it has also been banned in the United States, would the Minister not be wise, while his investigation is going on, to ban its complete use until the result of the investigations is known?
    Mr. Hughes: It would be wrong for a Minister to ban a weedkiller or anything else without having the advice of British scientists and Government committees. This could lead to general public alarm without necessarily any justification. I seek to take a balanced view of these things after proper consideration. As for the Forestry Commission, the hon. Gentleman knows that it suspended the use of 2,4,5-T as a management decision following special representations from the unions. It has made it clear that its decision was not made on grounds of safety.
    Mr. Woodnuttasked the Minister of Agriculture, Fisheries and Food if the ban imposed by the Forestry Commission on the use of the weedkiller 2,4.5-T
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    will result in a reduction in the proposed redundancies of manual workers employed by the commission.
    Mr. Cledwyn Hughes: The Forestry Commission has not imposed a ban on the use of 2,4,5-T, but has temporarily suspended its use at the request of the unions pending the result of the review to which I referred in my reply to my hon. Friend the Member for Fife, West (Mr. William Hamilton) on 22nd April. This suspension will have no effect on redundancy.—[Vol. 800, c.113–4]
    Mr. Woodnutt: Bearing in mind what I have been told by the Forestry Commission, that this is the most economical way of dealing with this wood weed, does this not mean that if it has to be dealt with manually more men will be required? Is it not ridiculous to cut a force of 28 men down to a low figure such as 12?
    Mr. Hughes: These are matters which we shall have to consider, as I said in my Answer to the previous Question, when the report of the committee is before us. At the moment, the redundancy question is unaffected. If a ban is effected we shall have to consider the position in the light of the new situation. I appreciate the hon. Gentleman's concern for his constituents, and I shall be glad to discuss it with him if it becomes necessary to impose any sort of ban.

    Agriculture (Capital Investment)
    Mr. Wigginasked the Minister of Agriculture, Fisheries and Food what yardstick he uses for assessing capital investment in agriculture during the rest of this year.
    Mr. Mackie: There can be no single yardstick for assessing levels of future capital investment in agriculture. This is influenced by the availability of cash and credit, the expected return, and other factors, but previous trends provide an important guide.
    Mr. Wiggin: With regard to the part of the Price Review devoted to deficiency payments, is the hon. Gentleman aware that it is revealed almost daily that farmers have so little left to invest in capital enterprises that in the coming year agriculture will suffer? Bearing in mind this long-term aspect, will the hon.

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    Gentleman consider either an emergency Price Review or other action to deal with this part of the Price Review problem?
    Mr. Mackie: My right hon. Friend has heard the last part of the hon. Gentleman's supplementary. As to the first part, there is no indication that this is taking place. The applications for farm improvement schemes are going ahead. There is no sign of a slowing down in the buying of tractors. There was a little recession in January but registrations went up 27 per cent. in February. For the first quarter of 1970 new investment is up 9 per cent.

    National Agricultural Advisory Service
    Mr. Wigginasked the Minister of Agriculture, Fisheries and Food what plans he has for the future of the National Agricultural Advisory Service; and if he will make a statement.
    Mr. Cledwyn Hughes: I would refer the hon. Member to my reply to my hon. Friend the Member for Brecon and Radnor (Mr. Tudor Watkins) on 9th April.—[Vol. 799; c.126–7]
    Mr. Wiggin: While thanking the right hon. Gentleman for that reply, may I ask him if he will take great pains in the reorganisation to ensure that the advisory and administrative functions of the new service are kept quite separate and are seen to be kept separate?
    Mr. Hughes: I take the hon. Gentleman's point. I think that he is referring to what has been called the integrity of the N.A.A.S. I take this opportunity to repeat willingly my unequivocal assurance that those engaged in advisory work will have a duty to give completely impartial advice. I attach great importance to that.

    Feeding Stuffs, Northern Ireland (Price Differential)
    Lord Hamiltonasked the Minister of Agriculture, Fisheries and Food what is the differential in the price of feeding stuffs in Northern Ireland compared with Great Britain.
    Mr. Hoy: The differential in 1969–70 is estimated at some £1 million.
    Lord Hamilton: Will not the right hon. Gentleman agree that this is a very serious
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    disparity, which has been allowed to drift owing to the ineptitude of the Government, in spite of the fact that a detailed analysis of this problem was carried out in 1968?
    Mr. Hoy: We have noticed the gap, but it has nothing to do with ineptitude. The gap is narrowing a little. I should have thought that the hon. Gentleman would have remembered that there are also disparities even within Great Britain itself.
    Sir Knox Cunningham: Can the right hon. Gentleman give his estimate of the increased costs of feeding stuffs in Ulster if the United Kingdom enters the Common Market?
    Mr. Hoy: No, I should not like to hazard a guess.

    Farm Amalgamations
    Lord Hamiltonasked the Minister of Agriculture, Fisheries and Food if he will now review the scale of incentive in the Farm Amalgamation Act, 1967.
    Mr. Mackie: We have increased the rate of grant under the Farm Amalgamations and Boundary Adjustments Scheme to 60 per cent. for the next two years, and the scheme will be made more attractive by the proposals in the Agriculture Bill, particularly the reduction from 40 to 15 years in the period for which the amalgamated unit must be kept together and in agricultural use.
    Lord Hamilton: Would the hon. Gentleman not agree that the response to this scheme has been disappointing and that, owing to inflation running at supersonic speed, the so-called " golden handshake " has dwindled in value to a meagre handshake, which will have no appeal to the outgoing farmer?
    Mr. Mackie: No, Sir; that is not the case. There have been about 3,500 applications in the United Kingdom; in Northern Ireland there were 270 amalgamations and 227 payments to outgoers. We did not get the supersonic speed which the hon. Gentleman would like, but we hope the new conditions will help.
    Mr. Peter M. Jackson: When the Bill was introduced in 1967, were any projections made of the trend in amalgamations over the succeeding three, four or five

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    years? Have these expectations been met by the scales which were then introduced?
    Mr. Mackie: No projections were made. There were two reasons for the scheme—first, to increase amalgamations and, second, to help people who wanted to retire. There has been a tremendous amount of help, particularly to elderly people, to get out of the industry.

    Wool Clip
    Mr. Buchanan-Smithasked the Minister of Agriculture, Fisheries and Food what will be the reduction in income to hill flocks of sheep as a result of the 1970 wool clip prices announced by the Wool Marketing Board.
    Mr. Hoy: This will depend on the farm, the flock and the season. I understand, however, that on average the prices in the board's schedule are around 5 per cent. lower.
    Mr. Buchanan-Smith: Could the right hon. Gentleman direct himself particularly to the problem of the hill and upland farmer? Is he aware that the 1970 wool guarantee is exactly the same as it was 10 years ago and that this is particularly hard for the upland farmer, because he does not benefit directly from the increase in the fat lamb guarantee price?
    Mr. Hoy: It must be remembered that the Government have maintained the wool guarantee at a high level in relation to the market price, and this accounts for about one third of the producer's return on wool. I do not agree with the latter part of the hon. Gentleman's question. He must know that the incomes of owners of hill flocks should benefit from the substantial increase in the guarantee for fat sheep of 3d. a pound, which was the highest since 1947.
    Mr. Hooson: Will the right hon. Gentleman not agree that it is a matter of national concern that the sheep flock is going down and that there has been particular hardship in the hill areas? Is this matter being kept under review this summer, in view of certain undertakings given by the Minister at the time of the Review?
    Mr. Hoy: Yes, but it is true that the flock is not going down in the uplands. We thought that it was right to put up
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    the end price, as all farmers have asked. The flock is going down in the lowlands, and we hope by these means to increase it so as to increase the flock overall.
    Sir J. Gilmourasked the Minister of Agriculture, Fisheries and Food what estimate he has made of the net value to the producers of the 1970 United Kingdom wool clip; and if he will make a statement.
    Mr. Hoy: I am advised by the British Wool Marketing Board that it estimates the return to wool growers from the 1970 clip, net of their marketing costs and based on a forecast clip of 65 million lbs., to be over £12·25 million.
    Sir J. Gilmour: Would the right hon. Gentleman not agree that there is a reduction in the return from wool? Why was no cognisance taken of this during the Price Review to safeguard the production and marketing costs increases which have happened?
    Mr. Hoy: It certainly was taken into consideration. That is why, as I said in reply to a previous question, we decided to put 3d. per pound on the end price for fat sheep.

    Potato Marketing Board (Levy)
    Sir J. Gilmourasked the Minister of Agriculture, Fisheries and Food what representations he has received about the proposals made to him by the Potato Marketing Board for increasing its levy; and if he will make a statement.
    Mr. Hoy: My right hon. Friend has received two representations. Amendments to the scheme, providing for this increase and other changes, were submitted yesterday to my right hon. Friends. Statutory procedures governing this matter will now be followed.
    Sir J. Gilmour: In view of rising costs to potato producers, would the right hon. Gentleman not agree that this is a serious addition to potato growers' costs?
    Mr. Hoy: We got these representations only yesterday. There have been intimations to my right hon. Friend, but, of course, there are certain procedures, of which the hon. Gentleman is well aware, which we must follow.

    Livestock Haulage
    Mr. Buchanan-Smithasked the Minister of Agriculture, Fisheries and Food what assessment he has now made of the effect on livestock haulage of the restriction on drivers' hours as a result of the Transport Act, 1968; and if he will make a statement.
    Mr. Mackie: As the hon. Member will know, the regulations provide concessions in respect of the haulage of livestock. As I said in my reply to the hon. Member on 15th April, we have received only one representation about the difficulties arising in England and Wales.—[Vol. 799, c.239]
    Mr. Buchanan-Smith: But would the hon. Gentleman please appreciate that the farming industry, on top of the extra costs which the Transport Act has brought, is suffering considerable inconvenience through the working of that Act in relation to hours, which in some cases causes suffering to animals? Would he consider this urgently and recommend the Minister of Transport to give exemption on hours for livestock haulage similar to that enjoyed already by fish traffic?
    Mr. Mackie: I am aware that the Minister of Transport and the Secretary of State for Scotland have received representations about this which are being studied. There are some concessions to livestock transport which help.
    Mr. Godber: Would the hon. Gentleman please make special representations to the Ministry of Transport? Is he aware that the animal welfare societies are becoming increasingly concerned about the hardship, pain and suffering being caused to animals because of the difficulties imposed by the Act? Would he get together with the Ministry of Transport to try to solve this problem?
    Mr. Mackie: I will certainly look into that point.
    Mr. Wellbeloved: Can my hon. Friend give any information about the payment of wages to transport workers who are not working this week because of the irresponsible ban by the farmers on the movement of livestock to market?
    Mr. Mackie: That is a question for my right hon. Friend the Minister of Transport.
    Mr. Monroasked the Minister of Agriculture, Fisheries and Food what discussions he has had this year with the agricultural industry relating to the haulage of livestock to and from auction markets.
    Mr. Mackie: None, Sir. My right hon. Friend has not been asked for any.
    Mr. Monro: The key point is the time that transport drivers spend waiting at an auction mart. Is it included in the working day or not?
    Mr. Mackie: It depends on the waiting time. In general, drivers of goods vehicles are restricted to 10 hours' driving time out of an 11-hour working day. Some relaxation has been allowed for work in connection with the carrying of animals. The daily duty can be spread over 14 hours provided that the actual on-duty time, including waiting time, is limited to 10 hours. Any time waiting in marts could be included in the 14.
    Mr. W. Baxter: Will my hon. Friend give this matter further consideration? It is causing consternation in many of the marts in Scotland where it is necessary to hold stock over to the following day. A slight adjustment here could be beneficial not only to farmers but also to haulage contractors without doing anyone real harm.
    Mr. Mackie: As I have said, my right hon. Friends the Minister of Transport and the Secretary of State for Scotland are discussing this matter with the Scottish N.F.U.

    West European Fishing Conference, Aberdeen
    Mr. W. H. K. Bakerasked the Minister of Agriculture, Fisheries and Food by whom he will be represented at the West European Fishing Conference in Aberdeen in September of this year.
    Mr. Hoy: I understand this will be a private meeting of European trawler owners, and the question of Ministerial representation does not, therefore, arise.
    Mr. Baker: If it does not arise on the Ministerial plane, would the right hon. Gentleman not consider sending an official to the meeting?
    Mr. Hoy: I am afraid that this is a private meeting among the trawler owners themselves. Since we are not invited to it, we can hardly ask them to invite an official to a private meeting. If they want to have one, we shall be delighted to co-operate.
    Mr. Hector Hughes: Does my right hon. Friend realise that it is very important that he should be represented by an expert and authoritative person, having regard to the various problems in the North Sea which are outstanding, such as poaching and the safety of life at sea?
    Mr. Hoy: All I can say is that I would be delighted to go, but I have not been invited.

    Eggs Authority (Appointsments)
    Mr. W. H. K. Bakerasked the Minister of Agriculture, Fisheries and Food when he will announce the appointment of the Chairman and Vice-Chairman of the Eggs Authority.
    Mr. Hoy: We shall be making an announcement as soon as possible.
    Mr. Baker: The right hon Gentleman will realise the anxiety in the poultry-industry as a result of the Government programme in the Agriculture Bill. Would he give an assurance that the Government will look again at the case for subvention, by means of support buying, for eggs?
    Mr. Hoy: That would hardly arise from this question. I said that we hoped to make an announcement about the appointments very soon.
    Sir A. V. Harvey: May we be assured that " jobs for the boys " will not be found before the dissolution of Parliament?
    Mr. Hoy: I can remember some of the jobs found for some of the other boys when they departed.
    Mr. Rankin: When my right hon. Friend is considering the two appointments, will he direct the attention of those who are appointed to the continuing diminution in the size of eggs? Is he aware that the diminution in size is not being accompanied by a diminution in price and that this is a most important matter to housewives? Will he take it into consideration and see what can be done?
    Mr. Hoy: At the end of the day, I shall have to leave it to the hen. But what my hon. Friend has said will be taken note of.

    Hill Cow Subsidy Payments, County Antrim
    Mr. Henry Clarkasked the Minister of Agriculture, Fisheries and Food what percentage of land in County Antrim has been approved for the payment of hill cow subsidy; and whether he is satisfied that all farmers who are eligible are receiving the grants.
    Mr. Hoy: Approximately 26 per cent. of the total areas of agricultural land in County Antrim has been approved as eligible hill land for the payment of hill cow subsidy. We are satisfied that all farmers who have claimed and are eligible are receiving the subsidy.
    Mr. Clark: Is the right hon. Gentleman aware that authorities in a position to judge the situation in Scotland as well as Northern Ireland are of opinion that if the same criteria were applied in Northern Ireland as in Scotland to define hill land the acreage might be doubled?
    Mr. Hoy: I have no proof of that statement. When land is inspected we are guided by experts. If the hon. Gentleman reflects on the figures I have given, I am sure that he will conclude that the area has been well treated.

    Hill Ewe Flock
    Mr. Monroasked the Minister of Agriculture, Fisheries and Food if he now anticipates an increase in the hill ewe flock in 1970.
    Mr. Mackie: It is too early to make a reliable forecast of hill ewe numbers for 1970. However, I am confident that the additional measures announced at the Annual Review provide the means and encouragement for greater productivity and growth in the hill sheep industry.
    Mr. Monro: Does not the hon. Gentleman agree that the price of wool has a significant effect on the increase or decrease of the hill ewe flock? Does he also agree that in the price review the Minister gave different increases in income for dairy farmers and so on,

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    together with different acreage calculations? What will be the decrease in income for hill sheep farms with two, four and six hirsels in the coming year?
    Mr. Mackie: My right hon. Friend answered the point about wool in a previous Question. I will try to give the hon. Gentleman the estimate he asks for.

    Sugar Beet
    Sir D. Rentonasked the Minister of Agriculture, Fisheries and Food whether he will make a further statement on this season's sugar beet crop; and what sugar import substitution is expected to take place during the current season.
    Mr. Hoy: The British Sugar Corporation now reports that 87 per cent. of the authorised acreage of sugar beet had been drilled by 2nd May and that drilling was virtually completed last week. The season has undoubtedly been a late one but prospects in most areas now seem no worse than they did at this time last year and in some areas look rather better. It is, of course, too soon to make any prediction on the likely output of sugar.
    Sir D. Renton: Does not that reply show that there is a serious risk of the yield from home sugar production being below what the Government have planned and what is required? Would it not be better in future years to have a margin of safety in terms of a larger permitted acreage?
    Mr. Hoy: It is difficult to predict what the sugar content will be, as the right hon. and learned Gentleman knows. If we get weather like today's, it can improve it tremendously. It would be difficult for anyone to predict accurately what the outcome was likely to be.
    Mr. Costain: Is the right hon. Gentleman aware that a number of Kentish farmers are advocating the growing of sugar beet in Kent? What is his attitude towards extending sugar beet production to that area?
    Mr. Hoy: I will not deal with that area in particular but I can tell the hon. Gentleman that work is at present going on which will give us a considerable increase in capacity.

    Tea Prices
    Mr. Arthur Lewisasked the Minister of Agriculture, Fisheries and Food whether the 8d. per pound increase in the price of Brooke Bonds P.G. Tipped tea was made with his consent; why this was not referred to the National Board for Prices and Incomes; and whether he will make a statement.
    Mr. Cledwyn Hughes: I was not given information to enable me to consider whether the increase was justifiable against the criteria set out in Cmnd. 4237. In view of this, and of other increases in tea prices similarly made without giving me advance information, my right hon. Friend the First Secretary of State and Secretary of State for Employment and Productivity and I are referring the industry to the National Board for Prices and Incomes.
    Mr. Lewis: I thank my right hon. Friend for that reply. Is he aware how pleased we are to see that he and his Ministry are doing something positive to try to prevent what would appear to be quite unnecessary increases and the very high-handed attitude which has been adopted by some of these big businesses?
    Mr. Hughes: I note what my hon. Friend has said.
    Sir G. Nabarro: Would the right hon. Gentleman bear in mind that, from the statement on the front page of the Daily Mail yesterday, 16,500 individual price increases have now been notified since devaluation, and that wholesale grocers say that they are in the position of not being able to notify the Minister within the 28 days required simply because costs are rising so fast as to overtake any possibility of giving that notice?
    Mr. Hughes: Perhaps the hon. Gentleman will await the statement which I hope to make on the general issue at the end of Question Time. As he and the House know perfectly well, the figure of 16,500 increases produced by the Grocer was totally misleading.

    Meat and Livestock (Home Production)
    Mr. Wolrige-Gordonasked the Minister of Agriculture, Fisheries and

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    Food what representations he has now received from the Meat and Livestock Commission to improve home production; and what reply he has sent.
    Mr. Hoy: We have had no recent representations from the Meat and Livestock Commission on home production generally. My right hon. Friend and his right hon. Friend the Secretary of State for Scotland have received the commission's views on sire licensing, which are being considered along with those of other interested organisations.
    Mr. Wolrige-Gordon: I thank the right hon. Gentleman for that reply. Is he aware that, in view of the capital position in the industry at the moment, this proposal, particularly for the abolition of bull licensing, seems incredibly complacent?
    Mr. Hoy: As the hon. Gentleman has heard, we have had this represented to us, and it and other representations will be considered.
    Mr. Paget: Is my right hon. Friend aware that fattening livestock is becoming so unprofitable that for the first time since the war keeping is not selling in the Welland Valley?
    Mr. Hoy: That is a rather different question, but I note what my hon. and learned Friend has said.

    Imported Agricultural and Horticultural Produce (Chemicals)
    Sir J. Langford-Holtasked the Minister of Agriculture, Fisheries and Food whether agricultural and horticultural products consumed in Great Britain have been grown abroad using chemicals which are either prohibited or restricted in the United Kingdom.
    Mr. Mackie: My right hon. Friend cannot exercise surveillance over the detailed agricultural operations in the numerous countries from which we import agricultural and horticultural produce, but the food we import is safeguarded by the provisions of the Food and Drugs Act, 1955, and the Imported Food Regulations, 1968.
    Sir J. Langford-Holt: Can the hon. Gentleman, in his Ministry of Food hat, say whether he is satisfied that in no
    1234
    circumstances is food consumed in this country having been grown in conditions which would not be allowed in this country? Secondly, is he, wearing his Ministry of Agriculture hat, aware that in certain circumstances it is possible that the farmers in this country have to maintain standards higher than those maintained by our suppliers overseas and that they are, therefore, at a disadvantage?
    Mr. Mackie: The answer to the first question is " No ", and the answer to the second " Yes "; and it is difficult to avoid.
    Mr. Snow: Does not my hon. Friend remember that there are provisions in the Medicines Act, 1968, whereby World Health Organisation regulations were anticipated and the covering provisions of our own legislation were embodied? Has that part of the Act yet been put into operation?
    Mr. Mackie: It has not been put into operation, but I am glad that my hon. Friend has reminded the House of it.

  HOUSE OF COMMONS

    Members (Names and Titles)
    Mr. Arthur Lewisasked the Lord President of the Council whether he will move to refer to the Select Committee on Procedure the rules and procedure by which hon. Members are referred to by name and their constituencies with an instruction to the Committee to make proposals to enable any hon. Member to select and adopt any name or title to which he may lawfully and legally be entitled, and to be so referred to in Parliament.
    The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): Such a matter is already within the terms of reference of the Committee.
    Mr. Lewis: I thank my right hon. Friend for that exciting reply, but cannot he go a step further and refer the matter to the Committee, as he has done other important subjects, and no doubt ask the hon. Member for Berwick-upon-Tweed (Mr. Lambton) to give evidence on this very important issue?
    Mr. Peart: Although my reply may not have been exciting, it was precise and I cannot go beyond it.

    Self-Seal Envelopes
    Mr. Crouchasked the Lord President of the Council if he will now provide self-seal envelopes for the use of Members.
    Mr. Peart: If there is evidence that Members generally would like these envelopes to be stocked, I will certainly make the necessary arrangements.
    Mr. Crouch: The House will appreciate the great anxiety felt about what is rather a sticky question. Will the right hon. Gentleman bear in mind that I have calculated that I could save myself half an hour a day—extended over 50 weeks, that is 10 working days—in this way, which perhaps would allow me to ask 16 more Oral Questions a year? Does he not think that this should be taken into account?
    Mr. Peart: On that evidence, I might have wished to give a different reply. I am anxious to help hon. Members and save their time. I will make the necessary arrangements.
    Mr. George Jeger: While my right hon. Friend is looking into that matter, will he also look into the question of the printed postcards of acknowledgement? If they had " official paid " printed on the reverse side, it would save the use of an envelope.
    Mr. Peart: I will look into that suggestion.

    Security
    Mr. William Hamiltonasked the Lord President of the Council if he will initiate an inquiry into the question of security within the Commons part of the Palace of Westminster.
    Mr. Peart: The problems of safeguarding classified documents in the Palace of Westminster are being reviewed by the authorities of the House in consultation, as necessary, with the security authorities, to determine whether any changes in present procedures are required.
    Mr. Hamilton: I thank my right hon. Friend for that reply. Has he considered,
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    or will the appropriate authorities be considering, the need for the appointment of a full-time security adviser for the House rather than leaving the matter to the House authorities, who are not as experienced in the matter as perhaps they might be expected to be?
    Mr. Peart: I note what my hon. Friend has said. In view of my answer, I think this point should wait until we have the consultations.
    Mr. Kenneth Lewis: Is the right hon. Gentleman aware that on 24th July, 1968, when this House was considering, on a Privilege Motion, the case of an hon. Member providing information to the Press from one of our Select Committees, the hon. Member for Fife, West (Mr. William Hamilton) supported that hon. Member? Is he further aware that I accordingly declined to sit under the chairmanship of the hon. Member for Fife, West on the Estimates Committee and resigned from that Committee? What right has the hon. Member, therefore, to raise a question of security when he himself condones the provision of information to outside bodies from within this House?
    Mr. Peart: In view of what I have said in reply to the Question on the Order Paper, my hon. Friend the Member for Fife, West (Mr. William Hamilton) has a perfect right to ask me about this matter, which is one of interest. In view of my reply, let us leave it at that.
    Mr. Hamilton: On a point of order, Mr. Speaker. The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) has made an attack on me which is quite unjustified. If he reads in HANSARD the speech I made on the occasion he referred to, he will see what a distortion of it he has just made.

    Sessional Printed Papers (Demand Form)
    Mr. Sheldonasked the Lord President of the Council if he will arrange to have published a daily Demand Form for Sessional Printed Papers and affix it to the front page of the Vote.
    Mr. Peart: I am asking the Services Committee to look into this matter.
    Mr. Sheldon: Is my right hon. Friend aware that many hon. Members receiving this form have some difficulty in finding it at times? Very often it is mislaid or an hon. Member drops it, with the result that important matters are not brought to Members' notice as they should be.
    Mr. Peart: I have said that I will look into this with the Services Committee.

  SCOTLAND

    Economic Growth Points
    Mr. Sillarsasked the Secretary of State for Scotland how many economic growth points there are in Scotland.
    The Minister of State, Scottish Office (Dr. J. Dickson Mahon): The Government's investment incentives policy and programmes of infrastructural investment are designed to benefit the country as a whole rather than a limited number of favoured growth points.
    Mr. Sillars: Would not my hon. Friend agree that the Government's attitude is infinitely preferable to the limited growth which we should get from the limited growth point philosophy of the Conservative Party? Would he not further agree that it is essential now in the run-up to the General Election that the Conservative Party should clearly determine those parts of the country which would be in growth areas and those which would not?
    Dr. Mabon: I agree with my hon. Friend. The best example that I can give from recent months has been the publication of the Gaskin Report, in which two so-called growth points are identified. This caused a great deal of controversy locally. Our attitude is that areas as such and zones as such should be encouraged in accordance with industry moving in.
    Mr. Buchanan-Smith: Is the hon. Gentleman aware that the General Secretary of the T.U.C., speaking in Glasgow last weekend, urged that in Scotland we should consider a return to the growth area principle which was worked so well by the previous Conservative Government?
    Dr. Mabon: It was not worked well by the previous Conservative Government, as is exemplified in many counties in Scotland, including my own. I am not
    1238
    aware of what the General Secretary said. [HON. MEMBERS: " Why not? "] He is the Chairman of the Regional Committee of the Scottish Economic Planning Council, which wholeheartedly supports the present policy of the Government.

    Industry (Government Assistance)
    Mr. Sillarsasked the Secretary of State for Scotland what representations he has received from organisations to reduce total Government assistance to industry in Scotland; and what replies he has given.
    Dr. Dickson Mabon: None, Sir.
    Mr. Sillars: Is my hon. Friend aware that both he and the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith), on Question No. 45, mixed up Mr. James Jack, the General Secretary of the Scottish T.U.C., and Mr. Victor Feather, General Secretary of the T.U.C.? Is he also aware that I have read Mr. Feather's speech in Scotland last week and that it did not coincide with Tory Party policy in any way whatsoever?
    Dr. Mabon: It is not the first time that the hon. Member has been tripped up by a feather.
    Mr. MacArthur: Will the Minister agree that what matters in the end is the success of the policy? Will he not agree that under the regional policies operated by the Conservative Party employment in Scotland increased by 30,000 jobs over our last four years and that under the regional policies of the Labour Government there has been a loss of 41,000 jobs?
    Dr. Mabon: Under the present Government the rate of supplying new jobs to Scotland has doubled, is on target, and is well over 120,000. Under this Government the slimming-down of the older industries has gone faster than expected by anyone, including right hon. Gentlemen opposite.
    Mr. Maudling: The hon. Gentleman was asked a simple question. Why does he not answer it?
    Dr. Mahon: I answered it. The hon. Gentleman does not like the truth.

    Ore Terminal, Clydeside
    Mr. Edward M. Taylorasked the Secretary of State for Scotland what

    1239
    recent discussions he has had with the Scottish Economic Planning Council regarding the proposed construction of an ore terminal in Clydeside.
    Dr. Dickson Mabon: I would refer the hon. Gentleman to the answer given to the hon. Member for Ayr (Mr. Younger) on 16th July, 1969. There was a public inquiry between 17th November, 1969, and 13th February, 1970, into the rezoning of land at Hunterston for various industrial purposes, including an ore terminal. My right hon. Friend awaits the report on that inquiry and cannot comment on the physical planning issues meantime. No recent discussions have taken place in the Scottish Economic Planning Council.—[Vol. 787, c. 110–11.]
    Mr. Taylor: Would not the hon. Gentleman agree that it is a long time since the Clyde Port Authority offered to build this terminal at its own expense? Would he not agree that it is urgently required? Who makes the decision whether the ore terminal goes ahead? Is it the Board of Trade, the Scottish Office, or the Ministry of Transport? How many Ministries are involved, and who will sort it out?
    Dr. Mabon: I am sorry that the hon. Member is so ignorant of these important matters concerning Scotland. Without planning consent by the Secretary of State, this development could not take place. The Secretary of State's decision can be founded only on the evidence given at the inquiry. But that does not mean that various points of view—some, by the way, contradictory, including some from the Conservative Party—on this issue at Hunterston do not have to be taken into consideration by the Secretary of State.
    Mr. Rankin: Does my hon. Friend agree that with the tendency of the shipbuilding industry to run down in Clyde-side other industries of even greater importance would be highly welcome there to meet the coming deficiency?
    Dr. Mabon: I quite agree with my hon. Friend, but I am sure that hon. Members on both sides will realise the difficult position that my right hon. Friend the Secretary of State and I are placed in, owing to the quasi-judicial function of our office. We are considering a public inquiry. Certain persons
    1240
    have laid objections to certain proposals, and these must all be considered properly. When the reporter submits both sections of his report my right hon. Friend can make his decesion. In the meantime, it would be wrong for Parliament to lead me into making pronouncements of one kind or another, however tempting it may be to do so.

    Part-time Education
    Mr. Edward M. Taylorasked the Secretary of State for Scotland how many children were receiving part-time education in Scotland at the most recent date for which figures are available; what percentage was in Glasgow; and what were the comparable figures in each of the past four years.
    Dr. Dickson Mahon: The figures for January given in the replies of 22nd January and 10th February to the hon. Member for Perth and East Perthshire (Mr. MacArthur) are the latest available, At that time 46 per cent. of the children concerned were in Glasgow schools. The total for January 1969 was 7,191 and 55 per cent. of the children concerned were in Glasgow schools. I do not have January figures for earlier years.—[Vol. 794, c.190; Vol. 795, c.317]
    Mr. Taylor: Does the Minister agree that this is a rather serious situation in which Glasgow is carrying far more than its fair share of the load? What plans have the Government to relieve the situation in Glasgow and, more important, to try to obtain more regular and up-to-date statistics?
    Dr. Mabon: We are very concerned about the matter. We have asked for a regular return of the numbers of pupils in part-time education not only in January but also in May and September of each year. The supply of teachers for the primary teaching qualification courses —and it is in the primary schools that the fundamental shortage mainly lies—has risen from 2,049 in 1964–65 to 3,213 in the current session.
    Mr. Hugh D. Brown: Since mal-distribution of teachers is the real problem, were any representations made during the recent salary negotiations on behalf of primary teachers to have the £100 rise increased to £200 in special areas?
    Dr. Mabon: I would not like to answer that question off the cuff. I should like to consult my hon. Friend and my right hon. Friend the Secretary of State.
    Mr. MacArthur: Is the Minister aware that while the grave shortage of teachers is particularly serious in the primary sector, the shortage is spreading and widening in the secondary sector? Is he aware that this comes immediately before, and in addition to, the very large shortage of teachers that there will be in the secondary sector in 1972? Will he recognise that this is a very grave matter requiring the most urgent attention?
    Dr. Mabon: I recognise the gravity of the situation, which has been with us for a considerable time. Fortunately, the Government have made some progress, though I agree that it is not as much as we would like.

    Midlothian (Employment)
    Mr. Eadieasked the Secretary of State for Scotland if he is aware of concern for employment prospects in Midlothian as a consequence of the contraction of coal-mining and paper making; and what steps he will take to provide more job opportunities.
    Dr. Dickson Mabon: Along with my right hon. Friends the Minister of Technology and the Secretary of State for Employment and Productivity my right hon. Friend keeps in close touch with employment problems in Midlothian. The Government will continue to encourage new industrial growth and expansion in the area.
    Mr. Eadie: Whilst I thank my hon. Friend for his answer, is he aware that there is great anxiety in my constituency about the continued contraction of the older, dying industries, particularly those that provide male employment? Will he give an undertaking that a meeting could be held between representatives of the Ministry of Technology and Midlothian County Council to try to resolve the problem, which is perturbing us?
    Dr. Mabon: I share my hon. Friend's concern. I met the Greater Livingston Group, which comprises West Lothian County Council, Midlothian County Council and the Livingston New Town Development Corporation on 24th April,
    1242
    when we discussed the Greater Livingston Plan. We also discussed the question of industrial promotion and the need for more industry for Midlothian. I am certain that out of that meeting will come initiatives which should help us to improve the situation in the county of Midlothian.
    Mr. Edward M. Taylor: Has the Minister given any consideration to what would be the future of the coalmining industry in Midlothian and elsewhere in Scotland in the event of Britain's joining the Common Market?
    Dr. Mabon: I would not be bold enough to try to answer that question without notice.
    Mr. Willis: What steps have been taken to promote the growth of industrial development to the south-east of Edinburgh, which is in Midlothian, as was proposed in the development plan in 1965?
    Dr. Mabon: If my right hon. Friend, who has a great deal of knowledge about the matter, looks again at the Greater Livingston Plan, coupled with the recent study of the area carried out by HeriotWatt University, and consults Midlothian County Council about the recent meeting I have mentioned, which was held in the county council buildings, he will see that we are pursuing this very matter.

    Health Services (Reorganisation)
    Mr. MacArthurasked the Secretary of State for Scotland whether he will now make a further statement about the reorganisation of health services in Scotland.
    Dr. Dickson Mabon: I would refer the hon. Gentleman to the reply given on 18th March to the hon. Member for Galloway (Mr. Brewis).—[Vol. 798, c. 396–7.]
    Mr. MacArthur: Is the Minister aware that there is considerable concern in Scotland about the apparent delay in making a further statement? Can he give us any indication when a statement can be expected?
    Dr. Mabon: We must take into account the views of the doctors, and being a doctor I would naturally like them to be considered in this matter. The White Paper on the reform of local

    1243
    government in England, published in February, has suggested that the health services will not be run by local authorities. That is not necessarily to be the case in Scotland. We are still discussing the matter, and we shall issue a statement as soon as we can.
    Mr. David Steel: Will the Minister give an undertaking that consideration of the reorganisation of the health services will in no way hold up the Government programme of local health centres in different towns in Scotland, which does not seem to be going at the speed originally intended?
    Dr. Mabon: I do not see the connection between the second Scottish Green Paper and the progress in health centres, which has been remarkable in the past five years. There were three health centres when we came to office, and now there are 22 built, under construction, or scheduled.

    Agriculture (Capital Resources)
    Mr. MacArthurasked the Secretary of State for Scotland what estimate he has made of the capital resources available to Scottish farmers in 1970–71.
    Dr. Dickson Mabon: No precise estimate can be made but the recent Annual Review settlement is designed to augment the resources available.
    Mr. MacArthur: Is the Minister aware that capital should come very largely from farmers' income? Is he aware that incomes are already low and are being constantly and rapidly eroded by rising costs?
    Dr. Mabon: The hon. Gentleman is as expert in agriculture as I am—[Laughter] Normally he is not the spokesman on agriculture, and neither am I. I accept the first part of his statement as very true. As to the second part, I will consult my hon. Friend.
    Mr. Maclennan: Whilst I welcome the substantial increases in capital grants to both crofters and farmers in the recent Price Review, will my hon. Friend keep a close watch on the rate of take-up of the increased grants with a view to studying whether the necessary injections of capital are being made for the modernisation of Scottish farming?
    Dr. Mabon: Certainly, Sir

    North-East Scotland (Migration)
    Mr. Wolrige-Gordonasked the Secretary of State for Scotland whether he will give the net migration figures from the North-East of Scotland for 1969 as compared with 1967–68.
    Dr. Dickson Mabon: The Registrar General estimates that the net loss by migration from the North-East of Scotland in the years 1967–68 and 1968–69 was 2,500 and 2,000.
    Mr. Wolrige-Gordon: What impact do the Government think the massive unemployment throughout the country has on this serious problem of migration from certain districts?
    Dr. Mabon: The hon. Gentleman will be glad to know that for the rest of Scotland the net emigration figure has been halved since the present Government came to power. We have seen it drop from an all-time high of 47,000 in the country as a whole to about 20,000. In the North-East, which I agree was one of the most badly-affected regions, it is a welcome fact that that loss is also being reduced steadily.
    Mr. Buchanan-Smith: Is the Minister aware that in the North-East of Scotland, as elsewhere, there is a steady decline in the number of men in employment? This is causing great worry. When will the Minister give effect to the growth point policies put forward in the Gaskin Committee Report?
    Dr. Mahon: They are being acted upon quite rapidly. Hon. Members opposite did nothing about the matter for the North-East when they were in office. We have authorised the erection of six Ministry of Technology advance factories, and we have an extensive building programme by the Scottish Special Housing Association in support of industry. Assistance has also been obtained from the Development Commission. and within that assistance there is to be an advance factory at Keith, which I had hoped to announce personally in March.
    Mr. Dewar: Will the Minister accept that the news of evidence of a drop in emigration will be very welcome, and that the tremendous break-through of the

    1245
    announcement of the factory which will provide jobs in Aberdeen gives enormous hope for the future of the area?
    Dr. Mabon: I agree, and I am only sorry that hon. Gentlemen opposite did not trumpet forth the good news as they should have done.

FOOD (PRICE INCREASES)
The following Question stood upon the Order Paper:
31. Mr. STAINTON: To ask the Minister of Agriculture, Fisheries and Food as from what date the system of voluntary notification of proposed price increases by food and allied manufacturers, with a 28 days' scrutiny period, ceases; and whether he will make a statement on the new arrangements.
The Minister of Agriculture, Fisheries and Food (Mr. Cledwyn Hughes): With permission, I will now answer Question No. 31.
I have discussed the voluntary notification of future price increases with the Food Manufacturers' Federation. It has undertaken to advise its members to continue to observe the principles of the prices policy, limiting increases to cases where unavoidable cost increases cannot be offset, or where necessary to provide capital for investment. It will advise its members to notify intended price increases, together with the justification for them, in time for me to be adequately informed before changes are announced.
I have made it clear that I shall have to decide, in the light of the information and opportunities for discussion available, whether, in any case, intended increases are consistent with the principles of the prices policy, or whether reference to the National Board for Prices and Incomes is necessary.
Mr. Stainton: There is something more fundamental in my Question than what the Minister has touched on. However these prices rises have come about, the rate of return on capital in food manufacturing has been seriously declining, and is now between 11 and 12 per cent., whereas the 10 top food chains, the supermarkets, last year showed a return on capital of 25 per cent.
1246
This disparity, and the concentration of buying power in food distribution, is very serious. Will the Minister please direct his attention to this and the relative position of the manufacturer?
Mr. Hughes: This matter was discussed when I met the Food Manufacturers' Federation, and the point was put strongly to me. In spite of that, the federation has accepted that certain costs can be absorbed, and has undertaken to adhere to this new arrangement which, although more flexible than the last, nevertheless retains the principles of the prices policy.
Mr. Arthur Lewis: Will my right hon. Friend bear in mind that many food manufacturers claim that one reason why they will have to put up prices is the increase in the price of tin and tinplate, yet the Metal Box Company has stated that there is no need for prices to go up by as much as the manufacturers threaten. Will the Minister look at this matter and ensure that the increase in the price of tin and tinplate is not used as an excuse?
Mr. Hughes: Certainly. This was one of the factors discussed during the last 10 days with the Food Manufacturers' Federation.
Mr. Godber: Will not the Minister face up to the real problem, that he and his Government have brought about conditions in which costs have risen enormously in the food industry, that these costs have to be passed on, and that the housewife is suffering the most savage increase in prices since 1951?
Mr. Hughes: The right hon. Gentleman, unfortunately, is exaggerating, and this does not help. I recognise that increased costs which cannot be absorbed, including increased wages, may have to be passed on in the form of higher prices. It is important that this should be acknowledged by all concerned. The right hon. Gentleman's agricultural policy would further substantially increase food prices.
Mr. Wellbeloved: Does not the fact that some large retail distributors in the food trade are making 25 per cent. dividend declarations indicate that there is considerable room for drastic price cuts at the retail point of sale of large retail distributors?
Mr. Hughes: I am obliged to my hon. Friend. I recognise that the size of retail price margins is an important factor, and I am giving very careful attention to it.
Mr. Maudling: To enable him to give his Answer the Minister must have made an estimate of the rate at which costs are rising in the food industry. Will he share that estimate with the House?
Mr. Hughes: The right hon. Gentleman will know that in 1969 expenditure on food went up by 5·5 per cent., but earnings went up substantially more. The present position is that food costs are increasing, but earnings are increasing at a more rapid rate, and that is fundamental.
Mr. Maudling: The Minister has not answered my question. I did not ask about 1969. He must have an estimate to enable him to give the Answer he has given about what is happening now. If he has an estimate of the way food production and sales costs are going up, will not he give it to the House?
Mr. Hughes: There are several factors here—
Hon. Members: Answer!
Mr. Hughes: —as the right hon. Gentleman must know. The question of retail price margins has just been mentioned by my hon. Friend. There has been an increase in the cost of food, but I cannot give a more precise and up-to-date figure at present.
Mr. Brooks: Does not my right hon. Friend agree that, if there is an obvious and overwhelming case for an increase, this can be demonstrated during the scrutiny period? The inference, therefore, is that if manufacturers are not prepared to submit to this, they have something to hide. Will my hon. Friend give the House an assurance that if the manufacturers are determined to hide things he will automatically refer such matters to the N.B.P.I.?
Mr. Hughes: This is precisely what the Food Manufacturers' Federation has now undertaken to advise its members to do, namely, to give me reasonable notice of any price increase. This will enable the Ministry of Agriculture to scrutinise the matter very carefully and decide whether there is aprima facie case for reference to the N.B.P.I.
Mr. Prior: If the Minister has done his sums correctly, will not he confirm that under his Government the cost of living has increased by over 5s. in the £, whereas our agricultural policy would result in an increase in the price of food of Id. in the lb.?
Mr. Hughes: I do not disagree that the cost of food has gone up. What I am saying is that earnings have gone up more, and that people are more prosperous today than when the Conservative Party was in power.

UGANDA (MR. BRIAN LEA)
The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Maurice Foley): With your permission, Mr. Speaker, and that of the House, I would like to make a statement about the kidnapping of Mr. Brian Lea.
My right hon. Friend, in his statement on 8th May, informed the House that he would be in communication with the Uganda authorities about the Commission of Inquiry set up by President Obote to look into the circumstances of the disappearance and reappearance of Mr. Brian Lea, and he undertook to keep the House up to date with information on this matter.
As a result of discussions with the Uganda Government, Her Majesty's Government have decided to agree to the request of the Uganda Government that we should co-operate with the Commission of Inquiry. We have accordingly agreed to waive diplomatic immunity to the extent of allowing Mr. and Mrs. Lea to attend the inquiry and answer questions relating to the facts of Mr. Lea's disappearance.
Before informing the Uganda Government of our agreement to co-operate, we established that Mr. Lea would be permitted to be represented for the whole of the inquiry by counsel of his choice, and Mr. Desmond Ackner, Q.C., has gone to Kampala to represent Mr. Lea at the Commission's hearings. The High Commissioner will be represented by counsel, Mr. Robin Auld.
Mr. and Mrs. Lea themselves have expressed their desire to give evidence before the Commission.

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Her Majesty's Government trust that the full facts about these events will now be clearly established. In the circumstances, the House will not expect me to comment further.
Mr. Braine: I am sure that the whole House would wish me to thank the hon. Gentleman for making that statement. Does not he agree that, for the sake of all concerned, the real truth of this strange affair must be established without doubt as soon as possible? Will he confirm that he conveyed this view to the Uganda High Commissioner recently, and will he also say when the Kampala inquiry will start and when it is expected to finish?
Mr. Foley: Clearly, it is in our interests and those of the Uganda Government that the real truth is discovered; this is the object of the inquiry. It is not a trial or a prosecution and, as the Attorney-General of Uganda said this morning, in opening the inquiry, this does not and will not affect the good relations between our two countries. The inquiry opened this morning and was immediately adjourned until Monday, at the request of Mr. Lea's counsel.
I confirm that the High Commissioner was summoned this morning and was informed of the mind of Her Majesty's Government on this matter.
Mr. David Steel: Will the right hon. Gentleman accept, in the interests of maintaining good relations between our two Governments, that the steps taken by Her Majesty's Government are correct? Also, will Mr. Lea's legal representation be paid for by the Government?
Mr. Foley: Yes, Sir.

SOUTH AFRICAN CRICKET TOUR
Mr. Philip Noel-Baker: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
the proposed South African cricket tour and the need for action by this honourable House to persuade the Cricket Council to withdraw its invitation and the further need, if necessary, for action by Her Majesty's Govern-
1250
ment to ensure that the tour shall not take place, in view of the grave effects on Commonwealth relations which it would produce, the serious racial tensions which it would cause in this country, and the intolerable burden which it would impose upon the police".
This matter is urgent, Mr. Speaker. Soon after the Whitsun Recess the South African team will be here, if the invitation to it is not speedily withdrawn. Tomorrow is the last day when any useful discussion can take place.
The matter is specific. About 18 months ago the Prime Minister of South Arica forbade a cricket tour by an England team in his country on the sole ground that there was a coloured player in the England side. He thus brought politics into sport, politics in its most explosive and uncivilised form.
Mr. Speaker: Order. The right hon. Gentleman must not debate in detail the points that he would be able to make if his application should be successful.
Mr. Noel-Baker: I am trying to give the facts on which I base my appeal for leave to adjourn the House, Sir.
The South Africa team which has been invited is chosen on the principle of apartheid, which violates the fundamental basis of world co-operation in international sport. If the tour goes forward it will mean that Britain accepts the principle of apartheid in respect of cricket, which has been the greatest game in the Commonwealth for many years.
The matter is important. Last week, the Government of India officially announced in both Houses of its Parliament that no Indian team would come to the Commonwealth games in Edinburgh, if the tour takes place. India has since been joined by Malaysia, Ceylon and Singapore, while Pakistan has cancelled a tour of under-25 cricketers who were to visit this country in a few weeks' time. Last week, Jamaica announced that it would boycott the Edinburgh Games if the tour went on. Jamaica has since been joined by Barbados, Trinidad and Guyana.
Ten or 13 African Members of the Commonwealth have announced that they will send no teams to Edinburgh if the invitation to the South African cricketers is not withdrawn. This was officially confirmed this week by the Nigerian

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chairman of the Supreme African Council on Sport.
I submit that these decisions not only would destroy the Edinburgh Games but, if the tour goes on, would have a most disastrous long-term effect on Commonwealth relations.
The results in this country would be no less important and no less disastrous. Few people speak with such authority and few are so persuasive on race relations as the Bishop of Stepney.
Mr. Speaker: Order. The right hon. Gentleman is entering into a debate on the issues of the matter on which he is asking for a debate.
Mr. Noel-Baker: I am submitting, Mr. Speaker, that the tour will cause grave racial tension in this country and I quote the authority of Bishop Trevor Huddleston. Finally, I submit that the tour will impose an intolerable burden on the police.
I say, in conclusion, that if the Cricket Council was to listen to Parliament's appeal, that would be no humiliation. Indeed, everybody would honour it for accepting even at the last moment the necessity to face the facts.
Mr. Speaker: The right hon. Member for Derby, South (Mr. Philip Noel-Baker) was courteous enough to inform me that he might seek to ask leave to adjourn the House under Standing Order No. 9.
The right hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
" the proposed South African cricket tour and the need for action by this honourable House
1252
to persuade the Cricket Council to withdraw its invitation, and for the further need, if necessary, for action by Her Majesty's Government to ensure that the tour shall not take place in view of the grave effects on Commonwealth relations which it would produce, the serious racial tensions which it would cause in this country, and the intolerable burden which it would impose upon the police."
I am satisfied that the matter raised by the right hon. Gentleman is proper to be discussed under Standing Order No. 9. Does the right hon. Gentleman have the leave of the House?
The leave of the House having been given—
Mr. Speaker: The Motion for the Adjournment of the House will now stand over until the commencement of public business tomorrow, when a debate on the matter will take place for three hours, under paragraph 2 of Standing Order No. 9.
The Motion stood over under Standing Order No. 9 (Adjournment on specific and important matter that should have urgent consideration) until the commencement of public business Tomorrow

BILL PRESENTED
  COUNCIL TENANTS' CHARTER
  Mr. Robert Edwards, supported by Mr. Roy Roebuck, Mr. Edward Milne, Mr. Leslie Huckfield, Mr. John Horner, Mr. Peter Archer, Mr. Stan Newens, Mr. Geoffrey Rhodes, Mr. Eric S. Heller, Mr. Alfred Morris, and Mr. Laurence Pavitt presented a Bill to establish a charter of rights for council tenants: And the same was read the First time; and ordered to be read a Second time upon Friday 12th June and to be printed. [Bill 185.]

  HUMANE CAPITAL PUNISHMENT
  3.48 p.m.
  Sir Richard Glyn: I beg to move,
  That leave be given to bring in a Bill to provide for the abolition of execution by hanging or shooting for those offences in respect of which capital punishment is in force, and to provide for the introduction of a humane method of execution; and for connected purposes.
  To remove any possible misapprehension, I wish to make it clear—[Interruption]
  Mr. Speaker: Order. We are on a very serious topic. I hope that the House will listen to the hon. Gentleman.
  Sir Richard Glyn: I wish to make it clear that my Bill is concerned solely with a humane method of execution for those offences which are still the subject of capital punishment and is in no way concerned with increasing the number of capital offences.
  On the day after the House voted on the abolition of hanging for murder, several newspapers pointed out that the gallows were to be retained at Wands-worth Gaol for executions which might be ordered for those offences for which capital punishment has been retained. It was clear that these executions could not take place until the next war, which seems unlikely to occur for many years. One newspaper published a report of an interview with the common hangman, whose appointment apparently has not been terminated.
  These facts go to underline the importance of the recommendations of the Royal Commission on Capital Punishment, which had been specially directed to consider systems of execution. After analysing the five methods of execution then in use in different parts of the world, and two suggested new methods, the Commission recommended that hanging be retained until a better system could be found on the ground that, when carried out by an expert executioner, hanging was the most suitable method then in use.
  It pointed out that, with an expert hangman, hanging was humane in the sense that no pain was caused and that the interval between the entry of the executioner into the condemned cell and
  1254
  the moment when a condemned man became unconscious was less than half a minute.
  It also quoted examples of other countries where, with inexperienced executioners, the interval was normally as long as six minutes, and it quoted one ghastly example of a condemned man who had to be reprieved after an untrained executioner had made three unsuccessful attempts to hang him. This horrible episode lends weight to the question that aDaily Telegraph representative asked a Home Office spokesman, that is, what would happen if the next war were so many years ahead that, when the remaining gallows was required, there was no experienced hangman available to operate it? The Home Office spokesman replied that this difficuly would be met when it arose.
  That reply directly conflicts with the advice of the Royal Commission on Capital Punishment, which recommended " unanimously and emphatically " that methods of execution in Britain should be periodically examined with a view to a change in the system. Had the Royal Commission foreseen any possibility of hanging having to be carried out by inexperienced hangmen, no doubt it would have used even stronger language.
  It is difficult to estimate how many executions might be ordered during the next war. We can only be guided by what happened in the last one. During and just after the last war, 15 persons were hanged for espionage and two for treason. On 11 December, the Secretary of State for Defence told the House that, in addition to those 17 executions, there were 49 executions for mutiny and other Service offences during and after the last war, the last being in 1953. It is true that the great majority of the executions took place abroad, but they were ordered by British military courts and carried out, after the sentences had been confirmed, under the British Service discipline Acts.
  The great majority of these Service executions were carried out by firing squads, but 14 were by hanging which, with the 17 spies and traitors, gives a total of 31 executions by hanging and rather more by firing squads, all for offences which would still be capital offences if another war were to break out. The Royal Commission mentioned a

  1255
  number of countries which had reintroduced capital punishment for war time offences during and after the last war, although in some cases these countries had abolished capital punishment for every offence many years before.
  Incidentally, the Royal Commission considered and rejected execution by firing squad on the grounds that it was neither certain nor humane. In plain words, it meant that the condemned man was not always killed outright. It also pointed out the disadvantage of having a number of executioners.
  The new system of execution in the Bill which I seek leave to introduce depends on the fact, long known to scientists, that man cannot live without oxygen and that, if carbon dioxide is removed with the oxygen, no pain or discomfort is involved. Present-day technology enables this to be done in a way not considered by the Royal Commission, because the necessary apparatus did not then exist. Now it can be done by attaching a commercial air-conditioning plant with both input and extractor fans, designed for a large workshop of many cubic feet, to a small execution chamber containing far fewer cubic feet.
  This proposed system of execution has the support of leading doctors and anaesthetists. It is not in any way a theoretical proposition because, while investigating the causes of black-outs in aircraft, the Royal Air Force Institute of Aviation Medicine has for many years experimented with the expulsion of both oxygen and carbon-dioxide from a confined space which has been, in its technical term, " over-ventilated " with pure nitrogen.
  Nitrogen is not a poisonous or harmful gas. It comprises over three-quarters of the air that we breathe. But nitrogen alone cannot sustain life even for a moment. In this process, it is used solely to expel the oxygen on which life depends.
  Experiments have been conducted on volunteers who have been reduced to unconsciousness by " over-ventilation " with nitrogen. When they became unconscious, the nitrogen was turned off and air and oxygen were turned on, so that they revived. Had that not been
  1256
  done, eventually they would have died without regaining consciousness. Published reports show that the volunteers suffered neither pain nor discomfort, but only giddiness and faintness, before they blacked out, which occurred between 17 and 20 seconds from the moment when the nitrogen was turned on. I have spoken to one volunteer who breathed nitrogen until he became unconscious and who confirms that there was no discomfort, but only giddiness and faintness.
  One unique feature of this proposed new means of execution is that no trained executioner is required. My Bill provides for the abolition of the post of common hangman. The nitrogen can be turned on by an electric switch operated by an official, or even by an electric timing device.
  Experienced prison officers take the view that some condemned men would wish, for religious reasons, to know when their end was approaching, and obviously, their wishes should be respected, and this could easily be done. Other prisoners might prefer to know nothing, in which case they could be offered sedation and taken to the execution chamber in a drugged sleep from which they would not awaken. This system would obviously be more humane than either firing squads or hanging, especially hanging by inexperienced hangmen.
  I realise that many hon. Members find the whole question of executions so extremely distasteful that they prefer not even to contemplate the subject—
  Mr. Russell Kerr: The hon. Gentleman is enjoying it.
  Sir Richard Glyn: But as long as the Wandsworth gallows remain, and British firing squads are liable to be ordered to execute their fellow Servicemen, I hope that many hon. Members will accept the unanimous advice of the Royal Commission on Capital Punishment as to the need for a new humane system of execution and will feel able to support my Motion for leave to bring in a Bill which would do away at one blow with inhumane firing squads, with the last remaining gallows, and with the common hangman.
  Question put, pursuant to Standing Order No. 13 (Motions for leave to bring

  1257
  in Bills and nomination of Select Committees at commencement of Public Business):—
  The House divided: Ayes 29, Noes 186.

  Division No.[126]

  AYES

  [14.0 p.m.

  Allason, James (Hemel Hempstead)

  Longden, Gilbert

  Russell, Sir Ronald

  Biggs-Davison, John

  McAdden, Str Stephen

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

  Cordle, John

  MacArthur, Ian

  Taylor, Frank (Moss Side)

  Cunningham, Sir Knox

  McMaster, Stanley

  Thatcher, Mrs. Margaret

  Doig, Peter

  Maginnis, John E.

  Tilney, John

  Galbraith, Hn. T. G.

  Montgomery, Fergus

  Wells, John (Maidstone)

  Gilmour, Sir John (Fife, E.)

  More, Jasper

  Williams, Donald (Dudley)

  Glover, Sir Douglas

  Orr-Ewing, Sir Ian

  Glyn, Sir Richard

  Page, John (Harrow, W.)

  TELLERS FOR THE AYES:

  Kimball, Marcus

  Pearson, Sir Frank (Clitheroe)

  Sir Gerald Nabarro and

  Lewis, Arthur (W. Ham,)

  Rhys Williams, Sir Brandon

  Mr. Edward M. Taylor.

  NOES

  Alldritt, Walter

  Gray, Dr. Hugh (Yarmouth)

  O'Halloran, Michael

  Allen, Scholefield

  Greenwood, Rt. Hn. Anthony

  Orbach, Maurice

  Ashton, Joe (Bassetlaw)

  Grey, Charles (Durham)

  Oswald, Thomas

  Atkins, Ronald (Preston, N.)

  Griffiths, Eddie (Brightside)

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

  Atkinson, Norman (Tottenham)

  Hamilton, William (Fife, W.)

  Paget, R. T.

  Bagier, Gordon A. T.

  Hamling, william

  Pannell, Rt. Hn. Charles

  Balniel, Lord

  Hannan, William

  Pardoe, John

  Barnett, Joel

  Harper, Joseph

  Parker, John (Dagenham)

  Bell, Ronald

  Harrison, Walter (Wakefield)

  Pavitt, Laurence

  Bennett, James (G'gow, Bridgeton)

  Haseldine, Norman

  Pearson, Arthur (Pontypridd)

  Bidwell, Sydney

  Hattersley, Roy

  Peart, Rt. Hn. Fred

  Biffen, John

  Heffer, Eric S.

  Pentland, Norman

  Biggs-Davison, John

  Herbison, Rt. Hn. Margaret

  Perry, George H. (Nottingham, S.)

  Binns, John

  Hooley, Frank

  Price, Christopher (Perry Barr)

  Bishop, E. S.

  Hughes, Hector (Aberdeen, N.)

  Probert, Arthur

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

  Hynd, John

  Randall, Harry

  Buchan, Norman

  Iremonger, T. L.

  Rankin, John

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

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

  Rees, Merlyn

  Butter, Herbert (Hackney,C)

  Jackson, Peter M. (High Peak)

  Rhodes, Geoffrey

  Carmichael, Nell

  Jenkins, Hugh (Putney)

  Richard Ivor

  Chapman, Donald

  Johnson, Carol (Lewisham, S.)

  Roberts, Rt. Hn. Goronwy

  Coe, Denis

  Jones, Dan (Burnley)

  Robertson John (Paisley)

  Coleman, Donald

  Jones, Rt. Hn. Sir Elwyn(W.Ham,S)

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

  Concannon, J. D.

  Jones, J. Idwal (Wrexham)

  Rodgers, William (Stockton)

  Craddock, George (Bradford, S.)

  Jones, T. Alec (Rhondda, West)

  Rose Paul

  Cronin, John

  Judd, Frank

  Rowlands,E.

  Crossman, Rt. Hn. Richard

  Kelley, Richard

  St. John-Stevas, Norman

  Dalyell, Tam

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

  Shaw, Arnold (Ilford, S.)

  Darling, Rt. Hn. George

  Kerr, Russell (Feltham)

  Sheldon, Robert

  Davidson, James(Aberdeenshire, W.)

  Latham, Arthur

  Shinwell, Rt Hn E

  Davies, E. Hudson (Conway)

  Lee, Rt. Hn. Frederick (Newton)

  Silkin,Rt Hn John(Deptford)

  Davies, Dr. Ernest (Stretford)

  Lestor, Miss Joan

  Silkin, Hn, S C(Dulwich)

  Davies, Ifor (Gower)

  Lipton, Marcus

  Silfars J

  Davies, S.O. (Merthyr)

  Loughlin Charles

  Slater, Joseph

  de Freitas, Rt. Hn. Sir Geoffrey

  Lubbock, Eric

  Small, William

  Dell, Rt. Hn. Edmund

  Lyons, Edward (Bradford, E.)

  Snow, Julian

  Diamond, Rt. Hn. John

  Mabon, Dr. J. Dickson

  Snow, Julian

  Dickens, James

  McBride, Neil

  Spriggs, Leslie

  Dobson, Ray

  McElhone, Frank

  Steel, David (Roxburgh)

  Dunn, James A

  McGuire, Michael

  Strauss, Rt. Hn. G. R.

  Dunwoody, Mrs. Gwyneth (Exeter)

  McKay, Mrs. Margaret

  Taverne, Dick:

  Eadie, Alex

  Mackenzie, Gregor (Rutherglen)

  Thomson, Rt. Hn. George

  Edelman, Maurice

  McMillan, Tom (Glasgow, C.)

  Tinn, James

  Edwards, Robert (Bilston)

  McNamara, J. Kevin

  Wainwright, Richard (Coine Valley)

  Edwards, William (Merioneth)

  Mahon, Simon (Bootle)

  Walden, Brian (All Saints)

  Ellis, John

  Mallalieu.J.P.W(Huddersfield E)

  Walker, Harold (Doncaster)

  English, Michael

  Mapp Charles

  Wallace, George

  Evans, Fred (caerphilly)

  Marsh, Rt. Hn. Richard

  Watkins. David (Consett)

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

  Maxwell, Robert

  Watkins, Tudor (Brecon & Radnor)

  Fernyhough, E.

  Mellish, Rt. Hn. Robert

  Weitzman, David

  Finch, Harold

  Mendelson, John

  Wells, William (Walsall,N)

  Fletcher, Ted (Darlington)

  Mendelson, John

  Whitaker, Ben

  Foot, Rt. Hn. Sir Dingle (Ipswich)

  Millan Bruce

  Whitlock, William

  Foot, Michael (Ebbw Vale)

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

  Wilkins, W. A.

  Ford, Ben

  Morgan, Elystan (Cardiganshire)

  Williams, Aian Lee (Hornchurch)

  Forrester, John

  Morris, Alfred (Wythenshawe)

  Williams, Clifford (Abertillery)

  Fowler, Gerry

  Morris, Charles R. (Openshaw)

  Wilson, William (Coventry, S.)

  Fraser, John (Norwood)

  Moyle, Roland

  Winnick, David

  Freeson, Reginald

  Murray, Albert

  Wright, Esmond

  Garrett, W. E.

  Newens, Stan

  Wyatt, Woodrow

  Ginsburg, David

  Noel-Baker, Rt. Hn. Philip

  Golding, John

  Norwood, Christopher

  TELLERS FOR THE NOES:

  Gordon Walker, Rt. Hn. P, C.

  Oakes, Gordon

  Mr. Stanley Orme and

  Grant-Ferris, Sir Robert

  Ogden, Eric

  Mr. Richard Crawshaw.

ORDERS OF THE DAY

  FINANCE BILL
  (Clauses 13, 14 and 35, and new Clauses relating to the matters referred to in the Order of the House [5th May])
  Considered in Committee [Progress, 12th May]
  [Mr. HARRY GOURLAY in the Chair]
  Motion made, and Question,
  That after Clause 13, the Bill be considered in the following order:
  New Clauses, Clause 35 and Clause 14.—[Mr. Diamond]—
  put and agreed to

  FINANCE BILL
    Clause 13

      CHARGE OF CORPORATION TAX FOR FINANCIAL YEAR 1969
      4.7 p.m.
      Mr. Patrick Jenkin: I beg to move Amendment No. 10, in page 11, line 26, leave out ' 45 ' and insert 42·5 '.
      I begin by expressing the thanks of the Opposition to the Chief Secretary for the procedural Motion which we have just accepted. I am sure that this will be for the convenience of both sides of the House.
      Yesterday, we were debating personal taxes—income tax and surtax—and today we have the opportunity to debate company taxation. I am aware that this matter never rates quite as many column inches in the popular Press as do debates on income tax and surtax, but I suggest that this debate is every bit as important as that which we had yesterday, because of its influence on the economic health of the country.
      It is said that companies have nobody to be kicked and no soul to be damned. But the simple fact is that companies and those who manage and work for them are responsible for the overwhelming proportion of the process of wealth creation which goes on in Britain today. If companies are hampered by too heavy a burden of taxation, or by the wrong kind of taxation, the effect on the national
      1260
      effort will be serious and all our objectives will be frustrated.
      We on this side advance two contentions. We believe that grave damage was done when the new system of corporation tax was introduced in 1965, partly because of the manner of its introduction with the minimum of consultation, the minimum of preparation and the maximum of confusion and muddle, and partly because the form in which it was introduced, with its double taxation of distributed profits greatly increasing the bias against distributions, has driven a wedge between the company and its shareholders.
      Mr. Joel Barnett: Is it the policy of the official Opposition, then, to reverse this procedure and have the distributive tax working the other way?
      Mr. Jenkin: The hon. Gentleman must learn to contain his soul in patience: all will be made clear. I said in the Budget debate what we are proposing to do, and I will refer to it again today.
      Our second contention is that even accepting—which we do not, the existing shape of corporation tax, we think that the rate is too high and must be reduced. The Amendment will reduce it from 45 per cent. to 42½ per cent. and goes no further than reversing the increase which the Chancellor made last year.
      In the Budget debate—and I hope that I have the attention of the hon. Member for Heywood and Royton (Mr. Barnett) —I said that my party will aim to reform corporation tax so as to reduce the bias against distribution, and that our currently preferred reform—I emphasise that no final decision has yet been reached—would be to move to the French-Belgian system, which they call avoir fiscal, whereby the withholding tax on distributions is allowed as credit against the company tax paid by the corporations.
      In that debate, the Chief Secretary drew attention to the recent report for the European Economic Commission by Professor Van Den Tempel, recommending, in effect, that the Commission should aim to harmonise on what he calls the " classical system ", which is the system which we have in this country at present. At that time, I must confess that I was not aware of the Van Den Tempel report,

      1261
      and, on further reflection, that was hardly surprising: it is not available in this country, and, so far as I know, there has been no mention of it in the columns of the British Press. However, the Chief Secretary has been kind enough to supply me with a copy, for which I am grateful.
      Like so many Common Market reports, it is a formidable document and it gains as little in readability in the translation from the original Dutch as did the Finance Act of 1965 gain in its translation from the original Hungarian—
      Hon. Members: Oh, no.
      Sir Douglas Glover: Credit where credit is due. It was a very good crack.
      Mr. Jenkin: I am grateful to my hon. Friend.
      I cannot claim to have made an exhaustive study of the Van Den Tempel report, but from a brief look at it, and from consultations with people who follow these matters in this country, I have the gravest doubt about whether the E.E.C. countries will ever wish to adopt its recommendations. The French Government abandoned the classical system of corporation tax two days before we adopted it—one of the greater curiosities of the party opposite's fiscal reforms.
      In Germany, the Social Democratic Party, before the last general election, tabled in the Bundestag a draft Bill to move from the German split-rate system to the French-Belgian avoir fiscal system. Two years ago, the Segré Committee, also under the aegis of the Community, said that the French system would be acceptable as the basis of Community legislation, but only if the bias against non-resident taxpayers was removed. The present French system has a particular impact on foreign investors.
      But the Segré Committee went further —the French have since accepted this—and said that the French-Belgian system could become the basis for international taxation within the Community. It is of interest to note that the recent Franco-German and Franco-American double taxation conventions have clearly been drawn up with this in mind.
      Therefore, despite what may be said by the learned professor—a Dutchman who, I agree, enjoys a considerable
      1262
      reputation within the Community—the Community will, in the end, I believe, harmonise around the French-Belgian avoir fiscal system. Therefore, I am not in the least dismayed by the Van Den Tempel report which the right hon. Gentleman flourished briefly during the Budget debate. The recommendations of this eminent but academic Dutchman will not carry much weight on the other side of the Channel and they are unconvincing for this side of the Committee.
      4.15 p.m.
      Our second contention is the main subject of the Amendment—that the rate of taxation on companies is now too high. We propose a cut of 2½per cent. I estimate the cost—it must be an estimate, since we have not the machinery on this side—at between £100 million and £120 million. When, last year, the Chancellor increased the rate from 42½ per cent. to 45 per cent., the yield was estimated at £120 million in a full year, but, as he knows, profits are somewhat reduced in the current year and are likely to be for some time ahead. Therefore, the cost of our Amendment may be a little less than £120 million.
      My argument in favour of a cut is twofold. Since 1965, the weight of taxes on corporate profits has increased sharply and is now heavier than in most comparable countries. Second, as a consequence, both the incentive to invest and the resources for investment are now too low for economic health. By cutting corporation tax, we should make British industry more competitive and give a new, badly-needed stimulus for investment.
      On the argument that the weight of company taxation has increased, I will begin with the statement by the Chief Secretary on Second Reading on 5th May:
      "… companies are paying no greater proportion of their income in tax now than they did ten years ago. In 1960 the proportion of companies' gross income taken by tax was 25·1 per cent. The provisional figure for 1969 is 23·1 per cent. If tax on dividends is included, the 1969 figure was exactly 34 per cent. compared with 34·7 per cent. in 1960."—[OFFICIAL REPORT, 5th May, 1970; Vol. 801, c. 227.]
      I recognise that the right hon. Gentleman was there concerned to repel attacks from two fronts. The T.U.C. had argued in its Economic Review that company

      1263
      taxation as a percentage of profits had declined since 1960. It spoke of " the downward trend in the proportion of profits taken in taxation over the past 20 years " and quoted a number of figures to support that contention.
      On the other hand, of course, in its Budget representations, the C.B.I. had made an exactly contrary proposition, talking of " the increased burden placed on corporate profits in recent years ". It went on to say that the current rate of corporation tax was much higher than in pre-corporation tax days and was significantly higher if judged by international standards. The C.B.I. said:
      "…although several comparable countries impose a higher tax on retained profits, the aggregate tax on distributed profits is almost without exception much less than that in the United Kingdom; this applies even when it is not a feature of a tax system that distributive profits should be taxed, as in Germany, at a lower rate than retained profits."
      I hope that it will be accepted on both sides that, when we talk about taxation of corporate profits, we mean the combined effect of corporation tax plus the Schedule F tax on distribution. [HON. MEMBERS: " No."] Hon. Members may say " No ", but the Chief Secretary and the T.U.C., as well as the C.B.I., have produced figures on that basis and I am perfectly happy to argue it in that way.
      Why do these conclusions differ so widely? The T.U.C. says that there has been a reduction; the Chief Secretary says that it is much the same; and the C.B.I. has said that the burden is increased.
      Let me deal, first, with the T.U.C. In its table—and I do not necessarily criticise this as a manner of presentation—it has made the figures represent successive three year periods. The last such period is 1965–68, during which it claims that the tax on corporate profits declined from 33·1 per cent. in the previous three year period to 30·9 per cent. By taking a three-year period it has effectively concealed the rising trend that took place during those years.
      More important, the T.U.C. has adopted the Treasury basis of calculation of profits. I have never understood, perhaps someone can explain, why the Treasury adopts a very curious and idiosyncratic definition of profits in all the national income accounts. It takes
      1264
      the gross trading profit before depreciation including rent, non-trading income and income from abroad. This is a concept of profits which businessmen simply do not understand and never use.
      A very much fairer and more realistic definition of profits is what the businessman understands by pre-tax profits, net profits after all deductions including depreciation except tax. If company tax is taken as a percentage of profits on that basis a study of the Financial Times Analysis of Industrial Profits shows two things. Before 1965–66, there was a fairly steady decline in the tax burden on companies. That is not disputed. After 1965–66, the burden has risen quite sharply.
      The figures taken from the Financial Times analysis formed the basis of a study by Mr. Stuart Mansell and his conclusions were given in a recent article in the Investors Chronicle of 24th April. He said:
      " As a percentage of pre-tax profits…corporate tax has increased from about 41 per cent. to 45 per cent. since 1966."
      Of course it has. The Government have put up corporation tax. Hon. Members will remember how we argued in the 1965 Finance Bill on the basis of a 35 per cent. corporation tax rate and how often the Chief Secretary and the then Financial Secretary would argue that the weight would be no heavier compared with the previous system. Already, we have had an increase of 6d. in the rate of the withholding tax, 7s. 9d. to 8s. 3d. When the 1966 Budget came along, we were told that corporation tax was to be not 35 per cent., but 40 per cent. In 1968, it went up to 42½ per cent. and last year the right hon. Gentleman put it up to 45 per cent.
      The weight of corporate taxation has increased during the past three years and it is sheer nonsense to argue to the contrary. How does the Chief Secretary reconcile that with what he said in the debate on Second Reading? I ask the Committee to look carefully at his actual words. He said:
      ".…companies are paying no greater pro-portion of their income in tax than they did 10 years ago."—[OFFICIAL REPORT, 5th May 1970; Vol. 801, c. 277.]
      That was a very cunning form of words, because it wholly conceals the fact that companies paid less and less tax in the first years—there was a steady reduction

      1265
      in tax between 1960 and 1964—while there has been a steady increase from 1965 to 1969.
      How were we able to reduce the rate of tax on corporate profits? Here again, Mr. Mansell's article makes it quite clear. He says:
      "It is true in a crude sense that in the postwar years there has been a steady decline in tax which companies pay as a proportion of their profits…this decline has come about mainly because an ever increasing proportion of corporate profits has been spent on new plant and equipment.…."
      He went on to say that there
      " has been an increase in total fixed capital formation as a proportion of gross corporate income rising from under a quarter to about a third over the period."
      This makes it doubly clear what nonsense it is to talk about corporate tax profits before allowing for depreciation because if we are dealing with more and more depreciation year by year then, naturally, to leave that out would give a wholly distorted effect of the weight of taxation on corporate profits. So let us hear no more about the declining burden of tax on company profits, or even such misleading statements as " the burden is no greater than it was in 1960." Under this Government the taxation of company profits has risen sharply whereas under their predecessors it fell steadily.
      Let me turn to the consequences of this increase in the last four or five years upon investment. If rising corporate taxation were merely part of the general political argument on tax it would be an issue of importance. It achieves a much greater significance if it is looked at as a significant impediment to investment. It cannot be stated too often that the weight of tax on corporate profits enters directly into a company's appraisal of its investment projects. This has always been so and it has become more acute since more and more companies, under pressure from the N.E.D.C. and other sources have turned to using discounted cash flow techniques.
      Under that technique it is the net-back after all taxes and deductions which shows up in the return on a proposed investment. If the taxes go up, the point at which it ceases to be worthwhile to invest goes up, too. Therefore, rising taxation must inevitably lead to lower investment—lower than it would otherwise have been. There are many other
      1266
      factors which influence levels of investment, but taxation is without any doubt among the most significant.
      Let us see what is happening to investment. It is common ground that there has been a mild upswing in investment from about mid-1968 following the rise in export demand occasioned by devaluation. There are no surprises about that. However, the C.B.I. survey published last February showed quite clearly that this upswing is now ending. It said:
      " For the first time since June, 1967, the balance of respondents expect to authorise less investment in plant and machinery in the next 12 months than in the previous 12 months. If the relationship which has generally held between the C.B.I. series and the change in actual investment continues, we can expect the growth of investment to slacken by the end of 1970…."
      The rest of the report goes on to try to analyse some of the reasons for this. In part, the sheer shortage of cash occasioned by the credit squeeze has undoubtedly imposed a barrier to investment. In part—and I am sure that every hon. Member whose business it is from time to time to look at investment projects will agree—the profitability estimates now being thrown up simply do not encourage boards to release funds for investment.
      Rising wages are already squeezing profit margins and prices are rising rapidly in consequence as companies struggle to maintain a reasonable level of return on their capital. Where competition or Government interference through the prices and incomes policy precludes rises, then it is investment which becomes the victim. We all agree that investment in Britain is far too low and has been for too long. It is significantly lower than overseas.
      The Guardian put it well last October when it wrote:
      " Unless industry increases the rate at which it adds to and improves the efficiency of its productive capacity, then before long there will be a relapse in the balance of payments. Consistent and accelerating economic growth provides the only real guarantee of a healthier balance of payments. And there can be no growth without a real increase in the allocation of resources to investment."
      If that was an accurate statement of the position as of 23rd October of last year —and it certainly was—how much more serious is the situation today?
      One way for the Government to break the vicious circle of declining profit

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      margins and declining investment would be for them to cut the rates of corporation tax. This would both increase company liquidity and give a great boost to morale in industry. The Government would, in effect, be saying to industry, " We recognise that it is on faster industrial investment that all our policies depend. By cutting tax on profits we are giving tangible proof not only that we want to encourage more investment, but that we regard higher profits as the best way of getting it."
      Unfortunately, I cannot see hon. Gentlemen opposite ever saying anything like that. The Chancellor, let alone the Chief Secretary, could never bring himself to strike such a note. It is because the next Conservative Government will do just that that I confidently commend the Amendment to the Committee.
      Mr. Barnett: The hon. Gentleman will recall that I asked him a question earlier and that he promised to answer it.
      Mr. Jenkin: I specifically called the hon. Gentleman's attention, by referring to his constituency, to the point in my speech at which I answered that question, but he was so busily engaged in conversation with his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that he did riot hear me.
      Sir Gerald Nabarro: I congratulate my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin)—[Interruptionl]—and I note that the Chancellor of the Exchequer again ostentatiously leaves the Chamber, as he ostentatiously left yesterday, immediately the Chair calls me to speak. Indeed, this is the third occasion on which he has done that. I suppose that he has been called to urgent Cabinet duties.
      I congratulate my hon. Friend the Member for Wanstead and Woodford on a splendid speech, which embraced all the technical aspects of corporation tax and the dreadful implications of the increases in company taxation which have occurred since corporation tax was inaugurated in the Finance Act, 1965.
      All my hon. Friends were unanimous, at the onset of this form of taxation, in pressing for a rate not higher than 35 per cent. which was, in our view, con-
      1268
      stant with the required liquidity of companies of all kinds to which corporation tax would apply. If the correct rate was 35 per cent. then, we deem that the correct rate today should certainly not be higher than 40 per cent. In seeking a reduction to 42½ per cent., the Amendment is a token to signify that we regard the rates of corporation tax as being excessive and how, in present industrial and commercial circumstances, it is essential that they be reduced.
      I approach my duties this afternoon from a different angle from which my hon. Friend approached his, admirable though his approach was in every way. I wish, first, to consider the yield of this form of taxation, so far as we are aware, since its inauguration. In 1968–69, corporation tax yielded £1,346 million. In 1969–70, it yielded £1,687 million. In 1970–71, it is estimated that it will yield £1,900 million. It is difficult, with changing rates of corporation tax—the original rate was 40 per cent., which was increased to 42½ per cent., and last year further increased to 45 per cent.—to know when the increased rate will be translated, in monetary terms, to increased revenue, due to the great variation there is in the calendar span of the chargeable accounting periods of companies of all kinds.
      It is, therefore, difficult to relate an increase in the charge of corporation tax to the revenue yield year with year. The fact is, however, that when corporation tax was 40 per cent. the yield was estimated to be £1,346 million. Now that it is 45 per cent. the yield is thought to be £1,900 million. Thus, an increase of one-eighth in the tax, if applied pro rata to the earlier figure of £1,346 million, would have given a yield of corporation tax of the order of £1,545 million. But it is not £1,545 million. It is £1,900 million. This suggests that the yield of the tax from company profits has increased, apart from the advance in the rate of corporation tax, by £355 million in a short period of two years.
      This suggests to me that extracted from the liquidity—from gross profits, if one prefers it that way—or diminished from the cash flow of companies is an additional £355 million on account of the increase in corporation tax and the huge enlargement of the rate from this form of taxation, which is today very much

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      bigger than was originally anticipated by the Treasury.
      My hon. Friend the Member for Wan-stead and Woodford applied himself largely to the impact of these excessive rates of corporation tax on investment in the private sector of industry. He made only a passing reference—not because he attaches less importance to it than I do, but because he could not give an encyclopaedia of references to all aspects of corporation tax in a short speech—to the effect of the rates of this form of taxation on prices, and he said that prices were rising very rapidly.
      It is this aspect of the problem to which I particularly wish to refer. We had a controversy just over an hour ago with the Minister of Agriculture, Fisheries and Food about the rise which has occurred in food prices. This is the gravest aspect of inflation today. I just do not believe the Minister when he says that in 1969 food prices rose by only 5½ per cent., or by just over 1s. in the £. I do not believe him.
      Mr. John Nott: Nor does any woman.
      Sir G. Nabarro: I will willingly give way to my hon. Friend if he wishes to intervene.
      Mr. Nott: I was mumbling words to the effect that I support my hon. Friend. I am, of course, not a housewife, but I occasionally go into shops. It is easy to see that it is totally wrong to say that food prices have increased by only 5½ per cent.
      Sir G. Nabarro: I am grateful for that support.
      Sir Ian Orr-Ewing rose—
      Sir G. Nabarro: I willingly give way to my hon. Friend.
      Sir Ian Orr-Ewing: There cannot be an hon. Member who has not been beset by his wife to raise the housekeeping money by certainly more than 5½ per cent. in the last year as a result of increased food prices.
      Sir D. Glover rose—
      Sir G. Nabarro: Would my hon. Friend like to comment on this aspect, too?
      Sir D. Glover: My hon. Friend is, perhaps, not aware that I am quite an expert on this subject. My wife was not well for about 12 months and I had to do the household shopping. I know from practical experience by how much goods have increased in price in the last year, and they have increased by a jolly sight more than 5½ per cent.
      Sir G. Nabarro: I am grateful to my hon. Friend the Member for Ormskirk. Does my hon. Friend the Member for Salisbury (Mr. Michael Hamilton) wish to intervene?
      The Chairman: Order. I think that we must limit interventions and have some speech as well as interventions.
      Sir G. Nabarro: I am sorry. I will give way to my hon. Friend the Member for Salisbury and then—
      The Chairman: Order. We cannot have three interventions in a row.
      Mr. Michael Hamilton rose—
      The Chairman: Order. I have ruled and the hon. Member for Salisbury (Mr. Michael Hamilton) will have to wait.
      Sir G. Nabarro: I am sorry, Mr. Irving, but I was led away by the exuberance of my hon. Friends. The Member for St. Ives (Mr. Nott) in Cornwall, my hon. Friend the Member for Hendon, North (Sir Ian Orr-Ewing), my hon. Friend the Member for Ormskirk (Sir D. Glover), in Lancashire, and my hon. Friend the Member for Salisbury, in Wiltshire—all parts of the United Kingdom—are at one with Worcestershire, South in finding that food prices are rising precipitately and that 5½; per cent. inflation of food prices in 1969 announced by the Minister of Agriculture, Fisheries and Food in his statement earlier this afternoon was a gross understatement. May I give way to my hon. Friend now?
      Mr. Michael Hamilton: I hope that my hon. Friend will point out that currently food prices are now rising by 12·6 per cent.
      Sir G. Nabarro: I am grateful for my hon. Friend's prompting and support.
      My case is that the projection of food prices upwards is caused very largely by

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      the fact that wholesale and retail distributors of food work on tiny margins of profit. When corporation tax is levelled at the excessive rate of 45 per cent. in order to maintain reasonable profits from their enterprises it is quite imperative that food distributors raise their general level of prices for the increased corporation tax is an essential and direct item of cost.
      It is costed into the price of the food in the same way as the tin plate referred to by an hon. Member opposite at Question Time is included in the price of tinned food or any other ingredient in the business. Tax is an essential element in cost, especially corporation tax. Whereas the Tories maintained company taxation at a much lower and generally declining level of incidence throughout their period of office, a declining level of application for company taxation which had the effect of stabilising food prices and much less inflationary impact on food prices than is the case today. I believe that the huge increase we have suffered in the last year or two is very largeley due to the Labour Government's policy of increasing year by year the amount of direct company taxation.
      Of course, there can never be direct proof or otherwise of this statement; it is a matter of opinion, but every businessman is with me on this. I do not expect Labour accountants to agree with me. The benches opposite are strewn with chartered accountants who have joined the Labour Party. They are really neither business nor professional men. They have never earned a jot nor tittle in trade and commerce. I prefer real Tory capitalists.
      Mr. Richard Wainwright: I am sure that the hon. Member, in the midst of his exuberance—
      Sir G. Nabarro: Not exuberance, enthusiasm.
      Mr. Wainwright: On reflection, the hon. Member will agree that one of the great drawbacks in this House is the appalling shortage of chartered accountants on either side.
      Sir G. Nabarro: I do not think that I can reply to that assertion. I do not wish to be rude to the right hon. Member for Gloucester (Mr. Diamond) this afternoon,
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      as he has lost the Chancellor's aid and support.
      My attention was riveted on this matter yesterday by the front page of the Daily Mail, but the Daily Mail missed the point. It quoted the effects of an important conference and confrontation with the Minister of Agriculture, Fisheries and Food on food prices, but did not mention the impact of taxation. I wonder why that was left out. The newspaper reported:
      " Grocers Warn of Big Rise in Food Prices."
      Food prices are bound to increase dramatically soon, grocers warned yesterday. Higher wages and transport costs have already eroded recent price rises.… The grocers are finding it almost impossible to hold back increases for as long as 28 days in order to give the early warning of 28 days to the Minister that he is trying to insist on, so fast are costs increasing"
      I suggest to the right hon. Member for Gloucester that this rate of increase in food prices is not dissociated from the fact that as between 1969–70 when the yield of corporation tax over the whole field of companies was £1,687 million and has advanced to £1,900 million in 1970–71, an advance of no less than £213 million in a single year, that the advance in these food prices is directly related to that huge increase in the collection of corporation tax, a large part of which goes on to food prices.
      4.45 p.m.
      I go further. The whole of the £213 million is put on the retail prices by manufacturers, wholesalers, retailers, distributors and others to try to maintain their profit margins. Does the Treasury think that businesses can absorb—repeat, absorb—the selective employment tax or the increased duty on petrol or oil for distribution or the increased corporation tax and all these other vast increases in direct and indirect taxes to which I referred on Second Reading of the Bill? Of course they cannot. They go straight on to prices and the inflation we suffer today in food prices and elsewhere is directly related to the rise in corporation tax of 2½ per cent. last year, 2½ per cent. the year before, and the fact that the Labour Government had deliberately escalated the corporation tax from 40 per cent. two years ago. [Interruption]
      Is the hon. Member for Heywood and Royton (Mr. Barnett) mumbling? I shall happily give way if he wishes to

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      intervene so that he may stop mumbling. This big corporation tax is the principal contributory cause of rising prices. That is the complement of what my hon. Friend the Member for Wanstead and Woodford said about the decline in investment by private industry and the sad omens for the future.
      The Chief Secretary to the Treasury (Mr. John Diamond): I have followed the hon. Member's speech with great care. I am not asking him anything about his argument, but, purely on a matter of fact, do I understand him to say that in the companies of which he has first-hand knowledge and responsibility it is now their practice, when costing the goods they put on the market, to include in the costing, just as much as the metal—he referred to tin containers —corporation tax at its then current rate?
      Sir G. Nabarro: First, it is the practice of all companies to include in their costings the incidence of direct taxation and all indirect taxation when calculating the net return or earning capacity of their investments as my hon. Friend the Member for Wanstead and Woodford said. Secondly, in calculating price levels they include taxation provision in their margins of profit. Both are equally applicable and the higher the corporation tax goes then the higher retail prices will rise. The higher the selective employment tax on food, transport and distribution goes, the higher the retail prices will go.
      Mr. Diamond: I am most grateful to the hon. Gentleman for giving us that information. I was not asking him about that. I was asking him to be good enough to give me first-hand evidence—I have no right to ask him to do it; if he wishes to do it, I shall be grateful—of what happens in the company where he is responsible and has first-hand knowledge.
      Sir G. Nabarro: All companies take into account in their costings the incidence of direct taxation. I see the hon. Member for Heywood and Royton indicating dissent. He has never been the managing director of a company and has no knowledge of these matters other than auditing the accounts of companies. He has no right to criticise.
      Mr. Sheldon: Nonsense.
      Sir G. Nabarro: Did the hon. Member for Heywood and Royton say " Nonsense "?
      Mr. Barnett: My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said " Nonsense ", but I would have said it.
      Sir G. Nabarro: Both the dreadful twins say " Nonsense ". I aver—I have no doubt that I shall be supported by every hon. Member on this side—that every company that costs its products properly will take fully into account the incidence of direct taxation.
      The Financial Secretary to the Treasury (Mr. Dick Taverne): No.
      Sir G. Nabarro: If they were not to do so, the inference of the Financial Secretary's reply would be that the greater the taxation on the profits of a company the less the margin of net profit is to become. With the degree of increase in taxation levied by the Labour Government profits would by now have disappeared altogether had companies not increased their profits to allow for additional taxation, year by year.
      I hope that the hon. and learned Gentleman follows me. [Laughter] The hon. and learned Member may laugh in scorn, but he, again, is one of those who have never run a whelk stall in his life. He has never run anything at a profit. He is merely a lawyer who picks on capitalists for fees. He picks on capitalists' earnings in the form of fees. [An HON. MEMBER: " Battens."] " Battens " is the word. The hon. and learned Gentleman is one of these legal parasites. Now I am being led from my major argument.
      Sir D. Glover: Leech, bloodsucker.
      Sir G. Nabarro: The plain fact of the matter is that all direct taxation is inflationary; and the higher corporation tax on the profits of companies is forced by the Labour Government, the greater will be the increase in wholesale and retail prices. The Government have themselves to blame most largely for the degree of inflation which we are suffering today.
      As the Prime Minister wants to fight the forthcoming election on the record of the Labour Government, I will happily join issue with him on their record on

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      taxation, their record on inflation, and their record on the cost of living; for corporation tax is a major culprit—one of the causes of these huge increases in prices. On that, the Labour Government will founder.
      Mr. Sheldon: The hon. Member for Worcestershire, South (Sir G. Nabarro) gave us his usual entertaining quarter of an hour.
      Sir G. Nabarro: Not " entertaining ".
      Mr. Sheldon: It was very entertaining. I am paying the hon. Gentleman a compliment, and I hope that he will take my remark in that way.
      I must take up the hon. Gentleman's point about firms including the effect of corporation tax in their costing, because it may well be that there are some misguided people who, on reading an account of this debate, will feel that they had got the matter wrong before the hon. Gentleman's intervention.
      I am sure that the hon. Gentleman knows that what happens is that at the end of the day what determines the price is the competitive position. Although it is undoubtedly true that many firms are not in such a competitive position, I was assuming that the hon. Gentleman was directing his remarks to those that were particularly so, because he illustrated at some length the case of the supermarkets and the groceries.
      It is here that we have had very high levels of competition indeed. It is a travesty of the facts to assume that these people go round charging what they think will leave them with the desired net profit after they have taken account of corporation tax and other direct taxes. Being supremely competitive, they try to work to the finest possible margins. The taxation they have to pay is the result of their profitability.
      Sir D. Glover: The hon. Gentleman is not disproving the argument advanced by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro). The hon. Gentleman says that traders work to the finest possible margin, but in arriving at those finest possible margins they take into account the on costs which they must incur, which include taxation.
      Mr. Sheldon: We are talking about " costs ". When traders work out their costs, because they are working in an extremely competitive position they try to add up all the various costs they incur in producing their articles; and their profit is a result of that. Out of that profit comes the taxation.
      Mr. David Howell: Is not the hon. Gentleman confusing pricing policy and investment policy? When it comes to project evaluation, the level of taxation is taken into account. That is done in private industry, although it seems that the Government's project analysis and evaluation is rather less effective.
      Mr. Sheldon: I thought that it was clear that I was referring to pricing policy. When I was giving illustrations of what goes on in supermarkets, I was giving the pricing policy and the way in which prices are established. When I pointed to the case of uncompetitive industries, I conceded that the hon. Member for Worcestershire, South might have some such point. Then the hon. Gentleman referred particularly to supermarkets, where competition, although not as great as it used to be, is still very large; and in such pricing policy direct taxation has little, if any, effect.
      Sir G. Nabarro: I was not referring only, or even notably, to supermarkets. I was trying to demonstrate that the three branches of taxation—that is, selective employment first, purchase tax second, and corporation tax third—all have a dynamic bearing on the price of food and that the increased cost of food is directly a result of the increase in those three forms of taxation brought about by a Labour Government.
      Mr. Sheldon: When the hon. Gentleman says " the cost of food ", he means " the price of food ". We are talking about prices. The effect of direct taxation upon prices is insignificant. Of course, there will be some remote connection, but in pricing policy the connection is very little, if any.
      I will not go into the question of other taxes. We are not discussing those other taxes. The hon. Gentleman should bring that question up at the suitable time.
      The effect of corporation tax on prices in a supermarket is as far remote as anything can be found in analysing the

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      various components of the prices that are charged.
      Mr. Nott: Will the hon. Gentleman congratulate my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) on the originality of his accounting procedures?
      Mr. Sheldon: I distinctly noticed that when the hon. Member for Worcestershire, South turned round to survey the benches behind him in search of support, as he tried to find support on another matter, on this matter he signally failed to get any support save, alas, for that of the hon. Member for Ormskirk (Sir D. Glover).
      Sir G. Nabarro: The hon. Gentleman is being rather unkind. You, Mr. Irving, prevented further hon. Members on these benches from rising to support me.
      Mr. Sheldon: You, Mr. Irving, prevented the hon. Gentleman from getting support, not on the question of pricing policy, but on the cost of living. The hon. Gentleman had no support on the question of the pricing policy. It is obvious that the hon. Gentleman has no support in this matter, because this Committee is usually fairly well-informed. The hon. Gentleman is the sole member of the Committee to have a lapse of judgment on this occasion.
      The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) sought to show that Britain had a higher level of tax on companies than other comparable countries.
      Mr. Patrick Jenkin: A higher level of tax on corporate profits.
      Mr. Sheldon: I accept the hon. Gentleman's qualification, because clearly he is taking into account the fact that, although we may have a high level of corporate taxation, the amount that we give back to industry makes the total burden upon industry much less. In view of the very large sums given by way of investment grants as well as other aids to industry, the net cost to industry of corporation tax is much less than what might otherwise appear to be the case from a study of the Financial Statement.
      One can argue about the way in which this is done; whether it is right that we should discriminate; whether having taken money in one form we should give
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      it back in another; but to argue that the burden on industry is great is a misconception. One can argue about the method, but not about the burden.
      The hon. Member for Wanstead and Woodford said that Schedule F was a tax on companies. I differ from him on this—
      5.0 p.m.
      Mr. Patrick Jenkin: If the hon. Gentleman contests what I said, he must get it right. It is a tax on company profits. Clearly, it is not a tax on companies. That is what I said, and if the hon. Gentleman disagrees perhaps he will spell out why.
      Mr. Sheldon: Of course it is a tax on company profits. I see no real distinction on which I particularly wish to dwell. I am prepared to accept the hon. Gentleman's interpretation, but he must understand that it is a tax on company profits which are utilised in a specific way, and that is not quite the same thing. If a company decides to do certain things with its profits, it will be subject to certain taxes. If it decides to do otherwise, it will not be so subject, and it is this which is important, because the company, as an entity, can go on expanding in a way which will eventually yield large profits if it decides that for a certain time it will reduce the levels of distributed profits.
      One of the problems has arisen because we have not had the expansion that we expected. I am sure that in future years we can expect that expansion as a result of the Government's policies. Once we get into this level of high, sustained growth I expect that the distribution policies which have been set in a mould because of the unadventurous rate of growth that we have had may be reassessed, as will be the policy on investment, and then there will be an opportunity to survey again the relationship between Schedule F and the rates of income tax, corporation tax and other matters. At the moment, we are set in a mould, and that mould may not be with us for ever.
      Mr. Nott: Schedule F affects the directly distributed, and not retained, profits. A private company which is growing fast cannot finance its expansion purely out of retained profits, and

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      Schedule F is a serious and damaging tax on the ability of fast growing companies to raise capital.
      Mr. Sheldon: I find that argument difficult to understand. The hon. Gentleman is saying that a company trying desperately to obtain money should make great distributions.
      Mr. Patrick Jenkin: My hon. Friend the Member for St. Ives (Mr. Nott) is right. How does the hon. Gentleman think that a company will ever be able to raise capital in the market unless it is prepared to offer investors a reasonable return on their money?
      Mr. Sheldon: Not when it is expanding at its greatest rate. Perhaps the hon. Gentleman will consider some of the highest fliers in the United States. One such company—I shall not name it, but I am prepared to do so if requested—grew at an enormous rate. For nine years it did not make a distribution, and the value of the stock rose from 1 dollar to 130 dollars because of a sophisticated investing public who knew what the company was about. The company was at the forefront of modern technology, and people knew that it would yield great profits in the years to come.
      In this country we have an over-obsession with the systems of the past. We fail to recognise that companies are growing at such a rate that the old dogmas, the old methods of learning by rote, do not apply in some of the most interesting situations that we are facing today.
      Mr. Nott: To say that people invested in that American company for nine years is irrelevant. The hon. Gentleman must mean that they were buying shares from those who were selling them. If the company raised new capital, the point is different. This American company clearly did not raise new capital.
      Mr. Sheldon: It did, based on an understanding of the company's prospects, and an acceptance by the banking houses of the assessment by those who knew what it was all about. What appals me is that we do not have this sophisticated understanding of how companies need to operate, and the value of operating in a particular way.
      Mr. Peter Hordern: I do not think that the hon. Gentleman appreciates how the stock market works. The price of this American company increased not because its retained earnings improved, but because of the expectation of shareholders of a higher pay out eventually.
      Mr. Sheldon: That is the whole burden of my argument. I should not have thought that that intervention was necessary. The shareholders were sophisticated enough to understand the technology in which the company was involved, and its prospects. As a result money, was pouring in to such an extent that the company could expand without making a distribution.
      Sir Ian Orr-Ewing: The hon. Gentleman has not named the company; perhaps he would. I cannot help feeling that it must have been a company which made a technological break-through in some area, and, therefore, was not subject to the normal price competition and could finance itself on expectations. That is the case with a new invention, but it is not true when there is the price mechanism to which the hon. Gentleman referred earlier.
      Mr. Sheldon: It is Recognition Equipment, and it is at the forefront of technological progress. There are a number of competitors now, and there were then.
      Nevertheless, the sophistication was such that people were able to make an assessment which was of benefit to the firm, to the industry, and to themselves. It is this kind of sophisticated approach which we seem to be lacking. We seem to be lacking in the approach which enables a firm with good ideas to be financed profitably and properly.
      Mr. Patrick Jenkin: The hon. Gentleman is deluding himself if he thinks that that wholly exceptional case represents the sort of pattern which one could expect to operate across industry generally. We have that sort of case here, but it is a rare bird.
      Mr. Sheldon: Of course, I am not saying that, in general, companies can go for years without making a distribution. I have cited an extreme case. There are many examples between that and the stagnant run-down company which the

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      hon. Member for Worcestershire, South was detailing. There are many modern progressive industries which could be helped by a different approach from that which is now taken. That is my only point, and I hope that as a result of the various interventions I have been able to make clear what I am trying to say.
      Mr. Peter Bessell: The hon. Gentleman has been extremely generous in giving way, and I thank him for doing so again. I want to follow his argument. Is he really suggesting that the American system of marketing products in advance of production by floating shares on the Stock Exchange and obtaining large sums of money, very often on nothing more than ideas, it is a sound method of business? Does he not agree that it is far better to adopt the system used in this country, which is based on a proven record before money is obtained? Is not that better than the American system which the hon. Gentleman seems to be advocating?
      Mr. Sheldon: If the hon. Gentleman had been listening he would have realised that I was not advocating a general adoption of the situation relating to this American company. It was obviously an exceptional company. I detailed it to show the kind of pattern which can emerge between this company at one extreme, and companies such as that mentioned by the hon. Member for Worcestershire, South at the other.
      I was trying to show that between the two there is a whole spectrum of industries which the hon. Gentleman has not considered. There is a whole range of experience, ways of doing business, and of conducting operations from which we can learn. This run-down, shattered old industry which the hon. Member for Worcestershire, South detailed is by no means the kind of typical industry which we should be considering.
      Sir G. Nabarro: I did not, from the beginning of my speech to the end, mention a run-down, shattered, or old industry. The whole of my speech was directed to the simple, perfectly honest and straightforward proposition that the whole of the increase in corporation tax finds its way into inflationary increases in wholesale and retail prices, and that is an unexceptionable doctrine accepted by all good businessmen.
      Mr. Sheldon: It was not accepted by the hon. Gentleman's hon. Friends. He must remember that the firms operating in that kind of way well qualify for the description of run-down, shattered old firms. A firm operating in that peculiar way in its levels of costings of raw materials, labour and taxation, and doing its pricing in that way is heading rapidly towards that end if it is not run down already.
      I now turn my attention to some other aspects of the introduction of corporation tax about five years ago. I was one of those, and I think that they included a number of hon. Gentlemen opposite, who welcomed this as a broadening of the base. One of the unfortunate aspects is that it is of little value for economic management. We cannot expect perfection from every tax, but we must be aware of its limitations. It cannot be used for economic management largely because of the time lag. By the time the corporation tax becomes due the economic situation for which any change in the rate of the tax was devised has tended to change considerably. So it does not have the direct effect on the economy that we might wish and which is obtainable from other forms of taxation.
      The importance of the tax is that we have increased a yield under the profit tax system of 5·8 per cent. of total tax revenue to a level of 10¾ per cent. raised by corporation tax; the figures were 5·8 per cent. in 1965 under profits tax and 10¾ per cent. from corporation tax in 1969. Those figures are not directly comparable, but they give us some indication. I am grateful for the table produced in reply to the hon. Member for Worcestershire, South, which I have used.
      We have seen that the tax has produced a large sum of money—£1,900 million—with very little political disadvantage. [Laughter] That is important, because this is a political place and to be able to make the changes in that way can sometimes be the only way they can be made.
      What we must consider against that is the cost to industry in efficiency, modernisation or lack of it, and so on. My own view is that the effect of corporation tax upon incentives is very small and probably insignificant. This is very important, because to say that we had a

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      level of taxation that struck at the very heart of the industry of this country and its need to modernise and expand would be one of the most serious charges that could be levelled against any tax.
      But I do not see it like that. If I were given the choice of how I would like to see corporation tax move up or down in relation to other taxes, if there is a relationship between income tax and corporation tax, I would like to see a rather greater burden on corporation tax and a rather smaller one on income tax. We could obtain money to reduce income tax in other ways, but I believe that those managing industries would be more susceptible to reductions in income tax and increases in corporation tax.
      Therefore, what we are left with is the possible disincentive effect of corporation tax upon investment. Clearly, this is a matter of some concern, if only for the cash flow. But we have seen that in regard to cash flow the tax is by no means as burdensome because of the large numbers of aids the Government give in investment grants and other forms of assistance.
      Sir D. Glover: The hon. Gentleman has spoken about these things balancing. He said that the Government give money back. There is a great fallacy in what the hon. Gentleman says, because the tax is collected generally, over the whole of industry, and the benefits go back in a very specialised direction. It is just as big a burden on 75 per cent. of industry. Therefore, there is not very much in the hon. Gentleman's argument.
      5.15 p.m.
      Mr. Sheldon: We can argue that the way in which the money goes back to industry is not as it should be, or that industry should be left freely to decide. These are respectable arguments, but I have come to very different conclusions. I believe that there are certain matters on which central Government can take a wider, more comprehensive view. Other countries, like Japan, France and possibly even Germany, are coming to that kind of conclusions. The hostility between Government and industry in this country is almost unique. It is special to the United States and Britain, and is found in hardly any other countries,
      1284
      mainly because industries there derive from Government.
      There is not the bitter hostility between Government and industry that we have, as industry looks upon Government as an outside body that tries to regulate it rather than a body that tries to assist it. Because of that basic difference in attitude, we do not have that relationship which I hope will develop over the years as a consequence of my right hon. Friend's policies in taxation and other matters.
      It can be argued that investment grants and the other aids to industry are not being channelled in the best possible way. We all have our views on the precise way in which these sums of money should be given to industry for purposes that the Government can understand in certain different ways—not necessarily better—from industry. As a result, I do not consider the burden to be great. I consider the cost of collection to be very reasonable, and I look forward very much to seeing corporation tax retaining its important place in the taxation system.
      Sir Ian Orr-Ewing: We are discussing a very important part of a Budget which increased taxation revenue by £1,200 million. It would have increased it by £200 million more if there had not been a slight cutback.
      I support the Amendment to cut corporation tax from 45 per cent. to 42½nt. The tax has a substantial effect on investment. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) touched on this, but he did not develop the matter in depth, and I hope to go rather further than he did. The Chancellor recognised early in his Budget speech just how important investment was to the country. He said:
      " The second requirement is an improved and sustained growth of industrial investment."
      Later, he said:
      " We cannot put this right overnight, but it must be an essential aim of economic policy to increase manufacturing investment…."— [OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1224.]
      This is not being done.
      The Financial Secretary took rather a complacent attitude the next day. He said:
      " What I can tell the House, and what is universally accepted, is that the rate of increase in manufacturing investment in 1969 over 1968

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      was 11 per cent., which is a very healthy rate of increase."—[OFFICIAL REPORT, 15th April, 1970; Vol. 799, c. 1411.]
      If he had been speaking about such a percentage increase in real terms, that would have been healthy, but he was not. In real terms it amounts to 5·7 per cent. Moreover, when we look at the record over the past four years of the expansion of industrial investment we see that our rate is very disappointing. I compare the percentage with the figures given in Table 13 of the White Paper, " Preliminary Estimates of National Income and Balance of Payments 1964 to 1969."
      It is right to point out here that one plans industrial investment at least a year ahead. All companies produce their capital budgets at least a year in advance, so that figures for 1965 which I shall quote were planned and put into operation in 1964. It is, therefore, realistic to quote the 1965 capital investment as being for the last year of Conservative policy. In 1965, the capital expenditure was £1,309 million. By 1969, the latest year for which figures are available, this had expanded to £1,428 million. Thus, in four years, capital investment in real terms had expanded by 10 per cent., or only 2½per cent. per annum. This is not enough for a competitive industrial nation dependent on advanced products for its livelihood.
      I will give the figures for plant and machinery. In 1965, a total of £2,226 million was spent on these, and in 1969 this had risen to £2,401 million—an expansion of 9 per cent. in four years, or 2¼ per cent. per annum. A lot of that machinery has to come from West Germany and Switzerland in the form of machine tools. [An HON. MEMBER: " Why?"] Because in Switzerland, for example, they have great expertise, and have had for a long time, in the small machinery which the electronics industries use. We need them for solid state transistors technology and integrated circuits. This machinery was developed for the watch industry, in which Switzerland has been pre-eminent. I agree that it is a shame that we have to get our machinery from abroad but one must buy in the best market. Devaluation has meant that more British £s have had to be spent so that the actual investment in plant and machinery is less than the figures I have given.
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      I want to compare our performance with those in Western Europe. I shall use the figures of what is being spent on manufacturing investment as percentages of gross national product. The figures are for 1967, the last year for which they are available. In the United Kingdom, it was 3·9 per cent., a reduction from 1965; in France it was 5·6 per cent. and in West Germany, 5·8 per cent. The Prime Minister used to love to quote the case of Sweden when he was Leader of the Opposition—a position which he will shortly be occupying again. The percentage in Sweden was 5·2 per cent. But Sweden has had a Socialist Government for a long time and one has always to pay a price for that in the amount of cash available for investment. Sweden is low in the league table. The United Kingdom's figure was 3·9 per cent. and the figures of our West European competitors considerably higher. This is disturbing to any Government. It certainly disturbs my right hon. Friends who will soon take over responsibility.
      The Board of Trade was over-optimistic in the last analysis it published on 21st January. It said, talking of manufacturing investment, that it would rise about 10 per cent. in real terms between 1969 and 1970. This is a gross and optimistic exaggeration of the position. The C.B.I. took its survey rather later and published its analysis on 19th February. It noticed that there had been a considerable turn round. The Board of Trade survey was conducted in November and December. The C.B.I. survey was conducted later. It said:
      " There is no marked change since October in the general degree of optimism about the business situation. Orders and output are on fairly buoyant trends, but two disturbing features of the present Survey are the replies to the questions on investment on the one hand and on costs and prices on the other.
      For the first time since June 1967 the balance of respondents expect to authorise less investment in plant and machinery in the next twelve months than in the previous twelve months."
      That is a more realistic picture. I have grown up in the light engineering industry and among my contacts in it I find considerable uncertainty about the future. All of us are being forced to cut our programmes by shortage of cash and the continuing squeeze which has gone on for a long time.

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      I want to quote the case of a large company with 15,000 employees in electronics to give the measure of just how much money the Government are siphoning off from industry and which inevitably forces industry to cut back on research and development and investment programmes because the money just is not there. I give a list of some of these levies: employees P.A.Y.E., £2 million a year; purchase tax £0·7 million; national insurance contributions, £1·2 million; graduated pensions £400,000; selective employment tax not recovered £200,000; rates, £0·4 million; import duties £1 million; corporation tax—almost the largest in the list—£1·6 million; import duty on finished goods, £1·9 million—exceptionally high that year because the firm was bringing in colour cathode ray tubes for television sets. The import deposits scheme cost the firm £1·2 million. The whole amounted to £9·7 million siphoned off by the Government. On a per capita basis, for every person employed by the firm, £600 per annum is being siphoned away in different forms of levy by the Government.
      Mr. George Brown: I notice that the hon. Gentleman includes a lot of interesting things, even the rates. Can he tell me what is the capital employed in that anonymous business and what the return on that capital was at the end of that year?
      Sir Ian Orr-Ewing: I have not those figures. I can give the right hon. Gentleman the total sales for 1968, which were £60 million. The Government siphoned off £10 million, and that is relevant.
      Mr. Brown: The hon. Gentleman must recognise that, at the end of the day, the interesting factor is how much capital is employed and what return the firm is getting on it, even after, to use his phrase, these things have been siphoned off. Can he tell me the return? Was it 6 per cent., 7 per cent., 10 per cent., 15 per cent. or 25 per cent.?
      Sir Ian Orr-Ewing: The company is Mullards, which is part of the Phillips Group, and I have not its permission to quote the figure, but no doubt the right hon. Gentleman can look it up in the Library. I know of no company in this highly competitive industry which
      1288
      is making a post tax 10 per cent. on capital employed. If any company is doing so, it is doing very well, because competition in the industry is severe and sophisticated.
      I come back to the necessary cutback as a result of the Government's policies. I cannot believe that this is a good thing. I think that it is particularly bad because the engineering industry is responsible for so much of our exports, as the right hon. Gentleman recognises. It is there that we see the profits turning down and getting much slimmer while all the time wages and costs go up precipitately. One only has to read the Sunday newspapers to see the turndown in profit margins and to look at the shop advertisements to realise that costs are going up. Massive wage settlements are going to make these profit margins even slimmer.
      How do we compare in taxation policy with other countries? One thing is clear. We do not give any help to small companies. We should be more generous to them because they are often the innovators. The Holloman Report in the United States made it clear that new inventions and innovations often come from small and medium sized companies much more quickly than from big companies.
      Mr. George Brown indicated dissent
      Sir Ian Orr-Ewing: The right hon. Gentleman shakes his head. Does he contradict the Holloman Report?
      Mr. Brown: It really is not true of large parts of British industry—for example. textiles, of which I know something. To argue that innovations come from small companies is to stand all our knowledge on its head. It is not the case.
      5.30 p.m.
      Sir Ian Orr-Ewing: That also applies to the chemical industry, but I said that I was concentrating on the engineering industry, which is responsible for so much of our exports. It is certainly true in engineering that much of the innovation comes from small companies, and this has been borne out by the many who have surveyed the position. We give no sort of incentive to the small company. The Labour Government have done exactly the opposite with their close company legislation.

      1289
      In the United States, for instance, corporation tax is paid at only 22 per cent. on the first 25,000 dollars of profits and at 26 per cent. above that figure. Then there is the Sub-Chapter S arrangement in the United States whereby young engineers, young inventors, can form a partnership with a rich man who wants to invest his money. Any losses can be set against the entrepreneur's income over five years. This is another way of getting partnerships going and getting small companies going in specialist areas, companies which may later become worth while, " go public " and add to the prosperity of the nation at large.
      In Japan, 28 per cent. is paid on the first £20,000–3 million yen. Above that, the rate is 35 per cent. In Germany, on undistributed profits the rate on the first £1,000 is only 39 per cent. and over £5,000 profits a year it is only 49 per cent. In Germany, as we all recognise and praise, for this helps to create the market, one pays only 26½ per cent. on distributed profits compared with 42½ per cent. in this country. In all these areas not only is lower taxation paid, but there is greater incentive for small companies to grow into something worth while.
      For these reasons, I hope that the Committee will support the Amendment and seek to reduce the burden of taxation on the companies which are the wealth creators for the nation.
      Mr. Bessell: Before coming to my main comments on the Amendment, I should like to refer to the argument advanced by the hon. Member for Worcestershire, South (Sir G. Nabarro).
      I realise that, in the considerable debate which took place across the Floor of the Committee, it appeared that the hon. Member for Worcestershire, South was advancing a rather unusual form of accountancy. Nevertheless, he has experience of the management of companies, as I have, and there was a point in his argument which appeared to have been missed by both sides of the Committee.
      If a company or corporate body is about to produce an article for sale, it does not cost it out in the sense that it says that this is the amount of the cost of the tin, this is the amount of the cost of the components, this is the amount
      1290
      of the cost of the labour, this is the selling margin, and this is to account for corporation tax, adding corporation tax to its direct costs, as the hon. Member suggested. I agree with the Chief Secretary that that is not what is done.
      On the other hand, the object of running a company is to produce a profit for those who have invested in it. In reaching a net as opposed to a gross profit, it is necessary to take account not only of the cost of raw materials, the cost of components, the cost of labour and the cost of overheads, but, for example, selective employment tax and, if one is involved in direct transportation, the cost of petrol, which also means a tax, and perhaps purchase tax, although that is rather exceptional. In arriving at a net profit, one takes into account the cost in terms of corporation tax, certainly if one is arriving at a dividend figure.
      Therefore, the hon. Member for Worcestershire, South was advancing an argument not quite as remote as some hon. Members appeared to think. Perhaps he did not express himself as clearly as he might, but he was pointing to a crucial point which certainly carries weight with me, and I say that as one who, as has the hon. Member for Worcestershire, South, has experience of running a business direct.
      There is a feature of the Amendment which I should like to make clear. It is that the Amendment which appears in the names of the right hon. Member for Enfield, West (Mr. lain Macleod) and his hon. Friends is identical with that tabled in the names of my right hon. Friend the Member for Devon, North (Mr. Thorpe), the Leader of the Liberal Party, and my hon. Friends and for convenience, quite correctly, the Table Office put the two together. I should not wish it to be thought that there had not been separate, yet identical, thinking.
      Looking back over the attitude of my party towards corporation tax, I found that I made some reference to this subject in my maiden speech on 12th November, 1964, when we were in Committee on the emergency Budget. I look back on it with some nostalgia, for, as some hon. Members are aware, I am not seeking reelection at the forthcoming General Election. Not surprisingly, perhaps, I looked to see what I had said on the

      1291
      subject of corporation tax when I first entered the House. I said:
      " A curious feature of the Budget proposals is the fact that the Chancellor has announced measures which will form part of the annual Budget proposals next April."
      That would be 1965
      " He has given advance notice of a capital gains tax and a corporation tax which, in principle, we welcome—".—[OFFICIAL REPORT, 12th November, 1964; Vol. 701, c. 1231.]
      The Liberal Party has always maintained that, within the framework of our taxation system, a corporation tax is essential.
      As the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has done, I looked through our lengthy debates which we had in 1965. I recall supporting the hon. Member and his hon. Friends in the proposal that the initial tax should be at the 35 per cent. level. Having looked at that and the answers then given by the Government, I thought it wise to contrast the situation in 1965 with the current situation. I do not think that I can do better than quote from the Chancellor of the Exchequer making his Budget Statement on 14th April. He said:
      " Our policies on taxation and public expenditure have transformed the accounts of the public sector as a whole. A borrowing requirement of £1,956 million in the financial year 1967–68 was reduced to one of £450 million in 1968–69 and then replaced by a surplus of about £600 million in the financial year just ended. There has thus been a turn-round in the public sector accounts of about £2,550 million in these two years."
      I accept that the Chancellor would have been a very bad politician if he had not used his Budget speech as an opportunity to congratulate himself and the Government on the reversal of fortunes in Britain's financial position. But, having said that—[Interruption] Invisibles are part of it, but we have a surplus on invisibles, too, which we cannot ignore and I shall not try to ignore it.
      Sir Ian Orr-Ewing: Not today.
      Mr. Bessell: I do not know what evidence the hon. Gentleman has for saying that, but I do not want to argue it.
      Having made that confident statement to the House and to the country, it is strange, when expansion is clearly desirable to maintain the impetus of exports and productivity so that we can have the growth which is necessary to
      1292
      enable us to compete in export markets, to look at a later part of the speech of the Chancellor of the Exchequer in which he said:
      "It will be apparent from what I have already said that the Resolutions to be put before the House "—
      those were the ordinary tax Resolutions—
      " will provide that the standard rate of income tax should be renewed at 41·25 per cent. and that the same surtax rates should apply for 1969–70 as for 1968–69; but, like the standard rate of income tax, the surtax rates will now be expressed as percentages. The Resolutions will also provide "—
      and this the crucial point—
      " for the renewal of corporation tax at its present rate of 45 per cent."—[OFFICIAL. REPORT, 14th April, 1970; Vol. 799, c. 1214 and 1252.]
      I understand and accept why the Chancellor felt it necessary last year to announce an increase in corporation tax before the current year. It was obviously necessary to give that warning. I understand, too, why in the financial condition of the country in which the right hon. Gentleman had to make his Budget Statement in 1969 it was wise to anticipate that he would need to make a greater call on taxation to provide income for the Government's expenditure programme.
      But, in today's very much brighter conditions which the Chancellor took pride in explaining to the House at such length, I should have thought that this would have been a golden opportunity to give industry a shot in the arm and to say to the people who, after all, have been responsible for Britain's economic recovery, " You have done well. We want you to do better. As an incentive for higher productivity, investment and growth in industry and towards our export programme, I have decided to ignore my proposal made in 1969 and, instead of making the level of corporation tax 45 per cent., I shall keep it at 42·5 per cent." That is something to which industry and the country were entitled.
      I do not believe—and this is where I take issue with the Chancellor—that his loss of revenue in a full year would have been as great as he perhaps expected. For example, I do not believe that, given that kind of encouragement, industry would not produce a great deal more and that the consequence in the long term would have been to have given him

      1293
      a greater revenue even than by increasing corporation tax.
      I looked f1294
      speech made by my hon. Friend the Member for Colne Valley (Richard Wainwright), who leads the Liberal Party so admirably in debates on the Finance Bill.
      Mr. Diamond: I endorse entirely what the hon. Gentleman says about the hon. Member for Colne Valley (Mr. Richard Wainwright), but express a little surprise about what the hon. Gentleman says about maintaining and not increasing the rate of tax. The rate of tax went up last year. What we are proposing now is the rate of corporation tax for the financial year 1969–70.
      5.45 p.m.
      Mr. Bessell: I may not have expressed myself very well, and I am glad of the opportunity to clarify the point. The rate was at 42·52 per cent, last year, but the Chancellor in his 1969 Budget Statement announced an increase for the year 1969–70 to 45 per cent. Am I correct?
      Mr. Diamond: My right hon. Friend announced an increase for the year 1968 —that is, the year ending 31st March, 1969—on which the tax would be payable during the following 12 months, depending when the accounting period ended.
      Mr. Bessell: I misunderstood. I accept the correction, and I am grateful for it. I should not want to mislead the Committee or to go on record making an error of that kind. However, it does not detract from my argument that it would have been a considerable boost to industry if the Chancellor had felt it right to make a reduction this year. That is the purpose of our Amendments.
      I turn to the speech of my hon. Friend the Member for Colne Valley—and I note with gratification the Chief Secretary's comments about the way in which he leads the Liberal Party in these debates. My hon. Friend spoke during the Committee stage of the Finance Bill on 7th June, 1967, when he advocated a reducation in corporation tax. He made the point at the end of his speech—and I should have hoped that after a three-year lapse it would have been noted by the Chancellor in the light of the opti-
      1294
      mistic picture which he presented in his Budget:
      " I hope that if there is to be a degree of reflation, as I believe there should be, its first fruits will go to those business concerns which are successfully jumping over the enormous hurdles, both in the shape of obstacles to foreign trade and the difficulties of trade at home, because they deserve it."—[OFFICIAL REPORT, 7th June, 1967; Vol 747, c. 1159.]
      That is the burden of what I am saying. Not merely do they deserve it, but they must have it.
      I could not agree more with the comments of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and other hon. Gentlemen that the incentives necessary for industrial expansion are simply non-existent. I do not say that the Government have not given a great deal of assistance to industry in the development areas in recent years. I paid tribute to it last night and I was glad of the opportunity to do so. But, when it comes to whether money will be invested in industry for that essential expansion, I return to my first point. I do not think that the hon. Member for Worcestershire, South was far wrong. Corporation tax is a factor which must be taken into account, and it is absurd to suggest that it is not. It affects industrial investment and consequently industrial expansion. Therefore, whether or not industry deserves it, it must have it.
      Last night, the Chief Secretary said that if an employee had said to him that he was not prepared to work harder unless he had a tax incentive he would not employ him. He was not as blunt as that, but that was the implication of his remarks. I am entirely with the Chief Secretary. If a person who is employed in a company in which I have any say told me that he was not prepared to work longer hours or to make any additional effort which would result in an increase in his wages, because he was afraid of the tax he would have to pay, I would make certain that that man was not on the payroll for any longer than I could help, because this attitude would show a total lack of responsibility towards the company for which he was working. I am with the Chief Secretary on this, but I am not so sure when it comes to industrial investment.
      A person investing money in industry or in commerce inevitably looks to see what will be the return after taxation.

      1295
      With the present level of corporation tax, which has jumped from 35 to 45 per cent. compared with 1965, if the incentive has not been taken away, it has been seriously endangered. The Amendment seeks to do no more than to reduce the level to 42·5 per cent. In the light of the optimistic statements of the Chancellor and the change in the economic situation—and I am the first to pay tribute to that—and in the light of the effort which has been made by industry to bring about that change, I should have thought that a reward was due to industry. But, much more important, if we are to have the expansion and development on which the future world trade of this country is to depend, incentive must be given.
      There comes a point when taking away incentives, reducing incentives or failing to provide incentives has an effect upon people who are engaged in business and industry and they begin to wonder if their effort is worth while. It is at that point that the country runs into grave difficulties and dangers.
      I have looked again nostalgically at the maiden speech I made on 12th November, 1964. I recognise that at any moment we may find ourselves plunged once more into a General Election—
      Sir G. Nabarro: The sooner the better.
      Mr. Bessell: Although I am not a contender for a seat at the forthcoming election, I agree with what the hon. Member for Worcestershire, South said—the sooner the better. This may well be the last speech I shall have the privilege of making—
      Mr. Nott Mr. Nott:rose—
      Mr. Bessell: I would rather not give way.
      Mr. Nott: I was about to say something nice about the hon. Member as a fellow Cornish Member. The hon. Member for Bodmin (Mr. Bessell) has been an admirable Member in Cornwall, although he is not a member of my party. This is the last opportunity I shall have of saying that to the Committee.
      Mr. Bessell: I am grateful to the hon. Member for St. Ives (Mr. Nott). I did not want the rest of my speech to be interrupted, but for that kind remark I was glad to give way.
      Mr. George Brown: Before the hon. Gentleman gets to the last part of his speech, which will not be interrupted by me as I do not share this generous view, may I question something which he said that struck me as being rather odd? He said that he thought it was wrong for a workman to work out what he would receive after paying tax if he worked overtime, and that such a man would not appear on his payroll for long. He then said that he expected an investor like himself to work out what he would receive from an investment after paying tax, and he thought that was quite proper. Will the hon. Gentleman explain to me—
      Sir D. Glover: On a point of order. Is it necessary for the right hon. Member for Belper (Mr. George Brown) in intervening to make another speech? Cannot he make his own speech if he catches your eye, Mr. Irving?
      The Chairman: All interventions should be brief. I will bring this intervention to a conclusion when I think it is appropriate to do so.
      Mr. Brown: I am just asking the hon. Gentleman why he differentiates between the workman and the investor. They both apply the same process. Why is it right for the investor and wrong for the workman?
      Mr. Bessell: I said that some time ago, but I will come back to the point. It is interesting that the right hon. Member for Belper (Mr. George Brown) should raise it. He has of course misunderstood—that goes without saying. I was agreeing with a comment made by his right hon. Friend the Chief Secretary last night. The right hon. Gentleman was referring to the speech of an hon. Member on the Opposition benches in which he said that an employee might refuse to do overtime or additional work if the incidence of tax is too high. I felt, as the Chief Secretary did, that if a person genuinely looked at it only in that way and was not prepared to give any extra effort to the company and earn more money even though it was taxed, he clearly had not got an eye to business and was not the kind of person who would make a good executive. The average investor is the trustee of other people's money and has to consider what

      1297
      he is doing on behalf of other people. This is certainly true of merchant banks and others. The private investor looks to see what his net profit and his tax liability will be, and an employee who is looking at a job will see what his tax level will be. I accept that it is the same thing, but I am sure that the right hon. Member for Belper would not wish investors to withhold money or workers to withhold labour. Yet we could reach a point where both could happen. It has not happened yet with income tax, but it could happen with corporation tax, and that is the point I am making.
      To return to my earlier speech. I concluded by saying:
      " I have crossed Jordan."
      That is what I felt like, I was very nervous.
      " If I have landed safely on the other side it is only because of the courtesy of hon. and right hon. Members of this Committee. I wish to thank them for their forbearance."—[OFFICIAL REPORT, 12th November, 1964; Vol. 701, c. 1233]
      I shall shortly cross back over Jordan and should like to take this opportunity, if you will allow me to do so, Mr. Irving, to thank hon. and right hon. Members on both sides of the Committee for their indulgence towards me while I have been on their side of the river.
      6.0 p.m.
      Mr. John Cronin: The hon. Member for Bodmin (Mr. Bessell) made an interesting speech, finishing on a graceful note which must have been agreeable to every hon. Member. I am sure we are all sorry that he is to leave us in the near future.
      I am in some difficulty in following his arguments in support of the Amendment. He referred to incentives, but the effect of incentives is difficult to assess because so much depends on the psychology of the person who is paying the tax. There may be some disincentive when a person does something involving personal effort and is paid for the total time spent. But I cannot see how there can be any disincentive in the case of a corporation when such a circumstance does not arise. The Royal Commission on the Taxation of Profits and Incomes, which reported about 12 years ago, went into the matter of incentive and found no real evidence of disincentive in taxation in regard to individual effort. Taxation must work
      1298
      both ways as an incentive or disincentive. It may be argued that a man will work less hard, or a corporation less effectively, because some of the wages or profits accruing will be taken away by tax. But equally it could be argued that the more taken away in taxation, the harder the person or persons would work in order to gain in the long run after taxation.
      The hon. Member for Worcestershire, South (Sir G. Nabarro) made an interesting and entertaining speech with his customary panache. He produced the rather exotic argument that the effect of corporation tax was to increase prices, particularly food prices. He suggested that corporation tax was costed into prices by firms when they were assessing costs. I am sure that he was pulling our legs. Prices surely must be based on the competitive situation.
      Sir G. Nabarro: The hon. Gentleman must not accuse me of pulling his leg. Any cost accountant responsible for fixing retail prices on behalf of companies will tell him that the return on capital employed is first calculated net after the incidence of corporation tax, and second in regard to retail prices on the incidence of all forms of tax. The first consideration is S.E.T., then purchase tax, and then corporation tax, which are taken fully into account in assessing retail prices.
      Mr. Cronin: I accept that S.E.T. and purchase tax would be taken into account, but I cannot see that corporation tax, which is a direct tax on profits, should be taken into account. Any well-run business—and I am sure that any business with which the hon. Gentleman is associated is well-run—will take into consideration primarily the competitive situation.
      Sir D. Glover: Of course, a competitive element is involved. If my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) and myself are in competing enterprises, we both have to take these matters into account in calculating our costs. Our competition starts when we have taken those matters into account.
      Mr. Cronin: The hon. Gentleman is making an assertion, but is not introducing any new argument. Surely in any well-run business prices are based on getting the maximum profit consistent with the competitive situation. There can

      1299
      surely be no other way of running a business.
      I notice that the hon. Member for Worcestershire, South did not rise to the fly cast to him by my right hon. Friend the Chief Secretary. He was wise not to do so.
      Sir G. Nabarro: The hon. Gentleman must observe the niceties of customary parliamentary procedure. In this Committee we never talk about any individual's tax liability and we never talk about the private financial affairs of individual companies or their liability to taxation. That is a well accepted rule in all quarters of the Committee.
      Mr. Cronin: I am interested to hear what is almost an admonition from the hon. Gentleman. But I seem to recall some years ago, when I took part more regularly in the Committee stages of Finance Bills—
      Sir G. Nabarro: We miss you very much.
      Mr. Cronin: —the hon. Gentleman himself talking in an extroverted way about his own tax affairs.
      Sir G. Nabarro: I am sorry to intervene again, but the hon. Gentleman is confusing the issue. I did what I did in 1961 to demonstrate that the tax inspector had allowed me to charge the cost of painting white lines on my tennis court at home against the maintenance of the court for the purpose of calculating my liability to Schedule A. I was poking ridicule at the law. And, what is more, I won.
      Mr. Cronin: I wish to treat the hon. Gentleman with the utmost courtesy, but if I pursue the question of his tennis court much further I am sure I shall be called to order.
      I shall turn to some other arguments. It has been suggested that corporation tax is a heavy burden on the companies concerned. It is noteworthy that the Amendment of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) reverses the increase in corporation tax which took place last year. The Chief Secretary last year said that the increase in taxation from 42·5 to 45 per cent. would bring in an increased return of £120 million. There was in that year a
      1300
      total increase in profits of £500 million. With that sort of increase in profits, companies surely can bear an additional burden of £120 million.
      I hope that my right hon. Friend will be able to give some figures to show the extent to which profits have increased during the last year. But unless there has been a large decrease in profits in the last year, which is quite impossible to contemplate, it can hardly be suggested that the burden is too severe for companies to bear.
      Mr. F. A. Burden: What worries me about the hon. Gentleman's argument is that he is confining his remarks to very big companies. He must remember that both last year and this year there have been more bankruptcies and insolvencies than have occurred for many years. This is an important factor, particularly in regard to small businesses.
      Mr. Cronin: That is an interesting point, but surely the hon. Gentleman is not suggesting that these bankruptcies and liquidations are brought about by the 2½ per cent. increase in corporation tax.
      Mr. Burden: It is the straw that breaks the camel's back.
      Mr. Cronin: In view of the figures I have advanced, one can hardly say that the 2½ per cent. increase in corporation tax constitutes a severe burden, or even a moderate burden, for the companies concerned.
      I could not follow the hon. Member for Wanstead and Woodford when he said that corporation tax drives a wedge between shareholders and companies. Surely there is already a gap between them. The amount of influence shareholders have in their companies' affairs is very small unless a catastrophe occurs to the company. I cannot believe he puts that point forward as an important argument.
      One interesting argument which the hon. Gentleman advanced was that corporation tax has an adverse effect on investment. If that was the case, it would be a serious reason for advocating its reduction. But does he seriously suggest that, when a board of directors considers investing in a new venture, it decides that it must not do it because the rate of corporation tax is so high?
      Mr. Patrick Jenkin: As the hon. Gentleman has asked me a question, perhaps I might answer it. No, of course it does not. However, I do not know whether the hon. Gentleman has ever studied a discounted cash flow appraisal of an investment project. There is always one column of it showing the amount of tax which will be paid on the profit, and that can then be discounted. If the required rate of return is not reached because the tax payment is too high, the company will not proceed with the investment project.
      Mr. Cronin: Obviously a board of directors will consider all relevant factors, but I suggest that this would be a minimal factor. I am a director of a successful electronics company. I cannot recall anyone saying at a board meeting that we should not invest in this or that direction or enter this or that market simply because corporation tax is too high. This is a patent absurdity. I cannot imagine that any board of directors—
      Mr. Patrick Jenkin: I answered the hon. Gentleman's question and said that no board of directors asks itself in that form and answers the question in that way. However, any company which is properly run is bound to take tax deductions into account when working out the net return on a proposed investment.
      Mr. Cronin: I do not think that there is any disagreement between us. Obviously, tax deductions are taken into account, but they are not a major factor in making an investment decision. I think that the proportion of investment decisions affected by corporation tax considerations is very small.
      Sir Eric Errington: The harm that corporation tax does is exemplified in close companies working with the shortfall. That is where the real effect of it is seen.
      Mr. Cronin: I accept that corporation tax has an adverse effect on close companies. However, that is an argument for reducing its incidence on close companies. It is no argument for a general reduction.
      The important point to bear in mind is that, if this corporate taxation were reduced, it would have to be made up by taxation from another source. If we accept that the country at the moment is having the right amount of taxation
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      in accordance with the general balance of trade situation, I suggest that hon. Gentlemen opposite should consider carefully what taxation they would apply to make up for the shortfall as a result of the reduction proposed in the Amendment. I suggest that the companies can best carry the burden of taxation and that there is no case for reducing that burden in a way which inevitably will increase the burden on other people who are less able to afford it.
      [SIR RONALD RUSSELL in the Chair]
      6.15 p.m.
      Mr. David Howell: I regret that the debate seems to have drifted away from the sharp focus on industrial investment provided by the hon. Member for Bodmin (Mr. Bessell) and my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth). They concentrated on what is, after all, the key issue, industrial investment. I am sorry that there were not more hon. Members on the back benches opposite to hear their contributions. I do not know where all the Government supporters are. No doubt they are in other rooms planning new and ambitious ways of spending taxpayers' money. I am only sorry that their plans will be disappointed.
      Industrial investment has been the Achilles heel again and again in the country's economic programme and recovery. We have to face the fact. Now that we have a balance of payments surplus, we are in business if we can keep it right and get the rapid rate of increase in industrial investment—and in the output investment ratio—that is essential.
      It is not just a matter of a good balance of payments by itself. It is important to keep in mind that with it must go a sound underlying investment trend. If that trend is weak, static or negative, we are no more in business than we were back in the wasteland days of Government two or three years ago. We shall be back to square one. All the gloss and glitter and huffing and puffing about our wonderful economic recovery will turn to dust and ashes in our hands.
      That is the key issue. I would be the first to concede that not all the wisdom and answers to the problems of industrial expansion and a rapid rate of investment

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      of new plant and equipment are contained in this Amendment. The impact of the tax rate on the motivations of people who make investment decisions is not the whole story.
      I read a recent very interesting U.S. submission to the O.E.C.D. on industrial investment in the United States. It made the point that at least half the energies and motivation lying behind the rapid rate of investment in the United States and the high output investment ratio come from a general group of motivations which the Americans call the " management alertness ". It is the management alertness of the American manager which provides this markedly high output investment ratio and this continuing high rate of manufacturing investment.
      Behind this management alertness there lie a number of causes. Pride in the prestige of the firm and the profit potential: the availability of stock options that is very important to drive management forward to make good investment decisions. I feel that this latter point should be catered for in a Clause of the Finance Bill. It is one of the sad-nesses of this now ending period of Socialist rule that right hon. and hon. Gentlemen opposite decided to knock out stock options in the 1965 Finance Act. It was pointless and a major blow to our efforts to increase investment.
      The other point made in the United States submission was this. If we want a high rate of investment and high quality investment, it is essential for those who make the decisions to feel that, if they are pushed too hard by their companies, they can start their own businesses, accumulate capital rapidly and not be hampered in building up their businesses by legislation forbidding stock options or by excessively high company tax rates. That is an important part of the psychological pattern leading to a high rate of investment. All those points were made in that submission, and they are extremely relevant to our investment situation.
      The United States submission made another point which seems to be essential to industrial expansion in this country. It said that these are the motives which lead to a high rate of investment and a
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      high output investment ratio. But it talked also of the size of the area in which profit-motivated investment decisions can be made. By this, it meant that the larger the public sector or the public area of the economy or the area covered by investment decisions which are not made primarily on profit criteria and the smaller the area of the private enterprise sector, the weaker will be these motivations and the less successful, overall, the investment performance.
      This, of course, is another way of describing the size of the resources taken by the Government and put into the public sector as against that left in the private sector pocket, either for consumption or for saving or for investment. But it is saying more than that, as the American report emphasised. I was not here last night, but I read that the Chancellor said that we on this side should not worry too much about the public sector, because it was not large by comparison with other countries and there were certain community needs which had to go on being fulfilled, and that our line of argument was therefore wrong.
      It is the right hon. Gentleman who is wrong. It is not just the quantitative size of the public sector which is at issue but the quality of the decisions taken in the public sector. It is the type of decisions which. instead of being taken in the private sector, are taken in the public. It is on these issues that there is such a startling difference between this country and the United States or many other countries. It is these issues where we have the circular process which my hon. Friend mentioned, of taking money in taxation, churning it in the bureaucratic machine into services of various kinds or subsidy by all kinds of agencies and aids and handing it back to industry. It is as it passes through this process that all the half-baked decisions and impact of a departmental bureaucracy play upon it and all the weaknesses in the policy analysis and policy making machine in Government are allowed to influence it. That is where we get the dangerous influence on investment decisions and the dangerous restriction of investment which marks us out from other countries.
      The things which I have in mind are too much Government control of commercial research or of the information

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      handling processes or of advanced industrial design. I mean the Government tendency to use the majority of in-house consultants or to dominate the data handling world or to provide more and more industrial advisory services at below cost—which are financed out of taxation in the first place. These may not sound the fashionable areas of the 1950s or 1960s, but they are the high growth points of the 1970s. If the Government dominate these areas and believe that they must spend taxation on these things, and that decisions on these issues must be made in the public sector, they are making sure that investment decisions will be dominated in the 1970s by the ethos of the public sector and by the ethos of Government Departments, rather than of profit-driven decision-making.
      This applies, of course, to these new areas, which I believe are the important ones. But it applies just as much to the whole vast traditional area of capital use and capital evaluation and capital programmes in the public sector. The bigger this sector, the more it covers these vital areas of decision-making, the smaller the area left in which profit-driven decisions can be made.
      It is not just a question, as the Chancellor said, of measuring the size and the proportions of investment and the proportions of income generated in the private or public sector. Perhaps, on that alone, reasonable comparisons can be made—not with West Germany or Japan, but with France and Italy—perhaps. In quantitative terms, their public sectors may be about the same as ours.
      But it is when we come to the type of decisions being made and the type of areas being dominated and influenced that we see the difference.
      The more that our Government are in research and consultancy and data handling—the explosive growth areas of the 1970s—the more the decisions in these areas and the more investment decisions generally will be weak, inefficient and based on bad policy analysis.
      It is that great public " soft centre " of our economy—not its size but its nature—which makes us so desperately vulnerable and liable to have an overall bad investment decision performance. It is the philosophy of believing that one must
      1306
      take the money in taxation through high corporation tax, as suggested in the Clause, transfer it, process it in the great Departments of State into advisory services or into grants and subsidies and then hand it back. It is that belief which is eating at good industrial investment decision and rapid investment expansion.
      I turn now to the other way in which the present high level of corporation tax is sometimes justified by Government. They say—the hon. Member for Ashton-under-Lyne (Mr. Sheldon) has already said it today—that the money may be taken away in high taxation, but it is given hack in grants and subsidies, particularly in investment grants, in very large quantities. That of course is true, but it begs the main question—what is the method by which it is given back? Who gets the grants? Are they the right people? Are the decisions by the bureaucratic machine for reallocating grants here, there and everywhere, in the development areas or the non-development areas as good as the decisions which would have been made if the money had been left with the taxpayer—in this case, the companies?
      There is room for argument on either side on this. Even if the resources must be reallocated by the Ministries and the machines, there is room for argument about the method by which it is done. There certainly is, in the reasonable and open mind of the hon. Member for Ashton-under-Lyne. He admitted that the present method of distribution of investment grants and other development subsidies and aids leave a great deal to be desired. This is a point which my right hon. and hon. Friends on the Front Bench have put again and again—that the method is ineffective and does not produce the results at the right cost which the taxpayer would have the right to demand. When it comes to producing new jobs and accelerating development in development areas, we propose better, more sophisticated and more effective methods of doing so.
      Every time we bring that forward, many people in industry listen to us. The Prime Minister will not listen to us, because any suggestion that the method is wrong is immediately distorted by him into a proposition that we are attacking the whole idea. But this sort of thing gets less and less surprising from the right

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      hon. Gentleman when one sees his latest dubious taste in advertising technique. This is something which we have learned to live with, I hope not for very much longer.
      But the method is wrong. The hon. Member for Ashton-under-Lyne said it, and the right hon. Member for Middlesbrough, West (Dr. Bray), a former member of the Government, has commented even more graphically on the large-scale waste arising from the various methods of re-channelling and re-diverting money taken from industry and the taxpayer back into industry, and on the lack of effect it has in achieving what is supposed to be the policy goal—which is more jobs.
      It is, I suppose, regrettable that, after 15 months of waiting, we still do not have the real study which the Government have promised us again and again on the effect of these grants, subsidies and investment incentives. It is more than regrettable: it is a shocking thing. If the Government are going to do a study on a large chunk of public funds of this size, amounting to £600 million per annum, it is little short of incredible that the Ministry of Technology cannot organise itself to produce this study in less than two years, as it will be in the end. The study will not be available, as the Minister told us the last time we questioned him, until the end of the year.
      I am told that the Ministry of Technology is a shambolic place to work and that decisions are taken in odd ways there. But even so it is incredible that they should take so long to come forward with a reasonably analytical study of how these vast sums are taken from industry and handed back in various ways.
      Perhaps I should not go too far here, because, in the end, I have doubts about relying on analysis for the answers to these questions. Yesterday, the hon. Member for Ashton-under-Lyne, in an excellent speech—much better than his speech today— called for analysis of the effect of income tax on incentives.
      6.30 p.m.
      He was saying that this would produce answers. In the same way, I suppose, several of us have been guilty of calling for an analysis of the effect on investment incentives and investment decisions.
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      I think that we can rely too much on this sort of behaviouralist analysis. In the end these matters are highly debatable, highly subjective, and they depend on the prejudice and instincts of the politician putting forward the argument. It would be scarcely credible if this study of income tax incentives or investment incentives under a Government from the benches opposite came out with arguments against their own prejudices, or with arguments which were watertight against their prejudices. Similarly, if the analysis were done under a Conservative Government we would take the points which reinforced our prejudices, and reject those which did not. In the end someone must have a good honest prejudice and force it into policy-making machines. That is what needs to be done about investment incentives.
      That is what we must do. I believe that,inter alia, the right hon. Member for Middlesbrough, West is right; that the present system is wasteful and incompetent and takes too much in tax and gives back too much in inefficient waste; that the whole system could, first, be more selective—that is our case against the present system of grants—and, second, be conducted at a lower level in the sense that less should be taken in taxation, and less handed back. There could be lower taxes and a more selective distribution of subsidies and grants. That would be a major contribution to better industrial investment decision-making, and that would be totally in line with the Amendment.
      The third and final means by which the Government can influence the rate of industrial investment is company liquidity. We know that the Government's monetary policy and their decision this year to have another whopping great surplus on central Government account is part of their tight money strategy. Obviously it is having, and will throughout the year continue to have, a telling effect on company liquidity. Many company reports and comments of company chairmen are showing it.
      The Government have decided to run yet again this year this huge Budget surplus. It is necessary for the Government to operate this forced saving on this large scale because, if they release this money into the economy, it will not go into investment, but will be gobbled

      1309
      up in higher wage increases as more and more wage earners struggle to maintain their living standards as prices bubble up beneath them and they try to maintain their position. This is the psychological climate which has been created by the Government's mistakes, and it means that the Chief Secretary and the Chancellor live daily, and I trust not too uncomfortably, on the horns of a dilemma which restrain them from reducing this large Budget surplus.
      The philosophy of the Labour Government, which we have known over the years, is that forced savings are necessary. The theory is that individual saving will not come about, or is undesirable anyway. But forced saving must be established and a high Budget surplus—the new thing for the Labour Party—must be obtained year after year so that any additional spending can be undertaken by the Government rather than be left to private enterprise and industry.
      A high Budget surplus also enables the Chief Secretary to come to the House —for two years running now—and say with a smile, or perhaps with a serious look, " Public expenditure is under control. Look at this wonderful surplus. Everything is all right ". The right hon. Gentleman is using words and language in a completely different sense from the sense in which I use them. I do not regard public expenditure as in any sense under control. I shall never regard it as under control until there is proper and systematic scrutiny of a whole range of public programmes, certainly in the Treasury, and ideally by the House, a systematic running critique as Peter Jay called it in The Times. When we have such a system, and the House has placed on record its wish to have it, we shall have public expenditure under control.
      It has nothing to do with a Budget surplus, or with the success of the Chief Secretary or the Chancellor in raising so much in taxes and maintaining tax rates so high that they can cover even their enormous public expenditure programmes and still have something left over. Whether one goes with the strategy or not, the price that is paid is low investment, as it must be. A tight money policy restrains company liquidity, prevents savings, and ensures that we have low investment.
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      The trick or challenge for the Government now, perhaps in the last few weeks of their existence, I do not know, is to see whether they can break out of this familiar pattern. There is a balance of payments surplus, but always with low investment, always with a feeble and dwindling trickle of new investment. If they can change that pattern, and have a rapid growth of investment, they will earn my respect and good wishes, but if it is just the old story we do not want to hear it.
      We on this side of the Committee coined the phrase, or brought it into public debate, that in Britain we needed a high investment, high wage, high research economy. That is what we argued for way back from 1964–65. I admit I sometimes feel that we have not kept that goal of policy as sharply in focus as we might. But the Amendment is in line with that goal, whereas the resistance to it and the determination to keep the levels of company taxation as they are are dead against it.
      Mr. George Brown: I shall be brief. I have thoroughly enjoyed listening to this discussion, and I find myself exceedingly puzzled. The high wage, high research, high investment goal about which the hon. Member for Guildford (Mr. David Howell) spoke most certainly did not exist when we came to power in 1964. None of the three things existed then.
      As I understand the argument, although it has wandered a bit, as the hon. Gentleman rightly said, it is that if corporation tax were fixed at some lower level than 45 per cent.—42½ per cent., 40 per cent., 37½ per cent.—we would achieve this high investment, high wage, high research goal. There is no evidence at all for that. In fact, during the years when this Government have been in power all three things have been happening.
      Mr. Hordern Mr. Hordern rose—
      Mr. Brown: No. I have only just got to my feet. Nobody will argue that we have not got a higher wage economy. I can understand hon. Gentlemen opposite always complaining about this. Nobody will argue that we have not got a higher research programme. Part of my life nowadays is spent looking at what is done

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      in research. We have a much higher research programme going on private enterprise-wise, private enterprise-cum-public enterprise-wise, and public enterprise-wise only, than we had in 1964. With respect to hon. Gentlemen opposite, we also have a much higher investment programme now.
      As I listen to this discussion I think back to the situation in October, November and December 1964, to my discussions with industrialists—admittedly most of them Tory, but some of them Liberal—and asking them what I should do. I think back to how we got the National Research and Development Council, the N.E.D.C., and the " Little Neddies " going, and how we got them started on a programme of increased investment.
      I think that some hon. Members in this House must be so completely out of touch with what has happened as to be almost totally blind. We have a much larger investment programme going on now. I am thinking at this moment of the large companies. I will come to the smaller companies later.
      Mr. Hordem: Concerning investment, the right hon. Gentleman must realise that what he says is absolute nonsense. Not only have we the lowest proportion of the gross national product devoted to manufacturing industry of any of the E.E.C. countries, but the rate of growth of investment is·2 per cent. under this Government whereas it was plus 2 per cent. every year under the Tory Government.
      Mr. Brown: One problem has been to persuade capitalists to understand the importance of investing. It has been an uphill job. The odd thing is that the hon. Gentleman can sit on the Front Bench as a proponent of private enterprise —of capitalism—and actually take it as a point in his favour that the Conservatives failed to do what they should have done as a matter of course.
      When we came in we had to find some way to stimulate—[Interruption.]—I wish that hon. Gentlemen opposite would listen. We had to find some way of stimulating private enterprise—" capitalism ", if hon. Gentlemen like the word—to realise that industrial investment was the most important thing. The hon. Member
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      for Gillingham (Mr. Burden) grins and thinks that he is scoring a tremendous point.
      Mr. Burden Mr. Burden rose—
      Mr. Brown: With respect, let me develop my argument.
      Mr. Burden: I ask the right hon. Gentleman not to get personal.
      Mr. Brown: With respect, let me develop my argument.
      If it is still so bad, all right, somebody is being so bad. But the large companies are being very good. The large industrial complexes in this country are investing. I could mention one which last year put £70 million into new investment. Our problem is that so much of our industry is small scale. So much of it is taking out instead of putting in and is not high wage, high research and high investment conscious at all.
      I am not making a case for more public enterprise. I could not be more bored by any argument than talk about whether it is more public or more private. In the end the balance works out. In the end we go public where public investment is needed. We have partnerships. I have been a great advocate of partnerships in my day. This is an outworn argument whether it is public or private. It is a question of the scale, the size, and what matches what requirements.
      No matter what we do about taxation —the large public companies apart, the public sector apart—too few of our businesses attend to the job of investing and replacing outworn machines.
      Mr. Burden: Why?
      6.45 p.m.
      Mr. Brown: Because I do not think that they are up to the job. If two, three or four big private enterprise companies had not come to the rescue, let us face it, Lancashire would be dead. The whole of the textile industry of this country would be dead. The tax system being what it is, being what hon. Gentlemen opposite attack, it is still true that a handful of companies rescued Lancashire by replacing the machines and putting in new capital investment. The hon. Member for Colne Valley (Mr. Richard Wainwright) knows as well as

      1313
      anybody that mills and machinery that had been written off years ago have now been replaced with new investment worth 100 times as much. This is what has rescued Lancashire. This has been done with increasing success between 1964 and 1970, despite the taxes which hon. Gentlemen opposite attack. My point is that it has been done in that climate.
      Mr. Burden rose—
      Mr. Brown: I will go on. Somebody said that taking the money away and handing it back bureaucratically was very bad. Oddly enough, it has turned out to be very good. I am not a great admirer of bureaucrats. I have had my fights with them. But if we want to get it down selectively, it has turned out to be the best means we know of doing it.
      Mr. Patrick Jenkin rose—
      Mr. Brown: I must go on. I have listened patiently and not interfered. There is something here which needs to be said. The hon. Gentleman has not been here for a large part of the discussion.
      I am not, like the hon. Member for Bodmin (Mr. Bessel), announcing my valedictory speech and proposing to leave the place, but as I look back on five most fascinating and interesting years, because I have been able to play a small rôle, I realise that what changed the situation in the regions of this country was when we deliberately took a hand and said, " We will not have this old business of tax reliefs ". The argument was that if somebody made a profit he got a tax relief and somehow, by the grace of God and all the rest, it would get to the right place. We said: " No, we will not do that. We will raise the money from everybody and then we will try, God helping us, to make the best decision that we can as to where it should go ". This is what has changed the situation in the regions.
      Hon. Members have referred to the polls and introduced into their speeches references to the coming General Election. If hon. Gentlemen opposite do not realise what has hit them, they had better start thinking about it now.
      I have shown that the situation has changed in the regions—not as much as I would have liked and not as firmly
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      as it might have changed—and boards of directors and great corporations are nowadays making their investments based on a number of issues, one of them being where they will get the largest grants for developing their businesses. Do people go to Skelmersdale or Ulster because they like those areas? Do firms establish branches in the North-West and elsewhere because they like those places, or because 40 per cent. grants are available? When hon. Gentlemen opposite talk about the bureaucrats interfering, that is the sort of interference they must bear in mind.
      We raise money overall so that we can redistribute it in certain areas and in certain other ways. Perhaps it is about time that we adopted a more sophisticated approach. It is time that we had a little more money for Swadlincote. These all involve bureaucratic decisions, and it is these decisions against which hon. Gentlemen opposite are arguing.
      Since 1964 things have changed. These changes have improved investment decisions and people now sneak freely about discounted cash flows. I recall the first meeting of the N.E.D.C. that I chaired, at which Fred Catherwood, the director, discussed the question of discounted cash flows, and the C.B.I. faces there looked extraordinarily confused. It was almost the beginning of the use of the term for most of them. Now it is understood.
      The hon. Member for Bodmin referred to a problem which I wish to discuss, though from a somewhat different angle. It is the problem caused by a large number of small businesses being inadequately staffed and being unable to understand, take into account and assess all the changes of which I have spoken. If I were still in the Government I would be asking myself if the time had not come for us to establish some sort of organisation, or perhaps a number of bodies, to develop the present climate of thought of the great corporations, now that we have regional industrial planning really under way.
      We now need to discover how we can produce some organisations which will bring small and medium-sized firms into this area of thinking. The C.B.I. does a first-class job in its own way, but it is too big for what I have in mind. We need

      1315
      a federation or association to which the smaller firms can belong.
      The hon. Member for Hendon, North (Sir Ian Orr-Ewing) spoke about small firms doing the inventing. I agree that many bright ideas begin in small firms, but the problem in Britain is that while we are marvellous at having bright ideas and doing research, we are not awfully damn good at developing them, and we certainly lose out on commercial exploitation.
      I do not want to get rid of small family firms, force amalgamations or even force partnerships between the private and public sectors, though there is a lot to be said for that. We must find a way to enable small, medium-sized and family firms with ideas to develop and exploit those ideas.
      If this is to be done, access to funds and brains is necessary. I do not see how that will be achieved except by the actions of those whom hon. Gentlemen opposite scornfully describe as bureaucrats. It will come from something that we will have to produce nationally. And to do that we will need finance. In other words, we must take the finance from where we can get it and use it for the best possible purposes.
      Sir Ian Orr-Ewing: The right hon. Gentleman is absolutely right in his broad argument. Is he aware that there is a way of doing what he wants to do and that it has been done by a small business centre alongside Aston University in Birmingham, where it has been possible to bring together and test products and have expertise in finance so that managements may be advised on how best to get their invents more broadly based and so how to get them off the ground?
      Mr. Brown: As a member of the Convocation of Aston University—it happens to be my university—I accept what the hon. Gentleman says, and I have had the honour to play a small part in that process. We are proud of what is being done there, but I do not believe that any of us at Aston would claim for what is being done as much as the hon. Gentleman is claiming for it.
      Having listened to most of this discussion, I suggest that hon. Gentlemen
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      opposite are wrong and that the level of corporation tax is not a deterrent factor. The money that the nation gets from it is used for purposes which would otherwise not get financed, and I reinforce what my hon. Friend the Member for Loughborough (Mr. Cronin) has said on this issue.
      Hon. Gentlemen opposite keep on pressing us to reduce this and that while keeping up expenditure on this and that. If we do not raise money we cannot use it for any purpose, so that their equation does not add up. I do not believe that the level of corporation tax has hurt anybody very much—[Interruption.] Somebody is bound to be hurt a little, obviously—but the money that is raised is being redistributed in a useful way, including for the improvement of every under-used region of the nation.
      When I think of the position in the regions when we came to power in 1964 and compare that with the position today, it is obvious that they are benefiting from the selective use we are making of the moneys that we raise.
      7.0 p.m.
      Mr. Michael Shaw: This has been a fascinating debate. I am sorry that more hon. Members were not here to hear the opening speech of my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) and other very thoughtful speeches. Those who have been here, as we heard from the right hon. Member for Belper (Mr. George Brown), came to hear and stayed to speak. This testifies to the interest in the general debate.
      The right hon. Gentleman rather put me off early in his speech by claiming that an increase in investment had taken place, for which he took some credit under this Government. When my hon. Friend the Member for Horsham (Mr. Hordern) repudiated this claim and showed that the contrary was the case, instead of taking the opprobrium the right hon. Gentleman blamed the businesses themselves for not having continued to expand their investment programme under a Socialist Government. I parted company with the right hon. Gentleman there. I also parted company with him when he claimed great credit for investment grants as against investment allowances. Every evidence seems

      1317
      to show that even the Government themselves are having considerable doubt as to the wisdom of the change they made.
      Such is the length of time that these changes in regional policy take that I believe it is only now that we are beginning—and only just beginning—to get the full effects of what my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg) did for the North-East in 1963–64. Both parties are as keen as each other to see that the regions return to prosperity. I very much regret what is happening in certain parts of the development areas. Socialists are trying to infer that we will get rid of development areas when we get back to power. My right hon. Friend the Member for Leeds, North East (Sir K. Joseph) has said on many occasions that that is not the ease. We shall not alter the boundaries until the conditions are right for such an alteration and prosperity has returned to those areas.
      Much has been said this afternoon on the subject of investment. I believe it right that that should have been the main target of the debate, but as it has been so well covered I wish to look at a different aspect of the corporation tax burden, or, to take it more widely, the burden of taxation on companies. It was well set out by my hon. Friend the Member for Wanstead and Woodford in his opening speech, and I believe it is felt very keenly by companies throughout the land. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) did not go along with him when my hon. Friend claimed that in looking at company taxation one should include the withholding tax of Schedule F. He said that Schedule F could be regarded as a tax only if the profits were used in a certain way. Inherent in this is a difference in philosophy. The divorce of companies from their shareholders which has taken place since this Government came to power is for the bad.
      Shareholders are treated very differently from the way in which taxation-wise they were treated before. They find that when considered as a separate entity from the company from the taxation point of view they are treated much worse than debenture holders or other such debtors. The introduction of corporation tax and withholding tax took place in 1965, when. I fully accept, I was temporarily absent
      1318
      from the House. When the first Conservative Budget is introduced and the great change comes about, I am confident that I shall not be absent. When the full complexity and full import of what was done in 1965 first came through to the public and to industry and commerce, there was a general feeling of horror and bewilderment. The history of the taxes, although we have learned more or less to live with them, in general has proved that first reaction to be right.
      My big theme in this debate is that the introduction of these taxes has led to a great change in the relationship of directors, shareholders and debenture holders. This aspect has not been touched on this afternoon. That is why I am developing it to the exclusion of others. Dividends are now much more expensive in relation to salaries than they were under the old system. Dividends are now much more expensive in relation to interest payable than they were under the old system. The enlargement of these differences is harmful to our commercial and industrial life. The larger these differences become the more restricted become the methods of financing businesses. The means of financing businesses should be chosen as far as possible on commercial and financial requirements of the situation rather than on the taxation implications of those means.
      I know of private companies where directors were wont before the war to pay themselves modest salaries and for the rest, because they along with other shareholders had a stake in the company, to rely on their dividends to make up their income. Because of the incidence of taxation and the differences built up between earned income and savings income, investment income, they were forced more and more—so were their companies—to pay more of their income by way of salary and to look with not much favour on increases in dividends. This meant that over the years the interests of the directors and the shareholders became more divergent. Today in such a company—this happens many times in varying degrees throughout the country—directors maximise their salaries and are not very interested in maximising the dividends because of the great cost of doing so. Today equity capital is very expensive to service.
      In 1964, under the old system of company taxation, to pay a gross dividend of

      1319
      £100 to shareholders, a company had to earn £133. Today to pay a gross dividend of £100, a company has to earn £182. To pay the same dividend they have to increase profits by 37 per cent. No wonder companies are short of money in these difficult times for profit-making. It may be argued that companies should not pay out all their profits by way of dividends. Let us look at the situation. Take the case of a company that regards it as a reasonable cover when its dividend is covered one and a half times by its net profit. In 1964 to pay a gross dividend of £100 the company would have to earn £199. In 1970, with the same retention—not the same proportion but the same retention as in 1964—for a gross dividend of £100 the company would have to earn £253. It would have to increase its profit by 27 per cent. to pay the same dividend.
      This shows the true cost to companies in holding their position compared with previous years. It shows how difficult it must be if they have, merely to maintain their dividend, to increase their profits, in the case I have quoted, by 20 per cent. If they want, as they should, to plough back money for additional investment, the situation becomes very difficult. Costs are rising all the time. Not only are costs of servicing capital, in the sense of servicing the dividend to shareholders, rising, but also with the credit squeeze and high interest rates the cost of servicing borrowed money has risen.
      Would a reduction in corporation tax as envisaged in the Amendment increase consumer spending? The hon. Member for Loughborough (Mr. Cronin) implied that it would; he suggested that the whole climate is that we do not want to increase consumer spending. The answer to the hon. Gentleman is that a reduction in corporation tax would not increase consumer spending. If there were a reduction in corporation tax, the consequent saving would go in easing the credit position at the bank and in increased investment. I do not believe that it would have an undesirable effect on the economic situation if such an easement were made. The Amendment should be supported on every possible ground as a first stage in further reductions.
      Mr. Burden: I am sorry that the right hon. Member for Belper (Mr. George
      1320
      Brown) has departed. He assumed when I was smiling that I was making fun of him. In fact, I was smiling because he was referrring to a company with which we are both rather closely associated.
      The right hon. Gentleman, in company with other speakers, made some interesting points. However we may argue, the higher the taxation on companies the less possible is it for them to put aside money for investment. Whatever may be argued, it is right that people who invest in companies should have a reasonable return on their money in terms of dividends. Some companies do not in the early years pay out good dividends. It is obvious that in the present situation companies which are paying low dividends, but whose prospects are excellent, may find it very difficult to obtain money on the open market to enable them to expand.
      The Government, if they came clean on this question, would admit that there comes a point at which company taxation at a very high level limits and restricts company expansion, to the detriment of the economy generally.
      The right hon. Member for Belper dealt with the importance of small companies. He glossed over this point in an unfortunate way by saying that Britain has a peculiar inventive genius; we have ideas; we produce new things, but for some reason we do not exploit and develop them as well as we should.
      7.15 p.m.
      Many of the new inventions which originate in Britain are made in small, privately owned companies. It may be that those who make them do not develop them themselves because they do not have the necessary knowhow, equipment and cash. But Britain gets a big reward from the patent rights and overseas development. When people with inventive ability who are capable of introducing new elements into industry are absorbed into a giant company, they may lose their impetus, because in many instances they are denied opportunity to give expression to it.
      Far from discouraging small firms where these inventions might develop, we should do much more to encourage them. I believe that larger companies and corporations will be able to help small companies that might make these developments.

      1321
      The right hon. Member for Belper spoke about what has happened in Lancashire. It is fair to point out that much rationalisation in the Lancashire cotton industry was undertaken by the last Conservative Government. This cleared the way for much of the new investment that has taken place, particularly in the company with which the right hon. Gentleman and I are associated and which has led the way in investment in recent years. But this is only one company.
      My hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) pointed out that, whereas investment during the five years of Labour government has been at the annual rate of ·2 per cent., it was at 2 per cent. during the 13 years of Conservative rule. Nothing that the right hon. Gentleman said led me to believe that the companies to which he referred would not have made just as much investment in the last five years if there had been a Tory Government. As the total figure during the last three years has been at an average of ·2 per cent., the implication is that under a Conservative Government it would have been much more generally across the board and certainly would not have dropped below 2 per cent.
      Much has been made about the way in which corporation tax has enabled the Government to redistribute quite a lot of the money they have raised in this and other taxes in development areas, to encourage new industries in Scotland and in other places. A few days ago my right hon. Friend the Leader of the Opposition pointed out—he was not challenged—that every new job that has been provided in Scotland since the Labour Government came in has cost no less than £72,000. There is something wrong here. The whole question should be re-examined. I am sure that the Chief Secretary, with his inquisitive accountancy mind, will be looking into this matter in the near future. No doubt the right hon. Gentleman will be able to give us an answer at some time, in the future, if the present Government are still in office.
      The whole situation is serious when compared with the situation in countries overseas. We must have investment in the highest technological know-how and in the most modern and up to date machinery if we are to improve our
      1322
      economic position. I was greatly interested in figures recently produced by the E.F.T.A. countries. The figures are illuminating, but at the same time disquieting.
      Those figures show that from 1959 to 1968 the growth rate in the E.F.T.A. countries was 4·7 per cent In this country it has averaged only 3·2 per cent. Industry in those countries has expanded much more rapidly than ours. The gross national product in the E.F.T.A. countries is £880 and in this country it is £100 less. In addition, from 1959 to 1968 the exports of those countries work out at about 9·8 per cent. and imports 9 per cent., whereas the growth in imports and exports in this country has been at a rate of about 6 per cent.
      These disquieting figures show that we are beginning to fall behind in the race for overseas markets and in the expansion of our industries in markets overseas. This applies particularly to the E.F.T.A. continental countries with which we have had the closest possible association and for which area we have been the principal manufacturing country.
      May we be told how our investment compares with the continental E.F.T.A. countries and whether they suffer the same savage rate of company taxation as we do? Whatever the Government spokesman may say, the only way in which the standard of living of our people can be assured at its present level, and indeed to rise above it, is if we are able to compete in the world markets with our exports. Unless we invest in industry, in new machinery and in new techniques, in which we are sadly lacking under the present Government, there is no real economic future for this country or possibility of any great advancement in our living standards.
      Mr. Tom King: I wish to make only a brief intervention. I believe that I can claim to be the latest recruit to this House from full-time work in industry and the latest person to have had more than a part-time interest in the problems which lie at the heart of the issue which this Amendment attempts to tackle.
      I strongly agree with the words written in a recent article by my right hon. Friend

      1323
      the Member for Leeds, North-East (Sir K. Joseph) when he stressed the importance of the Government providing the right climate in which industry can be encouraged to do its job. All Governments—this applies to both parties—tend to make excessive claims for the contribution Governments make to the progress of industry. One of the most offensive claims made in recent years is the Prime Minister's claim about the restructuring of British industry. He made one speech to the T.U.C. in which he laid great stress on the efforts this Government had made to get industry going. From my own observations I know that industry started to wake up in the period 1958–60 when the first impact of the new management techniques started to operate. The development of our industry and expansion of our exports has been a progressive and gradual trend since then.
      So in the development area the growth pattern is continually being refined. We on this side are suggesting further refinements. It is a developing policy and it would be outrageous if this Government were to claim all the credit for recent improvements in the development areas.
      In an article celebrating its fifth birthday, The Times Business News said that the conclusion it would draw from its first five years was that things had generally happened more slowly in the first five years than it had predicted; that the bad news had happened more slowly and the good news had been slower in coming. Surely this is the lesson of the past five years, that the Government have expected things to happen more quickly than in fact has been the case. There is a considerable lag built into the system. This happened after devaluation. When at first the results did not come, there were fears that the benefits had been dissipated. When were the results supposed to show? Anybody with experience of booking export orders knew that we were on a three or four years' haul before the real benefits would come.
      Mr. Burden: Would my hon. Friend not agree that the great improvement in the balance of payments last year was due in great measure to the capital goods ordered then being read for delivery and that last year was probably the important
      1324
      year in regard to benefits flowing from devaluation?
      Mr. King: If I carry on my thesis not only would I agree with my hon. Friend but I feel that this process will go on for longer than is expected. These benefits tend to happen slowly. We are getting better at predicting effects, but we must not forget that results come rather more slowly in market terms.
      We recognise in the Amendment the need for more incentive, whether personal incentives to leaders of industry or incentives to shareholders, in order to recognise the need for capital investment. We do not predict that doom is just around the corner if the Government fail to take up our suggestions. We are setting the scene for something for which we shall have to pay the penalty in five or ten years' time. This is a plan for the future, not a matter of imminent change or collapse. It involves prudent steps which might be taken now to establish the right climate in which to give real investment incentive and to enable us to build on a sound foundation on which our balance of payments, not next year but in ten years' time, and in 20 years' time will be built.
      [Mr. GOURLAY in the Chair]
      Mr. Diamond: I appreciated that short but relevant intervention from the hon. Member for Bridgwater (Mr. Tom King), who comes freshly to our scene and who rightly claims that he can make a rather special contribution. I share with him the view that there is a lag in new economic development which neither we nor the United States have understood. I also share with him the view that this is a new phenomenon to which we must pay careful attention.
      I share the view that the important thing is to develop a basic system and a climate in which everyone will feel that it is possible to move ahead and invest. We have had a very long debate and I would say on behalf of the Government that no minute spent discussing investment, is a minute wasted. We all know that it is a most important part, if not the most important part, of possible growth in our economy and growth in the standard of living of us all. None of us knows the whole answer to this. A number of people are trying hard to

      1325
      understand the myriads of motivations which go into it. Discussions on these matters are most welcome and I have listened carefully to all that has been said.
      We are of course concerned with corporation tax. The Amendment proposes a reduction of corporation tax of £120 million in a full year, as the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) correctly estimated, and about £60 million in the current year. To put that into context the total amount estimated to be raised at the 45 per cent. rate for the financial year 1969 is £1,900 million. The more relevant figure is the total of dividends for 1969, because corporation tax can fall on retained profits and on dividends or partly on one and partly on another. Total profits distributed by way of dividend in 1969 was £1,800 million. If the whole of the £60 million for the current year came off that one source, and I do not for one second say that it would, it would reduce it from £1,800 million, supposing it were to be the same figure, to £1,740 million or, in a full year, from £1,800 million to £1,700 million.
      This is a very small proportion of the total distributed during the year. To say that liquidity is determined by the increase in the rate of corporation tax is an argument I do not find wholly persuasive. The hon. Gentleman raised the problem of the decrease in company liquidity over the last year. This is true, but it was preceded by two years of net increase in company liquidity. The figures show an increase in 1967 of £305 million and in 1968 of £106 million making a total of £411 million and a decrease last year of £357 million. There is a net increase in financial assets over the last three years of £54 million. I did not quote these figures to demonstrate that £54 million was not so very different from £60 million, but it so happens that it is not.
      The lack of liquidity has not been demonstrated. On the contrary company liquidity has improved over the last three years and in relation to an alternate source from which additional corporation tax of 2½ per cent. could be found, we have a fund of £1,800 million with which to provide either for £60 million this year or £120 million in a full year. I do not believe that there is any argu-
      1326
      ment on the basis of liquidity which determines whether companies, by virtue of the increase in the rate of corporation tax last year and which the Opposition are seeking to reduce, are prevented from making investments and from increasing their rate of investment.
      It is also claimed that the rate of corporation tax is heavier here than in other countries—
      Mr. Patrick Jenkin: We must get this right. No one has ever advanced that and manifestly it would be rubbish. The rate of taxation of corporate profits is heavier here than elsewhere.
      Mr. Diamond: The hon. Gentleman says that the point I first made has not been advanced and clearly it would be rubbish. That is a relevant, clear and entirely acceptable comment. I will gladly read out the rates of corporation tax applying to a number of countries. The hon. Gentleman is saying that what he has in mind when he refers to corporate profits and the tax which they have to bear is both the tax which the company has to bear and the tax which the shareholder has to bear on his income. We are right back at our original argument and have made no advance. I am sorry because I have made the position clear over the years and the hon. Gentleman usually takes a good point very fast.
      We are back at the old argument that a company need only pay 45 per cent. or whatever the rate is, on its profits tax and nothing else if it does not distribute dividends. The fact that it distributes dividends means that it puts income into the hands of an individual and our tax system is such that we tax individuals on their income. The company, under the tax on the distributed profits is acting with a song in its heart as an unpaid agent of the Inland Revenue, collecting taxes from the shareholder and handing it over to the collector of taxes. I cannot accept that we should talk about corporation profits taxation as meaning the tax borne both by the company and individuals deriving income from the company.
      The hon. Member for Guildford (Mr. David Howell) in a most interesting speech talked about the United States position with approval. I am not sure whether he had in mind the United States rate, but he was talking with approval of

      1327
      the attitude to investment in the United States where the standard rate of corporation tax is 48 per cent. There have been surcharges in each of the last two years so that for 1969 the rate was 52·8 per cent. and for 1970 54·4 per cent. The basic rate, I admit, is 48 per cent.
      I am not, therefore, persuaded that the inadequate increase in investment in the private sector—an inadequate rate of replacement—which we all recognise, is due to a small increase in the rate of corporation tax or even to the absolute rate. That cannot be demonstrated. What, then, is it due to? All of us wish that we knew the whole story. The right hon. Member for Enfield, West (Mr. kin Macleod) has come in. I was bold enough to say before he came in, on behalf of the whole House, that not one of us knew the whole story and wished that we did.
      The Government have tackled this situation in a number of ways. We have gone on to investment grants. The hon. Member for Wanstead and Woodford has made it clear that when companies—he had in mind sizeable and knowledgeable companies and we all know that if we could bring up the level of the less efficient to that of the more efficient in this matter we would not have problems with the economy—consider investment proposals one of the criteria they use is discounted cash flow. He said in that connection that one takes account of how much cash one is going to receive, not surprisingly, and that one's cash is affected by the amount of tax one pays. That is true. But one also takes into account the investment grant.
      Not only does one take into account investment grant. One takes into account the variations of investment grant in different areas. One puts all this on paper before one. Part of the whole process of changing from investment allowances to investment grants was to make the position clearer. My right hon. Friend the Member for Belper (Mr. George Brown), who made an interesting and valuable speech, is very well informed on this topic. The hon. Member for Bridgwater knows that this is going on and told us so. He is our most recent recruit. Perhaps he left it a bit late but there we are. He just managed to get in and give us the benefit of his recent.
      1328
      fresh and informed knowledge of this topic.
      This is one of the ways in which one brings the matter home. If we are to believe the hon. Member for Bridgwater, it was necessary to do so because this new kind of thinking and calculation did not go on in earlier days. He suggested 1958 or 1960, I believe. At any rate, it is a comparatively recent development, as all of us recognise. Therefore, the Government have not done a bad job in drawing the matter to people's attention in business and pursuing it in terms of regional development.
      Mr. Terence L. Higgins: The Chief Secretary's argument really only applies in the case of people who do not know how to take into account discounted cash flow. If they do not know how, they pay more attention to allowances than to grants.
      Mr. Diamond: It is not my habit to be unduly discourteous and point the finger at anyone. That is a nice way of saying that I agree with the hon. Member for Worthing (Mr. Higgins) but need not necessarily particularise. If people are not going to need encouragement to do it, all well and good, but we reached the conclusion that there was need for encouragement to firms to be a little more up to date in their assessment and measurement of the benefits of investment and the most recent recruit opposite, the hon. Member for Bridgwater, has just confirmed this.
      Mr. Higgins: The right hon. Gentle. man has not taken the point. If a firm thinks in terms of discounted cash flow, it will truly evaluate the value of allowances. It is only if one believes that firms are incapable of doing this that one thinks that they pay more attention to grants than to allowances.
      7.45 p.m.
      Mr. Diamond: I am coming to allowances now. No doubt the hon. Gentleman has in mind policy discussions which have been going on in the Opposition with regard to investment allowances, and I have in mind what the right hon. Member for Enfield, West, said about it in a recent discussion. He gave us to understand that the Conservative Party was giving serious thought to switching

      1329
      to investment allowances rather than having investment grants. I would say not that it is impossible to have a regional bias in investment allowances but that the Conservative Government never had that bias.
      The difficulties are clear and obvious. The Conservative Government, under whom there were investment allowances, did not introduce into those allowances any regional bias. Free depreciation was a way of avoiding dealing with regional bias in investment allowances. Of course one can have a regional policy based on direct subsidies of a variety of other kinds. What we have done has been of great help in encouraging firms to look at the real value of their investments, and I hope that they will continue to do so and will attach far more importance to the figures and to their attitudes with regard to investment.
      The hon. Member for Guildford quoted to us a United States report which said that a lot of importance was to be attached to the altertness of management. What that report was saying and what I believe—although I repeat that none of us knows the whole story—is that what is at the root of the willingness to invest and replace more frequently is an attitude of mind more than a financial inducement. We in this country are very conservative —" conservative " with a small " c ". There has been no poll on that topic. My experience and unsupported theory in more recent years is that there is an attitude of mind in which we depart very considerably from the American attitude for example. They are much more ready to scrap and reinvest and because of that only to have regard to propositions which are more attractive in terms of return on capital. There is much to be said for being much more selective about it.
      My right hon. Friend the Member for Belper said something very similar when referring to small firms and their investment habits. He said that we did not think that they were up to the job. That is another way of saying, " Alertness of management ". I do not think the two are very different. If we could get at that attitude of mind, we should be doing great service to our people and the economy in encouraging much greater readiness to scrap and invest in something newer, after going to great care, of course,
      1330
      to do all the measurements in all the forms that have been indicated.
      Mr. George Brown: There is something that I wish I had said at that point and perhaps my right hon. Friend will agree with me. Companies small or big should be more willing to scrap and replace sooner. Does my right hon. Friend agree with what I think I should have said at that point—that workers must, therefore, be more willing to work machines to death as soon as they can?
      Mr. Diamond: My right hon. Friend the Member for Belper knows that there are a few topics about which I know a tiny bit, but that which he has raised I know nothing about. What is more important when speaking from this Box, I have no Departmental responsibility in that respect. However, I readily admit that reinvestment often involves expensive machinery and for that expensive machinery to be used sensibly requires new attitudes to double shift or treble shift working. We all recognise that it brings many social and other difficult problems which management has to learn to tackle.
      I welcome any contribution which anybody has to make from anywhere in the Committee on this important, interesting and not wholly understood topic of the motivation of new investment. I cannot think that what determines that, or what has a measurable effect on that, is this 2½ per cent. in corporation tax, for that is what we are discussing. As I said yesterday, we are in the position where we have to exercise a priority in deciding whether we can relieve the burden of taxation within this modest £200 million in financial terms, not in resources, but in financial terms.
      My right hon. Friend explained in his Budget statement the kind of priority which we would adopt. The Opposition are now suggesting that the first claim on that and the first claim as to £120 million in a full year should be made by companies. I have explained already that the burden of company taxation, measuring like with like, that is to say, corporation tax alone, or corporation tax plus Schedule F, or gross or net—I cannot measure net after depreciation, but I can measure net after fixed capital replacement, which is very much the same thing —has not been greater in the past year than ten years ago.

      1331
      Hon. Members opposite say that it is not a straight line but is saucer-shaped. I confirm that it is saucer-shaped. I supplied the figures on which the arguments have been based. There is nothing to hide about this. Surely it is not suggested that we have not let anybody know that the rate of corporation tax has gone up from 40 per cent. to 42½ per cent. and from 42½ per cent. to 45 per cent. We have not hidden that. But the net impact is such that, although saucer-shaped, the two edges of the saucer are level and there is broadly the same burden of taxation—in fact, it is slightly less —on company profits as there was ten years ago.
      So it is not the excessive burden which has caused the inadequate investment. It is certainly not the 2½ per cent. This is why I was rude enough to interrupt the hon. Member for Bodmin (Mr. Bessell), who was taking the view that we were effectively putting up the rate 2½ per cent. this year. The proposal before the Committee is for a reduction. If the Government are asked for a reduction, responsibly they must say that this is not the first priority, and I cannot recommend the Committee to accept the Amendment.
      Mr. Hordern: I should like to start by congratulating the hon. Member for Bodmin (Mr. Bessell) on his valedictory speech. I had the good fortune to listen to his maiden speech. I should like to say only that he has passed back over Jordan, as he described it, as gracefully as he crossed it in the first place.
      This has been an interesting debate and the number of speeches have been rather greater than first appeared likely. One of the most worthwhile contributions, as always, came from my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro). He talked about the effect of taxation on the economy and in particular on the wholesale and retail trade. He said that wholesale and retail distributors worked on very fine margins and he said that it was right to draw attention to increases in taxation which inevitably resulted in higher prices. This point was taken up by many of my hon. Friends to whom my hon. Friend was courteous enough to give way. The effect of high prices is becoming ever more apparent in the economy and to the
      1332
      people, and it will become increasingly apparent over the coming weeks.
      However, the point that my hon. Friend was making was that the Labour Party believed in a high taxation economy. He said that the retail and distributive trade understood and wanted higher profits and less tax. Labour Members prefer the system of investment cash grants because, as the right hon. Member for Belper (Mr. George Brown) said, they prefer a system by which the civil servant hands out the cash to allowing the money to be retained by the companies which can make up their own minds about whether to invest.
      The right hon. Member for Belper made an extraordinary intervention. He claimed that the Government had succeeded in raising the level of investment since the Labour Party gained office. I remind the Committee that this increase in the level of investment in the last six years has been 0· 2 per cent., whereas the increase in industrial investment averaged 2 per cent. over the 13 years that we were in power.
      Mr. Sheldon: As the hon. Member believes that firms should be allowed to decide their own investment without guidance from the Government, can he explain why his party had an investment allowance system?
      Mr. Hordern: I will come back to that. We are now dealing with a reduction in the rate of corporation tax and I propose to concentrate on that.
      Mr. George Brown: As the hon. Member has misquoted me, let me get it quite clear. I did not at any stage say that I thought it better for the civil servants to hand out the money. What I said was that, under our system, the money was used selectively to better results. That is quite different.
      Mr. Hordern: I do not know what the right hon. Gentleman thinks he has said now, but it is perfectly clear that the meaning is that the civil servant knows better than public companies how to invest. That is the meaning of what he said.
      Mr. George Brown rose—
      Mr. Hordern: No
      Mr. George Brown: On a point of order, as the hon. Member does not give way. If he wants to assert—
      The Deputy Chairman: Do I understand that the hon. Member for Horsham (Mr. Hordern) has given way?
      Mr. Hordern: Yes.
      Mr. Brown: It is free for the hon. Member to assert that a consequence of what I am saying is what he suggests. What he must not do is to put words into my mouth. I did not say that and I do not believe it to be true. I believe that our method of running it is tremendously superior to anything the Opposition would put in its place.
      Mr. Hordern: Let us agree that the consequences of what the right hon. Gentleman said remain the same.
      The Chief Secretary spent some time in discussing the reduction in the rate of corporation tax which we are proposing. It is very modest compared with the amount by which corporation tax has been increased since the old system of income and profits tax on companies in 1964.
      When corporation tax was introduced we were told that the rate should be about 35 per cent. and that this was equivalent to the standard rate of income tax in the old form at 8s. 3d. in the £ which had itself been increased by the Government from 7s. 9d. But the rate was not 35 but 40 per cent. It was raised to 42· 5 per cent. in 1968 and to 45 per cent. in 1969. I suppose that we should be relieved that it has not been increased again this year on the Pavlovian principle that if one stops being beaten over the head one feels a lot better. But an increase of almost 30 per cent. in company taxation is large by any standards, even for this Government.
      8.0 p.m.
      The real disadvantages of our system of corporation tax are well known and have been debated in this Chamber for many years. But I refer again to the emphasis on retentions rather than on distributions, the bypassing of the capital market, and the damaging effect of the close company legislation. All the arguments have been well ventilated and I do not wish to repeat them. My right
      1334
      hon. Friend the Leader of the Opposition warned when corporation tax was introduced that it would make the fat companies fatter—or words to that effect. No doubt the fatter companies are thinner than they were, thanks to the Government. But the way in which corporation tax works is still a positive disincentive to distribute.
      It does not necessarily follow, however, that because there is a disincentive to distribute, the money thereby retained is necessarily invested. What is happening is that some companies are actively lending money to other companies and bypassing the banking system altogether. This is a new phenomenon. There is now a very active market in such loans.
      I do not think that the corporation tax was designed with that end in view, but that is what is now happening. It will last at least as long as the credit squeeze lasts and possibly longer, partly because there is no incentive to distribute earnings under the corporation tax and no particular incentive to invest them in new plant and machinery. Of course it is true that it is partly due to the very high level of interest rates. When a company of the standing of Imperial Tobacco has to pay 10½ per cent. in the market, clearly it must be a very attractive investment to justify that sort of rate.
      Sir G. Nabarro: Would my hon. Friend complete the sentence and go on to say that to guarantee 10½ per cent., 1990 to 1993, which must surely represent, not only in the longevity of the fixed term loan but the record high level of interest, an entirely new departure in lending arrangements in the whole of our history?
      Mr. Hordern: I agree. Who knows, we may even see higher rates, and for longer periods, judging by the way in which the gilt edged market is going because of the credit squeeze.
      The C.B.I. made the point in a recent publication that the average return on capital fell from 14· 7 per cent. in 1964 to 12 per cent. in 1968. If 12 per cent. is the average return on capital now, there is not much margin between that and the real cost of borrowing even to prime companies. Therefore, in talking about the form of the corporation tax, it is clear that there is little or no incentive to

      1335
      invest. When this is combined with the other difficulties which have been put in the way of companies, such as high interest rates, higher petrol duties, the forced loan through selective employment tax and the absurd distinction between manufacturing and service companies, it is not surprising that one of the most lamentable failures of the Government has been to secure an inadequate total level of investment.
      It may not be easy to prove that there is a direct causal relationship between investment and output, but the fact is that our increase in investment and our output is low both in historic terms and in relation to other countries, and it is difficult to see how output can increase without higher investment.
      Let me take our position in investment first. We know that gross domestic fixed capital formation by all industries, except dwellings and public services, increased by ·2 per cent. between 1964 and 1969—that is, at one-tenth the rate of the previous 13 years. We know that actual expenditure on plant and machinery was lower in 1969 than in both the two previous years, 1967 and 1968, although manufacturing investment as a whole was 6 per cent. higher last year and not 11 per cent., as the Financial Secretary said during the Budget debate.
      That does not sound much like recapturing the lost dynamic with which the Prime Minister regaled us in 1964. It is one thing to compare what has happened in investment with the Prime Minister's promises. That is altogether too easy. The word has no meaning for him. He might just as well have given a pledge. What is more important is to compare the respective records of the two parties. The Labour Party's is one-tenth as good as ours, and I hope that that goes into its election manifesto.
      What is most important is to compare this country's recent performance with that of other countries—what one might call the " seed corn stakes ". As a proportion of G.N.P. gross fixed asset formation is 18· 2 per cent. in the United Kingdom, 22· 9 per cent. in France, 23· 1 per cent. in Germany and 34 per cent. in Japan. So we start from a lower base. It is true that we are getting the usual encouraging noises about investment in-
      1336
      tentions from the Government. We were told recently by the Ministry of Technology that industrial investment is due to increase by 10 per cent. this year, but other bodies, notably the C.B.I. and the Financial Times,are a great deal more cautious in their prognostications for this year.
      The prospects for the machine tool industry—and this is the test—appear to be very uncertain. The Government expect no more to be invested in machine tools than was invested last year—£145 million. What is worse is that the figures for total net new orders have been dropping sharply since last October, both for home and for export. This is very discouraging for the outlook for our investment performance and for future production. When combined with the already low level of investment which we have experienced during the last five years, our international export performance is bound to be affected and will suffer.
      All that is in the future, and the Government are not worrying too much about the seed corn right now. But what about the present? What about production? We were promised that there would be no stop-go, and there was not: we had a grinding halt instead. In the last six years of Tory Government, manufacturing production rose by 4· 6 per cent. per annum. In the first six years of Socialist government it rose by 2· 9 per cent. So much for Socialist dynamism, It was by far the worst performance in the last six years of any of the 18 O.E.C.D. countries. The figures from 1963 show that there is not one country in the 18 O.E.C.D. countries which does not have at least a 50 per cent. better record in industrial production than we have. So what price league tables now?
      We have had the lowest increase in G.N.P. per head since 1964 of any of the E.E.C. or E.F.T.A. countries. Industrial production has been acutely disappointing, and with a low level of industrial development and a high level of unemployment it is unlikely to get much better. Let us suppose, however, that demand picks up because of increasing consumer expenditure.
      Mr. Diamond: The hon. Gentleman keeps on talking only about " investment ". Would he make it clear that all the figures that he has given relate to

      1337
      private sector investment, not to total investment, and certainly not public sector investment?
      Mr. Hordern: I am perfectly happy to make that distinction because it is from the private sector that the majority of our export trade must come. Let us suppose, however, that demand picks up because of increasing consumer expenditure. Where will the goods come from? There we have to look at the total stock position. After two years of declining stocks in manufacturing industry, stocks rose last year by £208 million. This compares with an increase of £411 million in 1964, so, if there is a revival of demand, for which we all hope, is not it all too likely that it will have to come from abroad? Are not we up against capacity constraints already? What has happened during the last six years? What has happened to the restructuring of industry which we were to get, and of which the Prime Minister boasted so recently at the Scottish T.U.C. Conference? What is the Ministry of Technology doing about it?
      The Prime Minister was very eloquent about this in 1964. In the Budget debate in that year he spoke of the measures necessary to encourage the creation of efficient competitive industries instead of having to rely so much on importing from overseas at a high cost to our balance of payments. He referred to the import of manufactured goods. He said —and this is a strong point—that in 1953 our import of manufactured goods was a total of £650 million, but, he said, 10 years later in 1963 it was £1,568 million, a rise of over £900 million in 10 years. The position now is that from £1,568 million it has risen to £4,137 million—not an increase of £900 million but of over £2,500 million in manufactured goods in only 6 years.
      The Prime Minister said that by 1963 imports of manufactured finished goods had risen in 10 years by 234 per cent., a very high figure, but the figure in 1963
      was £651 million. It is now £ 1,834 million, so what has he done about restructuring?
      The Prime Minister said that he could not believe that this was something this country can do nothing about. So he has done something. He has applied the import surcharge, and the figures have continued to break record levels. What else could the figures have done? Because of the high level of corporation tax and the other difficulties which industries have to face, the level of investment has been relatively and absolutely far too small, and there is no sign that it will be anything like adequate in the future.
      The trouble is that, even if investment does pick up by 10 per cent. this year, we shall have to rely on imports for a substantial proportion of our investment expenditure, and this is bound to have a harmful effect on our balance of trade. It is no good thinking that the solution to this problem lies in the system of investment cash grants which are given regardless of whether or not profits are earned. What the industry requires is a higher return on capital employed, and this means earning higher profits.
      One of the troubles about this Government is that their whole philosophy is against earning higher profits. They are always talking in terms of a " fair " profit as if there is something evil in earning higher profits. The Government do not seem to understand that it is this attitude which accounts for the lack of confidence in industry which has persisted for so long. One way to restore confidence would be to reduce the rate of corporation tax from 45 to 42· 5 per cent., to show that the Government are not entirely inimical to profits. An even better way would be to get rid of this Government altogether, and for that reason I ask my right hon. and hon. Friends to divide the House.
      Question put, That the Amendment be made:—
      The House divided: Ayes 152, Noes 221.

      Division No. 127.]

      AYES

      [8.15 p.m.

      Alison, Michael (Barkston Ash)

      Batsford, Brian

      Brown, Sir Edward (Bath)

      Allason, James (Hemel Hempstead)

      Bell, Ronald

      Bryan, Paul

      Amery, Rt. Hn. Julian

      Bessell, Peter

      Buck, Antony (Colchester)

      Archer, Jeffrey (Louth)

      Biffen, John

      Burden, F. A.

      Astor, John

      Biggs-Davison, John

      Campbell, B. (Oldham, W.)

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

      Blaker, Peter

      Carlisle, Mark

      Awdry, Daniel

      Brains, Bernard

      Chataway, Christopher

      Baker, Kenneth (Acton)

      Bromley-Davenport, Lt.-Col. Sir Walter

      Chichester-Clark, R.

      Clark, Henry

      Hordern, Peter

      Pike, Miss Mervyn

      Clegg, Walter

      Howell, David (Guildford)

      Prior, J. M. L.

      Craddock, Sir Beresford (Spelthorne)

      Jenkin, Patrick (Woodford)

      Pym, Francis

      Crouch, David

      Johnson Smith, C. (E. Grinstead)

      Ramsden, Rt. Hn. James

      Crowder, F. P.

      Kaberry, Sir Donald

      Rees-Davies, W. R.

      Cunningham, Sir Knox

      Kershaw, Anthony

      Renton, Rt. Hn. Sir David

      Davidson, James(Aberdeenshire, W.)

      Kimball, Marcus

      Rhys Williams, Sir Brandon

      Dean, Paul

      King, Evelyn (Dorset, S.)

      Ridsdale, Julian

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

      King, Tom

      Scott-Hopkins, James

      Dodds-Parker, Douglas

      Kitson, Timothy

      Sharples, Richard

      Eden, Sir John

      Knight, Mrs. Jill

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

      Elliot, Capt. Walter (Carshalton)

      Lancaster, Col. C. G.

      Sinclair, Sir George

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

      Langford-Holt, Sir John

      Smith, Dudley (W'wick & L'mington)

      Emery, Peter

      Lawler, Wallace

      Smith, John (London & W'minster)

      Errington, Sir Eric

      Legge-Bourke, Sir Harry

      Speed, Keith

      Eyre, Reginald

      Longden, Gilbert

      Stainton, Keith

      Farr, John

      Lubbock, Eric

      Stoddart-Scott, Col. Sir M.

      Fisher, Nigel

      McAdden, Sir Stephen

      Summers, Sir Spencer

      Fletcher-Cooke, Charles

      MacArthur, Ian

      Tapsell, Peter

      Foster, Sir John

      Maclean, Sir Fitzroy

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

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

      Macleod, Rt. Hn. Iain

      Taylor, Frank (Moss Side)

      Fry, Peter

      McMaster, Stanley

      Temple, John M.

      Gibson-Watt, David

      Macmillan, Maurice (Farnham)

      Tilney, John

      Gilmour, Sir John (Fife, E.)

      McNair-Wilson, Patrick (NewForest)

      Turton, Rt. Hn. R. H.

      Glover, Sir Douglas

      Maginnis, John E.

      van Straubenzee, W. R.

      Glyn, Sir Richard

      Maude, Angus

      Vaughan-Morgan, Rt. Hn. Sir John

      Godber, Rt. Hn. J. B.

      Maxwell-Hyslop. R. J,

      Waddington, David

      Goodhart, Philip

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

      Wainwright, Richard (Colne Valley)

      Gower, Raymond

      Mitchell. David (Basingstoke)

      Walker, peter (Worcester)

      Grant-Ferris, Sir Robert

      Montgomery, Fergus

      Walker-Smith, Rt. Hn. Sir Derek

      Grieve, Percy

      More, Jasper

      Ward, Christopher (Swindon)

      Griffiths, Eldon (Bury St. Edmunds)

      Morrison, Charles (Devizes)

      Wells, John (Maidstone)

      Hall, John (Wycombe)

      Mott-Radclyffe, Sir Charles

      Whitelaw, Rt. Hn. William

      Hall-Davis, A. G. F.

      Munro-Lucas-Tooth, Sir Hugh

      Wiggin, Jerry

      Hamilton, Michael (Salisbury)

      Murton, Oscar

      Williams, Donald (Dudley)

      Harrison, Brian (Maldon)

      Nabarro, Sir Gerald

      Winstanley, Dr. M. P.

      Harrison, Col. Sir Harwood (Eye)

      Noble, Rt. Hn. Michael

      Wolrige-Gordon, Patrick

      Harvie Anderson, Miss

      Nott, John

      Wood, Rt. Hn. Richard

      Hawkins, Paul

      Onslow, Cranley

      Worsley, Marcus

      Heald, Rt. Hn. Sir Lionel

      Orr-Ewing, Sir lan

      Wright, Esmand

      Heseltine, Michael

      Higgins, Terence L.

      Page, John (Harrow, W.)

      TELLERS FOR THE AYES:

      Hiley, Joseph

      Peel, John

      Mr. Bernard Weatherill and

      Hogg, Rt. Hn, Quintin

      Percival, lan

      Mr. Hector Monro.

      Holland, Philip

      Peyton, John

      NOES

      Abse, Leo

      Coleman, Donald

      Gardner, Tony

      Albu, Austen

      Concannon, J. D.

      Ginsburg, David

      Allaun, Frank (Salford, E.)

      Craddock, George (Bradford, S.)

      Golding, John

      Alldritt, Walter

      Crawshaw, Richard

      Gordon Walker, Rt. Hn. P. C.

      Allen, Scholefield

      Dalyell, Tam

      Gray, Dr. Hugh (Yarmouth)

      Anderson, Donald

      Darling, Rt. Hn. George

      Greenwood, Rt. Hn. Anthony

      Archer, Peter (R'wley Regis & Tipt'n)

      Davidson, Arthur (Accrington)

      Grey, Charles (Durham)

      Armstrong, Ernest

      Davies, Dr. Ernest (Stretford)

      Griffiths, Eddie (Brightside)

      Ashley, Jack

      Davies, S. O. (Merthyr)

      Griffiths, Will (Exchange)

      Ashton, Joe (Bassetlaw)

      de Freitas, Rt. Hn. Sir Geoffrey

      Hamilton, William (Fife, W.)

      Atkins, Ronald (Preston, N.)

      Dempsey, James

      Hamling, William

      Atkinson, Norman (Tottenham)

      Dewar, Donald

      Hannan, William

      Bacon, Rt. Hn. Alice

      Diamond, Rt. Hn. John

      Harper, Joseph

      Barnes, Michael

      Dickens, James

      Harrison, Walter (Wakefield)

      Barnett, Joel

      Doig, Peter

      Haseldine, Norman

      Baxter, William

      Driberg, Tom

      Hattersley, Roy

      Beaney, Alan

      Dunn, James A.

      Henig, Stanley

      Bence, Cyril

      Dunnett, Jack

      Hilton, W. S.

      Bennett, James (G'gow, Bridgeton)

      Dunwoody, Mrs. Gwyneth (Exeter)

      Hooley, Frank

      Bidwell, Sydney

      Eadie, Alex

      Houghton, Rt. Hn. Douglas

      Binns, John

      Edwards, Robert (Bilston)

      Howarth, Robert (Bol'on, E.)

      Bishop, E. S.

      Ellis, John

      Hynd, John

      Blackburn, F.

      English, Michael

      lrvine, Rt. Hn. Sir Arthur

      Blenkinsop, Arthur

      Evans, Albert (lslington, S.W.)

      Jackson, Peter M. (High Peak)

      Boston, Terence

      Evans, Fred (Caerphilly)

      Janner, Sir Barnett

      Bottomley, Rt. Hn. Arthur

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

      Jay, Rt. Hn. Douglas

      Bray, Dr. Jeremy

      Fernyhough, E.

      Jeger, George (Goole)

      Brooks, Edwin

      Finch, Harold

      Jenkins, Hugh (Putney)

      Brown, Rt. Hn. George (Belper)

      Fitch, Alan (Wigan)

      Jenkins, Rt. Hn. Roy (Stechford)

      Buchan, Norman

      Fletcher, Ted (Darlington)

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

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

      Ford, Ben

      Jones, Dan (Burnley)

      Butler, Herbert (Hackney, C.)

      Forrester, John

      Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

      Butter, Mrs. Joyce (Wood Green)

      Fowler, Gerry

      Jones, J. ldwal (Wrexham)

      Callaghan, Rt. Hn. James

      Fraser, John (Norwood)

      Jones, T. Alec (Rhondda, West)

      Castle, Rt. Hn. Barbara

      Freeson, Reginald

      Kelley, Richard

      Cos, Denis

      Galpern, Sir Myer

      Kenyon, Clifford

      1340

      1341

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

      Neal, Harold

      Silkin, Rt. Hn. John (Deptford)

      Kerr, Ruesell (Feltham)

      Newera, Stan

      Silkin, Hn. S. C. (Dulwich)

      Latham, Arthur

      Norwood, Christopher

      Sillars, J.

      Lawson, George

      Ogden, Eric

      Slater, Joseph

      Leadbitter, Ted

      O'Halloran, Michael

      Small, William

      Ledger, Ron

      Orbach, Maurice

      Snow, Julian

      Lee, Rt. Hn. Frederick (Newton)

      Orme, Stanley

      Spriggs, Leslie

      Lee, John (Reading)

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

      Steele, Thomas (Dunbartonshire, W.)

      Lewis, Arthur (W. Ham, N.)

      Padley, Walter

      Swain, Thomas

      Lewis, Ron (Carlisle)

      Palmer, Arthur

      Symonds, J. B.

      Lomas, Kenneth

      Pannell, Rt. Hn. Charles

      Taverns, Dick

      Loughlin, Charles

      Parker, John (Dagenham)

      Thomas, Rt. Hn. George

      Lyon, Alexander W. (York)

      Parkyn, Brian (Bedford)

      Tinn, James

      Lyons, Edward (Bradford, E.)

      Pavitt, Laurence

      Tommy, Frank

      MacDermot, Niail

      Pearson, Arthur (Pontypridd)

      Tuck, Raphael

      Macdonald, A. H.

      Pentland, Norman

      Urwin, T. W.

      McElhone, Frank

      Perry, Ernest G. (Battersea, S.)

      Walden, Brian (Alt Saints)

      Mackenzie, Gregor (Rutherglen)

      Perry, George H. (Nottingham, S.)

      Walker, Harold (Doncaster)

      Mackie, John

      Prentice, Rt. Hn. Reg.

      Wallace, George

      McNamara, J. Kevin

      Price, Christopher (Perry Barr)

      Watkins, David (Consett)

      MacPherson, Malcolm

      Price, Thomas (Westhoughton)

      Watkins, Tudor (Brecon & Radnor)

      Mahon, Peter (Preston, S.)

      Price, William (Rugby)

      Wellbeloved, James

      Mahon, Simon (Bootle)

      Probert, Arthur

      wells, William (Walsall, N.)

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

      Randall, Harry

      White, Mrs. Eirene

      Marks, Kenneth

      Rankin, John

      Whitlock, William

      Marquand, David

      Rees, Merlyn

      Wilkine, W. A.

      Marsh, Rt. Hn. Richard

      Rhodes, Geoffrey

      Willey, Rt. Hn. Frederick

      Mellish, Rt. Hn. Robert

      Roberts, Rt. Hn. Goronwy

      Williams, Alan (Swansea, W.)

      Mendelson, John

      Rodgers, William (Stockton)

      Williams, Alan Lee (Hornchurch)

      Millan, Bruce

      Roebuck, Roy

      Williams, Clifford (Abertillery)

      Miller, Dr. M. S.

      Rogers, George (Kensington, N.)

      Willis, Rt. Hn. George

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

      Rose, Paul

      Wilson, William (Coventry, S.)

      Molloy, William

      Rowlands, E.

      Woodburn, Rt. Hn. A.

      Morgan, Elystan (Cardiganshire)

      Ryan, John

      Woof, Robert

      Morris, Alfred (Wythenshawe)

      Shaw, Arnold (llford, S.)

      Wyatt, Woodrow

      Morris, Charles R. (Openshaw)

      Sheldon, Robert

      Morris, John (Aberavon)

      Shore, Rt. Hn. Peter (Stepney)

      TELLERS FOR THE NOES:

      Mulley, Rt. Hn. Frederick

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

      Mr. Neil McBride and

      Murray, Albert

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

      Mr. R. F. H. Dobson.

      Clause 13 ordered to stand part of the Bill.

    New Clause 1

      SAVINGS: OWN AS YOU EARN
      (1) Where, in accordance with the provisions of this section, a special banking account (hereinafter referred to as an Employee's Saving Account ') is opened on behalf of an individual, he shall be entitled, on making a claim in that behalf, to such relief from income tax as is provided in this section.
      (2) An Employee's Saving Account shall be an account deposited with a joint-stock bank or with a trustee savings bank or such other institution as the Commissioners of Inland Revenue may on application approve, and the Commissioners shall on application approve an institution which is in their opinion capable of handling such an account, bearing in mind the conditions hereinafter provided, the interests of persons on whose behalf accounts are opened and the need to protect Her Majesty's revenue.
      (3) An Employee's Saving Account shall be operated subject to the following conditions—

      (a) it may be opened by an employer on behalf of his employee;

      (b) sums of money, stocks and shares or other securities may be placed in an account by an employer on behalf of the holder of the account;

      1342

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

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

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

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

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

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

      (4) Where the total income of an individual for the year of assessment includes, or would but for this section include, any sum deposited in an Employee's Saving Account by his employer on his behalf, or any sum equal to the value of shares or other securities so

      1343
      deposited, such sum shall be disregarded for all the purposes of the Income Tax Acts other than the furnishing of information:
      Provided that in the event of any individual withdrawing any money or securities from his account an amount shall be chargeable to Schedule E income tax upon him for the year in which the withdrawal takes place equal to the amount of the money withdrawn from the account or, in the case of shares or other securities, their original value at the time at which they were so deposited.—[Mr. Richard Wainwright.]
      Brought up, and read the First time.
      Mr. Richard Wainwright: I beg to move, That the Clause be read a Second time.
      The Deputy Chairman: I think that it would be convenient to discuss at the same time new Clause 3, Contractual investment schemes.
      Mr. Wainwright: This Clause is based on an approach which has inspired a number of Amendments and new Clauses on Finance Bills moved from this Bench since 1956. Each time there has been both support and opposition from hon. Members of both other parties. Most of the opposition has been confined to matters of relative, although often important, detail, and in successive years, in drafting further new Clauses, we have tried to take account of the criticisms made— not that we claim, as a band of purely amateur draftsmen, to have achieved anything like perfection in the drafting of the present new Clause.
      The Clause would provide only one form of incentive for forms of new saving and personal investment compared with the twin and, in our view, expensive incentives required, for instance, by the S.A.Y.E. scheme, which offers a very high rate of interest to those who suffer a standard rate of income tax— 12 per cent. merely on the five year period of savings and a higher rate on the longer term— and almost astronomical rates of interest for surtax payers. That is why so much of the scheme consists of savings which must undoubtedly have been switched, or would at any rate inevitably have been saved, even without S.A.Y.E.
      The Clause offers only one form of incentive, namely, the tax incentive. It offers incentive in the following ways. First, it offers relief from income tax at the time of saving. My right hon. and hon. Friends and I regard this as of great importance. We believe that an incen-
      1344
      tive at the time that the saving is made will attract at any rate a large number of people who are not prepared to wait for what they may regard, perhaps wrongly, as pie in the sky. The claw-back in our case, which is very real, comes if and when the item is spent by the owner of the employee's saving account which we propose. I stress that, at any rate during the lifetime of the owner, we propose what can be in certian tax circumstances a very severe claw-back as a penalty for spending.
      The second branch of our incentive is exemption from any capital gains which may accrue while an invested item is in the custody of an employee's saving account. We regard this as a proper incentive, but, given expert draftsmanship, we would have wished to include in the new Clause some safeguards against abuse of the scheme by those who were using it over a very short time simply to avoid capital gains tax. This, simply owing to lack of drafting skill, is an omission from our new Clause.
      These twin tax reliefs are all within a strict upper limit of savings per year through the employee's saving account. For the purpose of the new Clause we have pitched the limit at £200 in any one year, but clearly—we deliberately intend this—the maximum is entirely flexible. If and when a scheme based on these lines is adopted, we would expect the upper limit to be varied over the years.
      At times, which it is difficult to envisage at the moment but which are certainly within the memory of certain hon. Members present now, when it would be important to release spending power, the upper limit could be appropriately raised.
      8.30 p.m.
      An employee's saving account as provided for in the Clause would be operated by the employer. He would be responsible to the Inland Revenue, rather in the same way as he is under the P.A.Y.E. regulations, for the proper ordering of the scheme, and such banking institutions as are approved by the Inland Revenue would be the responsible custodians. In that connection, I am glad to see that one of our largest clearing banks has in the last few days introduced its own savings scheme which is deliberately intended to attract a very large number of small depositors who hitherto have not been

      1345
      catered for by the large clearing banks. I think that it is safe to say that at any rate the more progressive of our great banks at last realise in one way or another they have to offer a service to the relatively small saver. I hope, although I have no warrant for saying this, that they will co-operate in operating a scheme of this kind.
      It will be apparent to the Committee that the sort of savings that we provide for in the Clause are not limited to cash. We provide for these employee's saving accounts to operate with securities of almost any kind. Chattels, naturally, are excluded.
      Perhaps the most important consideration guiding our minds is that the scheme is an employment-based scheme, being factory, mill, office and shop-based. I shall return to the reasons for this shortly.
      For tax purposes, the scheme distinguishes between the different uses to which income is put. It relieves temporarily from tax income which is definitely saved. To that extent, it is discriminating against income in the hands of another tax payer who might otherwise be in similar circumstances. I refer, of course, to income which is spent.
      There is nothing new in this. The life assurance reliefs for income tax are almost as old as the tax itself. But such discrimination seems to be contrary to the views reached by the most recent of the Royal Commissions on taxation. In the third chapter of the majority report, it seems to advocate that as far as possible in future the development of the tax system should be on neutral lines. It comes down specifically against discrimination in favour of saving.
      Since the publication of the Royal Commission's Report, I am glad to say that its purist ideas seem to have been repudiated by tax thinkers of almost every political colour, and they now look distinctly old-fashioned. That is partly due to the great success of tax-exempted investment schemes amongst our principal industrial competitors, notably the United States and West Germany. Admittedly in America there are limits which I regard as excessively generous. But the abandonment of a purist approach to income tax and the linking together of tax incentive and investment is paying off handsomely in national economic terms by giving a real boost to
      1346
      the small wage-earner investor for the first time.
      I said that one of the main features of the Liberal scheme is that it is employment-based, and we have two distinct reasons for introducing it. First, the new, fresh, genuinely additional savings reason. We believe, after consultation with colleagues and advisers in various industrial centres, that new savings are to be found from people with money to save whose whole habits of life do not lead them anywhere near banks, Post Office Savings Bank counters, or other traditional places where other thrifty people have been used to invest. We believe that the success of works savings schemes of the traditional kind point the way to the advantages of having a realistic savings scheme based on the place of work, so that the terms and conditions, for instance, can be discussed in the canteen, the company's sports pavilion, the drawing office, and in various ways associated with the employment where often the natural leaders of men, the natural wiseacres, the natural sages. are listened to and could stimulate a great interest in modern methods of saving. We believe that the opportunities at the place of work have been seriously neglected by savings agencies.
      The second and distinct reason why we want to see an employment based scheme is that at the moment the way is heavily blocked for ordinary, considerate, thoughtful, perhaps rather cautious, employers to give their employees an opportunity of becoming shareholders either in the concern where they work or in other industrial concerns. Even today, despite all the tax obstacles, an ebullient employer full of confidence and perhaps abnormally bold is, of course, quite free to recommend to his work people shares in his or some allied company, but on condition that they are sold at full market value if the employees wish to avoid a tax assessment. We believe that the number of employers and company directors who really would feel confidence in trying to influence their employees to buy shares in the company at full market value is strictly limited, because most of them are only too well aware of the hazards of the market and of the possibility that, within a short time of selling the shares to their employees at full market value,

      1347
      they might feel unable to look them in the eye because those shares might have slumped to a mere fraction of the figure at which they had been sold.
      We want to see an opportunity provided for employers to offer shares to work people at some kind of discount or as ex gratia bonuses, so that no question of paying full market value shall arise. It is only under those kind of conditions, as experience in other countries has shown, that we can look for a desirable, widespread increase in employee shareholding.
      This is not simply some Liberal notion which the new Clause seeks to propagate. I could quote many authorities miles away from the Liberal Party in their origin. But I content myself on this occasion with the Third General Report of the National Board for Prices and Incomes issued in July, 1968, Command 3715. In the course of that report, after outlining the difficulties of trying to control wage levels, the National Board for Prices and Incomes specifically
      " asked the Government to explore schemes for giving workers a share in the capital growth of industry."
      Here is a body, set up by this Government, under very distinguished leadership, which specifically asked the Government to explore schemes of employee share ownership. Although it is not strictly within the Chief Secretary's Departmental responsibility, I hope that he may be able to give us some indication tonight of what the Government have been doing since July, 1968, in response to that clear and specific request.
      The Clause would go a long way to answering the board's request because it would make it far easier for conscientious employers to offer employee shareholding to their employees. This is not a matter which, if left alone, will quietly go away. My colleagues and I—and I think that our experience is shared by other hon. Members—have found in recent weeks, when talking to people in our constituencies about the election, that the one thing about which shrewd voters have already made up their minds is that whichever Government are returned they will quickly impose some kind of clamp-down on wage increases. This has been said to me several times in my constituency by people of various
      1348
      political attitudes, and I think that it is a realistic prospect to face.
      One question which should be in our minds tonight as we consider this and the other new Clause is whether, if there is to be another clamp-down on wages, maybe in the interests of social justice, possibly in the interests of Socialism itself, we are to go through that whole difficult business without a few new weapons in our armoury? What sticks in the throat of the wage earner when he is told that wage increases must be strictly controlled is the total injustice of the amount saved by paying lower wages simply augmenting company reserves.
      If there is to be any justice in some future wage control system, some answer must be provided to this obvious injustice. At the moment it is the long-term shareholder, the shareholder who is interested in reserves, who benefits from the restraint, compulsory or voluntary, of the wage earner, because the money goes into company reserves. Let us hope that it goes into plant, or research, but, wherever it goes, on the other side of the balance sheet the workers' restraint is reflected in higher shareholders' reserves.
      To our mind the only overall way to deal with this inequity is to foster employee shareholding, not necessarily in the company for which a man works, but over the broad face of industry, whereby the worker would also be the person interested in company reserves.
      Before I conclude I should like to say something about the wider share ownership Clause which is being debated with the Liberal Clause. In our view there is nothing inconsistent in the two Clauses and, as I have said before, we on this bench give a warm welcome to that Clause, not least because it is in no way limited to operations by the National Savings Movement. The scheme very shrewdly devised and set forth in new Clause 3 would be available to anybody willing to satisfy the Board of Trade about certain necessary conditions, and, as it provides a free-for-all, under proper safeguards, we are particularly glad to welcome it.
      One final point occurs to me as an objection which may be raised by some hon. Members. It is a common experience among members of the Liberal

      1349
      Party when we hold forth about the importance of more and more wage earners becoming shareholders and having a stake in industry to be told that this is quite possible at the moment, that to become a shareholder the worker has only to see a stockbroker and give him a cheque, and why he should have any kind of concessions to induce him to do so.
      8.45 p.m.
      At present acquiring a small parcel of shares through the Stock Exchange, or in any other conventional way, is a relatively expensive process. The only way to cheapen share transactions for the small man is to create conditions in which a mass market can develop. It is absurd that the small wage earner should depend on the sheer altruism of certain stockbrokers, who are willing to do a number of small transactions at a loss, to get his transaction through at a reasonable cost. So long as we have antiquated stamp duties with clerical and administrative costs, including S.E.T., to put up the Bill to the small investor—and I fear that his bill may increase further as costs go up in the coming months— it is humbug to talk airily about wanting to encourage the small investor. The cost of making small investments in the present system is a powerful argument for the tax system to be relaxed so that a mass market can be created and the stock market can have conditions in which it would be able to reduce costs.
      These two Clauses taken together, the one providing for employees and the other relating to the Wider Share Ownership Council, remove the serious barriers which at present obstruct a growing tide. This is not a do-good proposal which has been thought up to impose upon people. It is made in response to a growing demand by people of all sorts and all political attitudes, by those who want to be modern, up-to-date investors starting in a small way.
      What is the purpose of educating not merely future business graduates but a large section of our young people in economics, which is now taught in schools in comparatively low forms, if at the end of the day we can only offer as a receptacle for their spare cash—and young, unmarried people often have a bit of spare cash—an outworn and limited choice in what are called national savings?
      [Mrs. LENA JEGER in the Chair]
      Mr. Patrick Jenkin: I am grateful for the opportunity to follow the hon. Member for Colne Valley (Mr. Richard Wainwright) since his new Clause is coupled with our new Clause 3, which stands in the names of both Liberal and Conservative hon. Members. We welcome the fact that in this matter their name is coupled with ours.
      I should like to comment on what the hon. Gentleman said in moving the Second Reading of his new Clause. I agree with what he said about difficulties in the way of members of the public with limited means who wish to invest directly in the stock market. There is no doubt that the whole stockbroking system has grown up and developed for substantial investors—on the whole, it serves them very well—and that it is totally unsuited to the needs of the small investor. For this reason the unit trust movement and other avenues for small investors have flourished mightily in the last decade and a half.
      Stamp duty is undoubtedly a disincentive. It is the oldest tax in the book. It was the first tax, apart from import duties, to be relied on over the years by Governments and it has become an anachronism. On another provision which we will be considering in Committee upstairs, a start is being made to get rid of this inhibition to normal financial transactions.
      I agree with the hon. Member for Colne Valley that there is no inconsistency between the two alternative forms of encouraging savings; the scheme in new Clause I promoted by the Liberal Party and that in new Clause 3. They are different and they approach the problem from different angles. They have many features which differ from each other, but they have in common a genuine desire to increase the savings ratio by providing new and attractive opportunities to savers to put aside, rather than spend, a part of their income.
      A feature I particularly like about the Liberal scheme is that it would give tax relief when the saving was made. Hon. Members will be aware that my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) had argued for years for a save-as-you-earn scheme. This

      1351
      name was taken last year by the Government, with the blessings of my hon. Friends.
      Mr. Diamond: And with acknowledgements from the Government.
      Mr. Jenkin: With acknowledgements from the Treasury Bench which we greatly appreciated. Under the S.A.Y.E. scheme tax relief, such as it is, accrues at the end of the contractual period and not when savings are made. The same would apply under new Clause 3.
      Another feature I like about the Liberal scheme is that it would link the machinery of saving with the saver's place of work, and I agree with what the hon. Member for Colne Valley said about this being one of the points of contact between the individual and the possibility of his saving, a point which has, perhaps, not been fully tapped in the past.
      I was somewhat less enthusiastic about the idea of employees' savings accounts being a principal vehicle by which employees could become shareholders in the concerns for which they work. I have always felt that there are considerable risks in this. One appreciates the desire to achieve a unity of interest between shareholders and employees—the share option scheme has a great part to play, but unfortunately it was severely hampered by legislation passed by the Government three years ago—but there are risks in asking people of limited means to tie up substantial parts of their savings by investing in the companies on which they rely for their employment. It means, for example, that if a company gets into serious difficulties and workers face redundancy, they could also face the loss of their savings.
      One must approach with great caution the argument that employee shareholdings can be a way of improving industrial relations. Considerable weight must be given to the experience of many firms and bodies which have advised on this matter. Experience shows that if one is to have what used to be called coownership—co-partnership or employee shareholdings—these must primarily be a reflection of good relations that already exist rather than a means of trying to improve relations which are at present strained.
      1352
      The hon. Member for Colne Valley foresaw the reluctance of employers to seek to sell shares to their employees because of animosities which might arise if the shares did not perform as anticipated. I always think of the story of an employer, no doubt great-hearted and benevolent, who was able to persuade his employees to buy shares in his company. Within six months the shares had depreciated very considerably in value. They came to him and demanded that the directors should buy back the shares at the price originally paid. The employer, being great-hearted and benevolent, finally agreed to do this. Six months later the shares had doubled above the value at which they had been orginally purchased. Then the employees came back and said, " We always thought you were a rogue; now we know you are." That is the sort of danger one could get into.
      I turn to new Clause 3, to which I wish to devote the greater part of my speech. Before dealing with the details, I shall say a word or two about savings in general. I regret very much the unavoidable absence of my hon. Friend the Member for Harrow, Central (Mr. Grant). As an active and enthusiastic member of the Wider Share Ownership Council he has done more than most hon. Members to promote saving by small savers. He had the support of my hon. Friend the Member for Farnham (Mr. Maurice Macmillan), who will wind up in this debate for the Opposition, as well as the hon. Member for Colne Valley, the right hon. Member for Sowerby (Mr. Houghton) and other hon. and right hon. Members who have served as members of the Wider Share Ownership Council. He is unfortunately unable to be with us this evening. He asked me to tender his apology to the Committee and to the Government because he would like to have participated in this debate.
      Mr. Eric Lubbock: Canvassing?
      Mr. Jenkin: On the contrary, he is attending the annual dinner of his contituency association.
      Few people would disagree that many of the problems of our economy would be a great deal nearer to solution if we could persuade more fellow citizens to save more and spend less. I think there was a tendency in the first years of the

      1353
      present Government to recognise that the high level of private consumption was one of the weaker aspects of our economy, but they saw the remedy rather in the form of increasing public consumption and shifting the balance from private to public consumption. Therefore, taxes were increased and public spending increased but private consumption, of course, continued very much as before. There has been little evidence of a turndown in it, and savings have taken the brunt.
      It is nothing other than the simple truth that the percentage of after-tax incomes which have been saved has fallen since 1964– 65. If one goes back to the years since the war, one finds that in 1951 the percentage of after-tax income saved was 1· 5 per cent., by 1959 it had risen to 5·1 per cent., by 1965 to 8·5 per cent. and there was a steady increase in the proportion of incomes saved. Since then it has fallen back steadily and is now only 7·7 per cent. Had savings in those first years after the 1964 election stayed at the level that was achieved in 1964–65, this year personal savings would be £300 million higher than they are. Had they continued to rise at the rate achieved in 1951, they would have been many hundreds of millions higher.
      9.0 p.m.
      In such a happy event the taxation which the Labour Government would have had to levy would have been much less and we should have been in that virtuous circle to which my right hon. Friend the Member for Enfield, West referred yesterday of lower taxation, leading to higher savings, in turn leading to still lower taxes. The Tories achieved this. Under the Socialists the circle as it were tailed off within a matter of months. This is no accident. Yesterday my right hon. Friend the Member for Enfield, West referred also to the work done by Mr. Brian Reading and Mr. David Lomax—
      The Temporary Chairman: Order. I appreciate that the hon. Gentleman is giving the background to his argument, but it would be for the convenience of the Committee if he could come a little nearer to the new Clause and give the Committee some more information about the contractual investment schemes which are the subject of the new Clause.
      Mr. Jenkin: I apologise if I have strayed out of order, Mrs. Jeger, but I thought that it was desirable to develop the argument as to why it is necessary at this stage to give a new thrust. It is difficult to argue this unless one has set the context. I will try to deal with this as briefly as possible.
      Yesterday my right hon. Friend dealt with the Reading and Lomax thesis which shows that changes in savings can offset up to a half of the change in the real disposable income level relative to its long-term trend. In other words, Chancellors who can achieve entry into the virtuous orbit can confidently expect that, over a period of years, tax reductions will turn into increased savings to a very substantial extent. On the other hand, Chancellors who fail to achieve re-entry will continue to orbit in perpetuity in a disastrous spiral of rising taxes and falling savings. It is an undeniable fact that Tory Chancellors have achieved the happy state with monotonous regularity. No Socialist Chancellor in Great Britain has ever succeeded in doing so.
      I come to the new Clause. We need an initial thrust to break out of the present vicious circle into the virtuous one. As major tax reductions are ruled out by this Government—we have had debates now for nearly two days on this subject—we must start at the savings end. If all savings could be made more attractive by hacking away at the disincentives to savings, that would be fine. It would be fine if we could do something about the higher rate of tax on savings income, if we could do something about the capital gains tax, one of the highest rates of capital gains tax in the world, and if we could do something about estate duty, which has virtually doubled in effect in the last 20 years. But we cannot do that. The Government have ruled ail this out.
      Therefore, we turn to new ways of attracting new savings—not just a switch from existing media, but genuine new savings. What we propose in new Clause 3 is a modification of S.A.Y.E. to give it, as it were, an equity link.
      Most new schemes have been aimed at infusing new life into the National Savings movement. The premium bonds have perhaps been the most outstanding and successful example of this, and now

      1355
      £700 million or £800 million remain invested in premium bonds. The recently announced 9 per cent. development bonds are also going well.
      However, it is undeniable that the National Savings Movement is at the moment very much in the doldrums. 1969–70 saw a net fall in National Savings of £129·4 million and, excluding net accrued interest of £136·8 million, the total fall was £266·2 million. The truth of the matter is that, in a year of accelerating inflation, there is little attraction for small savers.
      Indeed, one of the ironies of the National Savings Movement's efforts is that its educational programme, to which it attaches great importance, may actually be turning savers to other media—to building societies, life assurance, unit trusts, and others. I could quote figures; but, Mrs. Jeger, in view of your anxiety that we should concentrate on the Clause, I will forbear from doing that.
      It is true, as I am sure that the Chief Secretary will agree, that National Savings are uniquely valuable to Chancellors of the Exchequer. In that case, a £1 saved is £1 less in taxes. When we think of the need to finance nationalised industries the importance of this cannot be over-rated. We want to link our scheme with lending to the Government and the device which has been adopted by the Wider Share Ownership Council is to have a 50–50 split of the sums invested by savers, broadly on the lines of the Trustee Investments Act, 1961. Part will go into fixed interest and half into a selected range of equities. We go further. Because we want to make sure that the Government derive considerable benefit from our new equity-linked S.A.Y.E., the 50 per cent. that is to go into fixed interest is to be confined to the Government stocks, the same ones which are exempt from capital gains tax and are set out in the Schedule to last year's Finance Act.
      The other half would go into the wider range securities as defined in the Trustee Investments Act. The contractual saver would then save on exactly the same terms as apply to S.A.Y.E. at present. We would not have the seven-year term but would confine it to five years. The saver has to agree to save a certain
      1356
      amount each month for a minimum period of five years. The money saved would then go into the fund and would be divided into the two halves, fixed interest and the wider category fund. Income would be accumulated and the saver would become entitled to the units allocated to him on the monthly subscription basis precisely in accordance with the normal unit trust practice.
      At the end of five years he would be entitled to withdraw. The limits are the same for S.A.Y.E. There would be a maximum of £10 a month although lesser amounts could be contracted. Like S.A.Y.E., the main attraction is that—
      Mr. Diamond: The hon. Gentleman said that the limits would be the same as for S.A.Y.E. and instanced £10 a month. The limits under the S.A.Y.E. scheme are £10 a month, to both of the two schemes only. Would the hon. Gentleman tell me how he proposes to deal with that?
      Mr. Jenkin: This may not be fully spelled out in the new Clause but we would envisage this as being additional to the two. A person may have only one of the equity-linked schemes at a time when the existing S.A.Y.E. and the building society S.A.Y.E We see no difficulty in policing that There is no more difficulty than the Government already face in policing the difference between the building society scheme and the National Savings scheme. Presumably there is a spot check. There is no other way. We see this as additional to the other two.
      I was about to come to the tax advantages of the equity-linked S.A.Y.E. scheme. In the first place the Government stock fund would be charged to tax not at the standard rate but the life insurance rate of 37·5 per cent. This would put it on the same basis as investments in life funds. Secondly, there would be no Schedule F tax on income from investments in the Government Stock Fund, but Schedule F would inevitably be deducted from dividends paid to the equity fund and there would be no way of avoiding that. There would be no capital gains tax charged on the fund on gains or losses, either in the Government stock fund or the wider range fund. We regard this as one of the most important of the tax advantages. Similarly, there would be no capital gains tax or income tax

      1357
      charged on the investor in the disposal of the units after the five-year period had elapsed.
      It is interesting to see how one parallels this, although it is from a different approach. Like the Liberal scheme, we have to impose quite a severe disincentive on withdrawals before the five years are up, or of course, to prevent the fund going into breach of the terms approved by the Board of Trade. If the saver chooses to withdraw his units in those circumstances, all he will be entitled to is his money back, plus 2½ per cent. interest, exactly like S.A.Y.E., or the value of his units as they stand at the date of withdrawal if that is less. tie cannot get more than his money back plus 2½ per cent., but if the investments have fallen so that his money would be worth less, that is all he gets—the actual value.
      This seems a necessary precaution, just as the S.A.Y.E. scheme has to have a precaution to ensure that savers adhere to the principal purpose of the scheme, which is to save by contract over a period of years. We have tried to make this scheme as nearly similar to S.A.Y.E. as we can, while at the same time importing the equity element.
      We envisage that the scheme would be run by a variety of bodies. The hon. Member for Colne Valley suggested that it could be run by the National Savings movement, but I am not sure that that movement would wish to become involved in as big a departure as this from its normal activities. From discussions which I have had, I am satisfied that that movement would be perfectly happy that schemes should be run by such bodies as unit trust managers, trustee savings banks, and perhaps the public trustee could be persuaded to set up a scheme for this kind of saving.
      Anyone who was going to run this would, of course, require the approval of the Board of Trade and any charges and expenses—this is spelled out in the Clause—which the managers of the scheme would want to make would have themselves to be borne as approved by the Board of Trade.
      The Wider Share Ownership Council believes—I very much endorse its view—that a contractual investment scheme on these lines would have a powerful attraction for the modern saver, the saver who
      1358
      is perhaps a little more sophisticated than he was a generation ago, who wants the tax advantages of S.A.Y.E., is not prepared to go into a fixed interest situation, but feels that, in the current state of the economy, as it is likely to be for the foreseeable future, he wants a hedge against inflation.
      Certainly, some extra spur is needed and some new stimulus has to be provided. No one can be satisfied with the level of savings. S.A.Y.E. has attracted only about £6 million in 1969–70, although by the time that it has built up on the basis of existing contracts, represents a commitment of just under £100 million. But no one would disagree that this is only a modest and unexciting start. The simple truth seems to be that a contractual obligation plus a fixed interest return does not tempt savers, whatever the tax advantages. I believe that a contractual obligation, plus an equity element, could well do the trick and attract substantial additional savings which are not being found at present.
      Anyway, we are encouraged to try and we think that the Government should try. I hope that Treasury Ministers will look favourably upon what I might describe as this " tuppence coloured " version of their own " penny plain " scheme last year.
      Mr. Wallace Lawler: It is obvious that the place of employment is the best and most effective venue for the promotion of any new savings. I can speak on this aspect of the Amendment with some authority, because for about 30 years I have been closely connected with the shop floor in one of our largest industrial areas. I could give an example of the way in which savings can be encouraged by industry and I go a long way to support my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright) in saying, rightly, that the ordinary employee, certainly in the Midlands, is not too familiar with the joint stock banks. He has a hesitation about having a cheque book for the most part. This was shown by the considerable resistance and suspicion that accompanied the proposal for the payment generally of wages by cheque in the Midlands. Similarly, many workers shun the Post Office, perhaps for reasons not altogether connected with what we are talking about, until they

      1359
      reach the age when they go to a post office with their books to draw the basic pension.
      9.15 p.m.
      The shop floor and industry generally is, then the right place. My hon. Friend the Member for Colne Valley spoke about the atmosphere of the canteen that exists in about 95 per cent. of industry—the place where men and women can talk together and which, indeed, is the only communal place where they can talk about interest in group savings.
      A memory of 30 years ago was brought back to me rather painfully this week. In Birmingham, a small firm which started with about 80 employees grew to have over 1,000 through a mutual savings scheme operated by the employer and very happily enjoyed by the employees. The scheme was centred on the purchase of a canteen by the company on behalf of the employees and a share in the canteen and its profits was put into a savings account for each employee every month. That scheme stopped a few years ago when the firm was taken over by a large public company. Only this week the closure of the firm was announced. It is important to be prepared to recognise that if we want to see a substantial increase in new savings industry and the shop floor for the most part are the best place to start.
      The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) reminded us of something that might have applied to the mentality of 20 or 30 years ago on the subject of the issue of shares to employees. There are rises and falls in the share market all the time which must be taken into general consideration, but again I was reminded only this week, and the Committee should be reminded, that where there is no contact at board room or share-owning level between employer and employees one can often reach a stage, which an important company in Wolverhampton reached this week, when closure was announced overnight and every employee faced the loss of his job within a few days by the sudden appointment of an official receiver.
      Of course there should be a move towards co-ownership and every possible support for any sensible move that helps
      1360
      to give the employee a limited and active participation in the ownership of the company for which he works. Firms are quite accustomed to savings schemes. It is interesting to remember that practically every firm has to operate one unofficially at the moment. In order to pay its holiday credit each year each week it has to go through the administrative process of putting aside one-fiftieth of the employee's earnings in order to enable the employee quite rightly to have the money to enjoy his holiday. We would therefore not be asking for any great new administrative task in suggesting that the employer could play an important part—and some would do so happily—in the promotion of employee savings accounts. I hope that the Committee will not too readily dismiss some of the strong arguments in justification of the Amendment.
      Sir Brandon Rhys Williams: I am grateful to you, Mrs. Jeger, for giving me the opportunity of intervening, I hope at not too great length, before the Chief Secretary allows us to hear his observations. It so happens that new Clause 1, which I read only this afternoon, seems to run with thoughts which have been developing in my mind for a considerable time. I am only too happy to give my support to the ideas contained in new Clause 1, and particularly to congratulate the hon. Member for Colne Valley (Mr. Richard Wainwright) on moving it so ably and convincingly.
      For a long time I have felt that the most dramatic need hanging over the economy was an increased propensity to save in the private sector. The Government have solved the shortage of savings to some extent through a method which is entirely unacceptable to the Opposition, that is to say by raising taxation and achieving a form of compulsory saving—it might be known as the nationalisation of savings. New Clauses 1 and 3 are an atempt to show that the private sector is not finished where savings are concerned; but it needs encouragement from the Government.
      A very good principle is involved in the slogan, " Save now, pay tax later " or, considering the terms of new Clause 3, " Pay less tax later ", or even, " Save now, pay no tax later ". But before

      1361
      the Government consider giving concessions to the private sector to encourage savings, it would be useful to do an exercise, as a businessman might, and decide what is the target, what are the roles of the various parties involved, and to set the plan in the context of the economy as we see it today.
      First, what is the target? How much savings are we trying to obtain by means of the sort of concessions which we are now considering? It would not be unrealistic or too ambitious to say that what we ought to be saving in this country is about 20 per cent. of the national product, but I am told that the actual figure is now between 5 per cent. and 7 per cent. That is plainly not enough; it is probably not enough simply to replace the existing stock of capital and certainly not enough to enable us to compete with, for instance, the Japanese in the 1970s and the 1980s. My view is that the target for saving in the private sector should be about 20 per cent. I do not know, but I am inclined to doubt whether either New Clause 1 or New Clause 3, if adopted precisely as they stand, would achieve as much as 20 per cent. saving within a measurable time.
      If one is to think of this type of saving as arising automatically from employment, it may not be out of place to consider some slogan such as, " Ten minutes in the hour ". There are 60 minutes in the hour and one might allow oneself, say, 50 minutes for current consumption and 10 minutes for the future, 10 minutes against 50 gives 20 per cent., which seems probably the minimum at which we should aim.
      Of course, a great deal of saving is now going on in the private sector and one must particularly take into account contractual savings and savings in occupational pension schemes. What exactly is the employers' rôle? In New Clause 1 it is clearly intended that these schemes should be adopted at the instigation of employers. Suppose that the employer and employee are equally responsible for putting money aside for the future. The employer should therefore aim to reach 10 per cent. out of the 20 per cent. The National Superannuation and Social Insurance Bill makes it incumbent on employers to put about only4¾ per cent. towards the provisions of
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      pensions, and that only on a band of earnings up to £1,900 a year.
      I was extremely surprised and disappointed to find that under that Bill the percentage which employers were expected to put into savings schemes was under 5 per cent. But one cannot load too many burdens on to employers all at once; they are staggering under the weight of the burdens which they are carrying now. One perhaps might hope that employers should have it made incumbent on them that over a span of years—perhaps five or six years— their contribution to employees' savings funds should rise progressively from, say, 5 per cent. in the first year to 10 per cent. after the passage of time.
      That may seem to some people a wild or excessive suggestion. But all good employers are already doing at least that through their occupational pension schemes. A generous occupational fund aimed to give a pension of, say, two-thirds of final earnings on retirement is likely to require 15 per cent., or thereabouts, in current contributions as time goes by.
      Neither of the proposed schemes places sufficient emphasis on the obligation of the employer to contribute to some savings device; but if the best employers are already paying 10, 15 and, in some cases, 20 per cent. per annum into savings schemes on behalf of their employees, I do not see why over a period the State should not make it part of the contract of employment that all employers should do so. At present the best employers are putting themselves voluntarily at a disadvantage in competition with employers who do not honour this aspect of the contract of employment.
      So much for the employers' rôle which, I am not ashamed to suggest, should gradually become obligatory. What about the rôle of the employees? Do we feel that the national emergency demanding a transfer of resources from current consumption to savings and investment is so dire that we must make it obligatory on employees to give, say, 10 per cent. from their earnings from employment to some kind of savings fund? It can be argued that the need for saving and investment in the private sector is indeed so great that we should envisage it, but I would not wish to do so. If we are

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      on the way to a property-owning democracy—and that is not a slogan which one hears only on this side of the Committee —it must be one in which a man has arrived at a state of ownership of savings by his own endeavours and not by compulsion.
      In passing, may I deliver myself of a sentiment about occupational schemes which contain a compulsory element of contribution from employees? I know that there are arguments in favour of employers obliging employees to set money aside in this way. It is, not universal, but very common to find compulsory contributions to savings of 4 and 5 per cent. in well managed and reputable occupational schemes. Nevertheless, we should stick to the voluntary principle. I hope that in due course there will be a phasing out of the contributory occupational pension scheme, although in general my heart is in favour of encouraging to the maximum employees to put something aside out of their earnings for personal saving. I am not attracted by the theory that the employer has the right to compel an employee to dispose of his earnings in any specific way, and there are particular objections to employers obliging their employees to put their savings into occupational schemes which are final-salary related. A final-salary related scheme means that the value of the man's savings are ultimately determined not by himself or the market but by the employer's estimate of the man's earning capacity in his last few years. This introduces an arbitrary factor which is not appropriate in any compulsory savings scheme.
      Under the new principle embodied in new Clause 1 and new Clause 3, how are we to induce the new savings at the rate we want? We should aim to give tax concessions of the most seductive kind, to make savings so attractive and so interesting that the savings habit will rapidly become universal. It is not easy to pick upon a form of taxation concession which is likely to achieve the desired result all at once. New Clause 1 suggests the simple principle of the tax not becoming payable until the money is eventually drawn out of the fund. New Clause 3 suggests that there should be no tax at all provided the man is willing to tie up his money for at least five years. This
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      is similar to the principle of the Government's Save-as-you-earn scheme. Neither of those proposals says the last word on tax concessions. Will the Chief Secretary tell us how the Government's thinking is developing? He too must be aware of the need to stimulate saving in the private sector.
      Apart from tax concessions, one needs freedom to invest in equities or property or in an asset in which people still have confidence after years of inflation. The equity market at present may not give people too much confidence that their assets will retain their value in face of depreciation of the currency; yet over a period of years the equity market has given a considerable degree of protection, and more than protection, against changes in the value of money. The relative lack of success of the Government's save-as-you-earn scheme shows that if money has to be invested in a fixed interest security the scheme will not catch the attention of the public. I therefore commend the intention of new Clause 1 to allow any class of security to be deposited in, and presumably to be purchased by, this type of scheme.
      If, however, the money is allowed to go into equity investment, it must be admitted that the money will go into speculative investment. It would be disastrous for timid people who are embarking for the first time on accumulating new savings, especially through a Government induced scheme, to find that their savings, either through misadventure or, in an extreme case, misappropriation, were being lost. I therefore do not accept what appears to be the intention of new Clause 1, that any class of fund would automatically attract the approval of the Inland Revenue for the purpose. We should go much nearer the type of restriction that the 1956 Act placed on occupational savings for self-employed persons and have a tightly drawn-up list of approved funds to which public savings could go under this type of tax concession.
      There is a vexed problem in the withdrawal of savings from these schemes. The 1956 Act has not succeeded in creating a large flow of savings from self-employed people. It gives the attraction of total freedom from income tax and from capital gains, but it has apparently a fatal flaw in the fact that money once

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      subscribed under the 1956 Act cannot be withdrawn. People setting money aside for retirement are often afraid that business fluctuations, or some accident in the home, or problems of an unforeseeable nature, will place upon them the urgent need to mobilise their savings and all the assets they can lay hands on. The relative failure of the 1956 Act is not so much due to the upper limit that is built into it, but due to the problem that if a man requires to withdraw his savings unexpectedly, he is stuck. He is either penalised or he finds that the rules do not permit it.
      I am not too happy with new Clause 1 in this respect, because the incidence of tax on savings might be variable. If a man were to accumulate a fund of £5,000 or £10,000 with the passage of time and was then to draw it all out in one year, it seems to me that the clause would make him liable for income tax on that sum and surtax, too. This would be an insuperable obstacle to people accumulating large sums in these funds because they would recognise the danger of the whole amount disappearing in surtax all at one time.
      In occupational schemes in the private sector there has been a great deal of dispute over a number of years over what happens to a man's own contributions if he chooses to change his job and draws out his own contribution. I support what the Government have done in sticking to the existing freedom of an employee to withdraw his savings from occupational schemes when he changes his employment. But we need to have a longer look at the tax concession, which I feel is too generous in regard to schemes under section 379.
      One possibility is that one might apply to sums withdrawn from tax-concession saving schemes of all kinds the composite rate of tax used for Building Societies. I understand that this annually-negotiated composite rate is an attempt to arrive at the average true rate of income tax paid by the average person. I know that this is one of the most technical fields of tax, but the standard rate of tax appears to be inappropriate and if a man's own circumstances made him liable for surtax at the time when he withdrew his savings, that would not be appropriate either.
      There is an alternative which might commend itself to the Chief Secretary.
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      In occupational schemes we are working our way towards the idea of a lump sum which would be more or less automatic. Nobody is more enthusiastic about that idea than I am. The entitlement to a lump sum at the end of a career is one of the great attractions of the Civil Service occupational scheme. If it becomes normal in all occupational saving schemes for superannuation purposes that a 25 per cent. lump sum should be permitted, the concept will grow in the mind of the public that within each fund is a lump sum element building up as well as an entitlement ultimately to an annuity. It will be assumed that the fund is split between lump sum provision and money accumulating for the purpose of an annuity. If the lump sum is available on the attainment of the age of 65, it would not be inappropriate to consider allowing people to take out this lump sum at any time, particularly in the event of an emergency.
      The tax considerations are rather knotty and I realise that the British public contains people who are ingenious in devising ways round their tax obligations. People might soon learn to take their 25 per cent. lump sum every three or five years in order to evade tax. Some sort of tax no doubt would have to be paid on the 25 per cent. lump sum. But the more generous the tax concessions given in a scheme of the kind suggested in new Clause 1 or new Clause 3, the more necessary it will be for the Government to give serious attention to the circumstances applying when, for one reason or another, the owner of the savings decides that he wishes to withdraw a part of them.
      There are a couple of other considerations which are relevant. For example, what about an upper limit on the amount which people can put into these schemes every year? I suggested just now that our slogan should be, " Ten Minutes in the Hour ". I stand by that. But if " Ten Minutes in the Hour " is good, some people may say that " Twenty Minutes in the Hour " is even better. People like authors or actors with highly fluctuating earnings might try to take advantage of such a scheme to hide large parts of their incomes from the clutches of the Revenue.
      New Clause 1 is especially ungenerous here, so much so that it is likely to make

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      the scheme of little value in that it suggests an upper limit of only £200 in any year. One of the criticisms of the 1956 Act is that its upper limit is set too low at £750. The proposed £200 seems to make this altogether too tentative a beginning, and I would not agree to it in the long run, though that does not alter my support for the Clause in general.
      I would prefer the upper limit to be not an absolute sum but a percentage of the relevant year's income in total. Possibly it might be advisable to spread it over an average of two, three or five years and calculate the upper limit as a percentage moving over a period. However, that is a matter which would need to be given further study.
      I come finally to the question of when a reform of this kind should be introduced. I do not think that the Chief Secretary will recommend tonight the acceptance of new Clause 1. However, I urge him to accept that this idea is not just a kite or an interesting way of speculating in the course of an evening. It is a serious contribution, and so is new Clause 3, to a solution of the national emergency now arising through the shortage of savings. The time to introduce an imaginative scheme to stimulate the interest of the public in saving is now.
      The solution to our inflation problems is to invest our way out of inflation. The old classic description of inflation is, " Too much money chasing too few goods ". The Government have tried to reduce the amount of money, but they have done it in a way which has reduced the supply of goods as well. They have, at any rate, acted in a very unfriendly way towards investment both by raising interest rates to astronomical heights and by placing curbs on bank advances for investment purposes.
      A Government initiative to encourage private savings on a very large scale should have two principal objectives. The first is to reduce demand for the current supply of goods and services. The second is to increase the supply of a large number of goods and services in the long run by making available very much larger volumes of money for the capital market. Let the surplus of money which is troubling the economy at the moment be
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      converted into a superfluity of goods in the future.
      9.45 p.m.
      Mr. Diamond: I do not want to limit the debate, Mrs. Jeger. If any hon. Member is anxious to speak I will sit down after I have said the one thing that I am most anxious to say. I think that I can say, on behalf of the whole Committee, that we feel extremely privileged that we are the first to have the enjoyment of seeing you occupying the Chair with such grace and charm.
      Having said that, I will give way.
      Mr. Kenneth Baker: Such gallantry.
      I was rising only to express rather less enthusiasm for new Clauses 1 and 3 than some of my colleagues. None the less, these two new Clauses are being moved in the context of a declining level of National Savings both in the public and private sectors. I do not think that hon. Members on either side, even in election year, can take any joy from the fact that National Savings last year declined by about £125 million.
      We are also faced in the private sector with a considerable degree of disinvestment to the unit trust movement and also, to some extent, to the investment trust movement. This is a depressing and discouraging trend, because the economic growth that we all want—better factories, better machines and expansion—will only come from the small savings of relatively modest people. These savings are not being invested as they should be, constructively and effectively, in industry. Our savings ratio is one of the lowest in the developed countries. It is between 6 and 7 per cent. at the moment. Hon. Members have quoted repeatedly in the debate that in Japan it is over 20 per cent., and it is much higher in many Western European countries than the rate we are achieving. This is the context in which the new Clauses are being discussed.
      I believe that the only effective way to stimulate savings is for a Government, over a period of years, to do something to stop the rate of inflation. When the underlying value and purchasing power of money is being eroded at the present rate, why bother to save? When inflation is increasing this year at, I estimate, about 8 per cent.—I doubt whether the

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      Chief Secretary will deny that figure—it is ridiculous to invest, for example, in gilt-edged securities, which yield only 9 per cent., because one is worse off at the end of the year.
      Mr. Sheldon: In calculating the figure that the hon. Gentleman gives for inflation, we must deduct from the increase in costs through wages the actual increase in productivity. Assuming that wages may increase by as much as 10 per cent., a 3½ per cent. increase in productivity would mean a price increase of 6½ per cent. We are seeing figures of that kind on the Continent.
      Mr. Baker: That is a most interesting point. Taking the basic figures of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), one gets 6½ per cent. But I suspect that the real wage inflation, allowing for wage drift towards the middle and latter part of the year, will probably exceed 10 per cent. I suggest that it is likely to be about 12½ per cent. If we achieve an increase in productivity of 3½ per cent., which would be a record for the six years of Labour Government, having started with 12½ per cent., it would be 9 per cent. Perhaps the Chief Secretary in winding up will give his view on what it will be this year.
      The Prime Minister was repeatedly asked at Question Time on 7th May by my right hon. Friend the Member for Barnet (Mr. Maudling) for his estimate on inflation this year. The Prime Minister refused to answer that question on three sperate occasions, referring my right hon. Friend to the Budget Statement. But there is nothing in the Budget Statement which specifically states what the rate of inflation will be this year. I have hazarded a guess of 8 per cent. The hon. Member for Ashton-under-Lyne thinks that it may be a maximum of 6½ per cent.
      Mr. Sheldon: I was not giving my view of the rate of inflation. I was saying that, given the hon. Gentleman's most pessimistic figures, it would be 6½ per cent. I think that it will be considerably less than that.
      Mr. Baker: I hope that when the Chief Secretary replies to the debate he will give us his view, because it is awaited with interest. Until my view is refuted I maintain that it forms the basis for argument. When inflation is as high as that,
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      ordinary people are discouraged from saving, and rightly so. The most important thing is to get the climate right for saving and to persuade people that it is worth-while saving, because when money is being eroded someone might as well spend it on almost anything, preferably on something which will retain its value, but which is not very productive. Old pictures, old furniture, and things like that are almost certain to go up in value, but money spent on those items will not increase productivity by any per cent. at all.
      I have some reservations about the two new Clauses, because I think that they are rather gimmicky. Both would set up funds which would have special investment positions. They would be exempt from capital gains tax, and to some extent exempt from corporation tax and Schedule F. When it is necessary to produce gimmicks of that sort to stimulate savings, it reinforces my earlier argument that people have lost the saving habit, and it is only from savings that our growth can come.
      New Clause 3 contains one of the most unattractive features of any fund— a split fund between Government stock and equity shares. The House of Commons Members' Pension Fund is invested in this way, and its rate of growth is a disgrace. It would be much better if the trustees of the fund had decided to invest in the equity market and not in gilt-edged at all. We would all be better off in our old age if this decision were made as quickly as possible.
      Mr. Lubbock: Would it not be better if we had the money to invest ourselves instead of having somebody else to do it for us?
      Mr. Baker: I could not disagree with that at all. I do not want to go far beyond the point, but I think that our fund needs a great deal of looking into and investing in a more attractive way.
      I draw the Chief Secretary's attention to the rather interesting scheme written about in the Economist only a fortnight ago to try to stimulate small investors to invest in Government stock. Basically, small investors do not invest in Government stock, but if a Government stock could be issued with an interest rate which grew as the gross national product grew we would get a degree of growth

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      into that stock. It was an attractive scheme, but I see some bugs in it. Nevertheless, it contained an interesting germ, and perhaps the Chief Secretary could talk about the germ when he replies to the debate.
      I do not believe that any effective increase in savings will ever be achieved unless the Government are prepared, over a series of years, to commit themselves wholeheartedly to checking runaway inflation. During the last six years we have had a Government who have encouraged inflation at double the rate when we were in power. This leads me to the almost irrefutable conclusion that there will be no real rise in the savings ratio as long as the Labour Government are in power.
      Mr. Diamond: I am sure that there is no need for me to say that what does not divide the Committee is the desire to see savings increased and the savings habit being formed and encouraged. First of all, therefore, as evidence of the earnestness which the Government apply to this, I should like to say something about the Government's' savings scheme, Save-As-You-Earn, the success which it has achieved so far and the thinking which went into it. This may have some relevance to what I would then say about the two schemes before us.
      The total amount committed to date over the five years to the Government scheme under the three bodies under which it can arise—the Trustee Savings Bank, National Savings and building societies—is about £178 million. The hon. Member for Wanstead and Wood-ford (Mr. Patrick Jenkin) was good enough to say that it has gone up. It has gone up, and it is going up, and I very much hope that it will continue to go up. It is going up very satisfactorily. That is based on contracts received in the first five months and it is a very encouraging start.
      As to our thinking behind the scheme, first was the desire not only to encourage savings but to encourage new saving, to find a system which was not only a switch of savings but would encourage a new savings habit. Two things seemed absolutely essential for that purpose. The first was that, in order to encourage the habit, there had to be some kind of contractual savings scheme, under which
      1372
      there were contributions by the saver over a period.
      The second thing which seemed to me at all events to be essential was that not only should the saver have the right to withdraw at any time if he needed to but that under no circumstances could he make a loss. The kind of saver whom we are looking to, the small saver, the new saver, not the switcher, has not got anywhere near the stage at which he can contemplate and understand the reason for a loss and not be wholly deterred from future saving if, after saving a given amount over a given period, he had to take it out, perhaps because of a misfortune in the family, and could recognise a loss.
      So those are the two essentials to building up a savings habit of the kind which we are all seeking to establish and encourage. I have not said in that a word about income tax, because the incentive was not intended to be a tax incentive. It was a contractual savings scheme with a very good guarantee in return, particularly if the seven-year period was awaited. But, as one was looking to small savers, to those to whom a tax benefit would be of no immediate benefit because they were not standard rate taxpayers necessarily, one did not want to burden them with the need to make an income tax return which they would not otherwise have to make in respect of the income or other benefits derived from the scheme.
      Therefore, it was right, mainly for administrative reasons and only incidentally by way of incentive reasons, to have a scheme under which there was freedom from taxes of all kinds. That is the way in which we approached it. It has started very recently and it is going well. We all wish it well and none of us, therefore, wishes to put too much of a competitor against it until it well established. It is against that background that I now wish to consider the two proposals which we are discussing.
      10.0 p.m.
      There is no contractual element in the scheme proposed by the hon. Member for Colne Valley (Mr. Richard Wainwright). That is a lack of merit, if I may come to the one point where I think that there is a lack of merit. I do not think that the savings habit can

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      be encouraged by a once-for-all or voluntary arrangement of that kind.
      There are one or two other difficulties. They have been discussed before, because the scheme has been discussed before, but one strikes me as particularly important. It is that the ability to save in a scheme like this would depend on the co-operation of the employer. Therefore, there would be some who would save in this beneficial way, particularly beneficial to them, and others who would' not have the same facility. This would be haphazard and perhaps a little unjust. What I am saying is that our scheme of Save-As-You-Earn is to be preferred, for the reasons I have given. For the time being, at all events, one should not look towards another scheme which is less attractive, but which would be intended to compete and which would inevitably involve a good deal more switching than does the Save-As-You-Earn scheme.
      I cannot tell hon. Members how much switching goes on with the Save-As-You-Earn scheme. It is not possible to make any analysis and give a precise indication. The likelihood is that the switching is considerably less than the likely switching under the Liberals' scheme, but I am not saying anything more than that. I am certainly not closing my mind to savings schemes in general. I am considering what are the best at the moment and how much one can take on at the moment.
      I come now to the Conservative scheme. One of the difficulties is that it does not have safeguards against loss. To indicate my anxiety about this, I go back five years. The amount by which the Financial Times all-share index has varied over the last five years up to today or yesterday is, for all practical purposes, nil. Whatever the cause may be, the fact is that it is nil. Therefore, anybody investing would have as the benefit of the investment in equities, assuming them to correspond with the Financial Times index, nil. I understand that dividends are to be ploughed back, but there would be nil benefit on capital accumulation, and that is one of the main incentives of the scheme.
      Mr. Kenneth Baker: It is nothing to be proud of.
      Mr. Diamond: We are all considering how we may best promote further sav-
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      ings. The hon. Member may feel proud and may invite me not to feel proud, but that is not what is at issue. The issue is how best we can get together to promote savings schemes. The hon. Member is interested in doing that and I am. The Committee is asking me to consider savings schemes and the hon. Gentleman and his party have put forward a scheme. I am jobbing backwards to see what would have happened if the House of Commons had had the benefit of the hon. Members' membership five years ago and we had entered into a scheme then when his party was in power.
      The Financial Times index this time last year was 428 as against 358 yesterday. Anyone who entered the scheme a year ago and had need to draw out his investment after a year would find himself making a substantial loss. I do not think that we have reached a stage where a savings scheme which had the possibility of a saver making a loss would commend itself to the Committee. Certainly it would not commend itself to the Government at present. I do not want to close the door to any kind of scheme such as that put forward by the Wider Share Ownership Council, but we have to encourage new savings. We have to encourage the saving habit and we shall discourage it if we subject a possible saver to a possible consequence of that kind. So I do not propose to the Committee that we should at present consider expanding our savings scheme. We have a very good scheme which has got off to a good start. Let us encourage it on the right road. I am grateful for what has been said by every hon. Member who has spoken in this debate. I think that what we are doing is the maximum that we can reasonably do at present.
      [Mr. GOURLAY in the Chair]
      Mr. Maurice Macmillan: The Committee has become so accustomed to the degree of specialisation from this bench almost matching that of the Front Bench opposite that I should perhaps apologise for this intrusion of health into finance. However, I do so as in some sense representing the efforts since it was founded 12 years ago of the Wider Share Ownership Council to which my hon. Friend the Member for Wansted and Woodford (Mr. Patrick Jenkin) so kindly referred. A great deal has been

      1375
      achieved to encourage both spending and investment, particularly equity investment in those years. The growth of the unit trust movement among other things shows clearly the change of view and of heart among many people apparently not served tonight at any rate by the Chief Secretary.
      From various sources and with the work and help of hon. Members on the Liberal benches and also on the Labour benches we put forward from time to time to successive Governments ideas very much on the pattern of these two Clauses. One was the forerunner of the Save-As-You-Earn scheme, which was turned down with very much the same arguments that the Chief Secretary has put forward today. I was absolutely fascinated by the line of argument he took from the Financial Times share index. It appeared to me to indicate that all these wicked capitalists who have to be treated with capital gains tax and concentration of wealth in the hands of fewer and fewer people which we on this side of the Committee are seeking tonight to alter is an illusion and that owners of equity shares have not made any profit or capital gains at all. I find this extremely hard to believe.
      I do not think the Committee will pay—I hope it will not—too much attention to the somewhat narrow, technical and selective arguments put forward from the Treasury Bench tonight. They reflected arguments which have been put forward in the past which happily slowly and inevitably have been overcome. The schemes put forward in these two Clauses are the last of a larger package including such suggestions as started in the Post Office Savings Bank, the equivalent of the special investment department of the trustee savings bank and others, all of which were opposed by the Government of the day—I am not blaming the right hon. Gentleman's Government specifically on this—and they have now eventually been brought into being.
      What I am blaming the right hon. Gentleman for is the fact that the change of heart and attitude which many members of his party have had, an attitude which has been shown by both Liberal and Tory speakers tonight, does not seem to have penetrated the Treasury Bench. The small saver is still constrained. The
      1376
      tax system encourages him to lend mainly to the Government at fixed interest. It is still difficult for him to invest in equities. He is in some ways thereby unfairly disbarred from the hedge against inflation which one at least of these Clauses would provide for him.
      Both of these Clauses seek to remedy just this situation. In doing so, they are not alternatives, as the hon. Member for Colne Valley (Mr. Richard Wainwright) pointed out; nor, still less, are they mutually exclusive. They are, rather, complementary.
      In the same way, in the matter of saving and investing his savings in the growth of industry and of production, the small saver is at a disadvantage. He is virtually forced to be a lender and all but prevented by our present system from becoming an owner. These Clauses go a little, and only a very little, way to putting this right. We must all be very disappointed that the Chief Secretary cannot go with us this very little way, especially as I believe—this was hinted at from the Treasury Bench, as well as by other hon. Members—that part of the difficulty that the Government in particular have in getting new savings is that new savings do, as the Chief Secretary admitted, require new media with new attractions and new concepts more in line with the needs of the modern world.
      But the right hon. Gentleman did not admit that part of the attractions and part of the new need is a guard against inflation, which seems to be endemic in the whole world and in the United Kingdom under this Government to have reached chronic and alarmingly high proportions. Because for most people, without some such chance of guarding their savings against erosion by inflation, goods are far more valuable than money. To most people spending can well be a great deal more advantageous than saving, particularly spending on durable consumers. I think that the pattern of recent years shows this extremely well. This is the situation which we, in putting forward our Clause, are trying to safeguard by bringing an equity element into contractual saving and investment.
      Most important of all are the political and social implications underlying both these Clauses. There is the need for the small investor, the small saver, the

      1377
      new investor, to be able to invest directly in industry, with some safeguards, which we have provided.
      The Secretary of State for Social Services once said that private investment was irrelevant. However, as the hon. Member for Colne Valley reminded us, the National Board for Prices and Incomes did not agree with that Secretary of State and was anxious, as long ago as two years, that the ordinary worker on the shop floor should be able to share in the capital growth of industry and thereby become a long-term shareholder, for his profit, his benefit and his security; but also, I suggest, for a sense of participation that only a share in the benefits of industry can bring—participation in the growing wealth of the country. For surely, without such participation, increasing affluence means simply an increase in materialism and might well lead to the charge of a candy-floss society.
      10.15 p.m.
      Unless more people can share in the benefits and responsibilities of ownership thereby safeguarding their freedom, pride and independence, this will happen. We need growth, yes, but surely towards a responsible society. The increasing attribution of the growth in real wealth to machines and their work requires a spread of share ownership which is slightly helped by these Clauses so that everyone can have a share in the rising income as well as the capital growth of industry. I am sorry that the Chief Secretary appears to reject these arguments. I wish that in putting forward technical and perhaps professional objections to these new Clauses he had had something to say about the principles underlying them.
      I know that he must feel a need to protect his new system. I have heard that argument time and again inside and outside the Treasury and have never yet been totally convinced that a new scheme such as is put forward in these new Clauses will damage the S.A.Y.E. plan unless he is not confident that the plan gives a good bargain to those subscribing to it. If he is frightened of fair competition then let him look to the details of the scheme or take ours in its place. We are confident that there is room for all three.
      In what he did not say rather than what he did say the Chief Secretary im-
      1378
      plied a willingness to accept a form of society where the share in rising income and capital growth of an expanding industry is available to most people only through the Government control of investment and wages, savings and pensions, the product of investment. It is for this reason that we on these benches will be happy to support the Liberals although it is only fair to make it clear that we are not seeking a separate Division, not because we do not wish to support our own Clause but because it is easier for the Committee if we say now that we are voting for new Clause 3.
      Mr. Lubbock: I am extremely grateful to the hon. Member for Farnham (Mr. Macmillan) for his kind remarks about the new Clause tabled by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright) and for the arguments he put forward in support of it. In recommending my hon. Friends and his colleagues to vote in favour of our new Clause we are in no way derogating from the force of the arguments that he has put forward in favour of that tabled by the Wider Share Ownership Council.
      I agree with everything that he has said. I understand his point when he says that the arguments we have deployed this evening have been put forward on numerous occasions in the past. When the Chief Secretary and his colleagues have disputed with us the merits of this new Clause they have used arguments based on the conventional wisdom of the Treasury and those who support financial orthodoxy rather than those who are concerned, as we are, to support new kinds of savings which will benefit the economy as a whole.
      The hon. Member rightly pointed out that our tax system at the moment encourages savers to lend to the Government at a fixed interest. We must make a distinction in the incentives we give to savers between the person who is a member and the person who is an owner of the enterprise in which he invests. That is one of the most important elements of new Clause 1.
      The other, which again has been emphasised by the hon. Member for Farnham, is that we need to provide, in any mechanism of savings, some kind of ledge against inflation, which is uppermost in the minds of most people who are considering putting some money aside. Of

      1379
      course any new scheme is bound to affect those moneys which are deployed in existing savings, but I will try to produce a counter argument of some importance in a moment.
      The Chief Secretary made a perfunctory speech. He rightly said that what does not divide the Committee is the need to increase savings. He spoke in unwarrantedly flattering terms of the results so far of the S.A.Y.E. scheme, saying that £178 million had been committed over the next five years, as though this were something of an achievement. But if one looks at the amounts actually invested in the six months that the scheme has been in existence—we have figures only up to the end of April—one finds that the total amount of payments comes to £6 million and not to the £178 million he quoted, which may be committed over the next five years if all those who have invested so far continue to put their money into the scheme over the whole period.
      The right hon. Gentleman said that the point of the S.A.Y.E. scheme was that, under no circumstances—[Interruption.] It is rather difficult to make a speech against the background of conversation which is going on opposite. [Interruption.]
      The Deputy Chairman: Order. Perhaps the Committee meeting at the end of the Chamber would remove itself.
      Mr. Lubbock: It is rather difficult to deploy this type of argument when hon. Members at the end of the Chamber are discussing something quite different.
      The right hon. Gentleman said that an important element of the S.A.Y.E. scheme was that no one could make a loss and that that was to be commended. But people can make a loss in other forms of investment, such as bingo and football pools, and I do not suppose that the Chief Secretary is saying that no one should put money into bingo or football pools. This is a matter of free individual choice. Although there is an incentive in S.A.Y.E., in an extremely good and guaranteed rate of return that is not necessarily what the saver is looking for. As we know from the Premium Bond scheme, he is also interested in a large capital return which is free of
      1380
      income tax and provides a great incentive to investors.
      The Chief Secretary also said that our proposals depend on the co-operation of the employer, as though that were a disadvantage. As my hon. Friend said, when this was last debated, the trade unions are not powerless. If these proposals have any value, then of course the representatives of the workpeople can demand of the bosses that they should co-operate in such a proposal.
      My hon. Friend pointed out that, as soon as the thing had caught on, many other people would wish to join and it would be very difficult for any sizeable employer to stand out against a demand from his workpeople to provide these facilities.
      Then the right hon. Gentleman rather suggested that S.A.Y.E. should not have any kind of competitor. I think that is a defeatist attitude. I am coming to the S.A.Y.E. scheme, but I must say that if he has as little confidence in it as that I am disappointed with him. I would have thought that after rather less than a year of operation—it did not come into force immediately after the Finance Act, 1969—he would have been slightly more optimistic about its future than he appears to be.
      Finally, the right hon. Gentleman pointed out that the Financial Times index has dropped in the last year and that if employees had been induced to join such a scheme as we propose they might have become disillusioned with it because they would have lost part of their money. In any such scheme there must be a fixed interest element. We are not suggesting, as I am sure he realises, that the whole of the money invested on behalf of the employees should go into equity stocks, although if one looks at the situation over a period of years the employees would have benefited if the entire amount of their subscriptions had been thus invested. If he is taking the last year as an example, it is not particularly illustrative of the trend over a period of years.
      The hon. Member for Acton (Mr. Kenneth Baker) pointed out that our savings ratio has been one of the lowest of any industrialised country, quoting the case of Japan where, he said, 20 per cent. of the gross national product has gone into fixed investment. He said that this

      1381
      was an example we might try to emulate. But why should any saver bother to put money aside when inflation is galloping at the rate of about 8 per cent. a year? He said that perhaps during the current year wage inflation might reach as much as 12 per cent. whereas productivity would only improve by as much as 3 per cent. Although he had some argument with the right hon. Gentleman about the precise details, I think that most of us would agree that the value of money is likely to decrease by something like 7 to 8 per cent. during the current year. That is not an unrealistic figure, although the right hon. Gentleman may dispute it.
      We must look at this aspect when we consider the sort of returns offered by S.A.Y.E. and equivalent schemes. If the right hon. Gentleman says that he does not agree with these figures, what is his explanation of the dis-saving which has occurred in recent years and the reluctance of potential savers to join even such apparently attractive schemes as S.A.Y.E.?
      I turn now to the question of savings in general. Why is it in the doldrums? On 11th April, The Economist commented on the Report of the National Savings Movement for the last financial year:
      " National savings had such a rum time in 1969–70 that even Sir Miles Thomas, chairman of the National Savings Committee, described it as a ' very difficult year '. The movement has not been notable for dynamic growth since the mid-1960's, but last year even undistributed interest—which in 1968– 69 tipped the scales for a small net gain—could not save it from a £60 million net disinvestment."
      The Chancellor and the Chief Secretary may claim that the S.A.Y.E. scheme has not had time to produce its full effect.
      10.30 p.m.
      I daresay that the right hon. Gentleman, who did not adduce this argument, was being modest and would have done so if he had thought that it would carry weight with hon. Members, but at least he came part of the way along the road with us in having a scheme for contractual savings of any kind, even though it could not be claimed that the S.A.Y.E. scheme is likely to make a significant contribution to the total volume of savings.
      I return to the statistics which I quoted from the Monthly Bulletin of Statistics and Economic Information. This shows
      1382
      that during the first six months we have received only £6 million from this source compared with the £178 million which the Chief Secretary quoted.The Times of 2nd February, 1970, said:
      "It seems that it will take more than S.A.Y.E. to reverse this trend."
      That was the trend towards dis-saving which was discussed in the remainder of that leader, especially the non-realisation of the ideal mentioned by the Chancellor in his 1969 Budget—that direct taxation and, for that matter, indirect taxation, might be reduced to the extent that the private saver could be encouraged to put more money aside.
      Yet, unless we can reverse this decline in personal saving, the scope for tax reductions, as the Chancellor anticipated in 1969, is that much more limited. When a Liberal new Clause dealing with much the same principle was debated in 1967, the hon. and learned Member for Derby, North (Mr. MacDermot), then Financial Secretary, adduced several arguments against it. Some have been rehearsed again this evening, but it is interesting to see which have been left out.
      First, the hon. and learned Member mentioned the difficulty, which is common to all schemes for the encouragement of savings by way of tax relief, that no one has yet succeeded in making sure that the benefit goes to the new saver. We accept at once that if a new form of savings is more attractive than others already on offer, a great deal of the money flowing into that new scheme must come from withdrawals from other methods of saving.
      Mr. Diamond indicated assent.
      Mr. Lubbock: I see the Chief Secretary agreeing. But it is important to bear in mind that the relative permanence of the investment in different types of schemes may be very different. For instance, if money is withdrawn from the Post Office Savings Bank in order to cover contributions which an employee may make under our new Clause, it is likely that that money will be retained as an investment for many years. The withdrawals from the Save-As-You-Earn scheme, and this is one of its advantages which I give to the Chief Secretary, it he wants to use it, have been negligible in the first six months of its operation.

      1383
      The same would be the case for savings invested under the Liberal new Clause.
      There is the argument used by the Royal Commission on Taxation, that tax relief on savings is inequitable as between one taxpayer and another, although it was said that it was reasonable to have the exceptions for life assurance already provided. But the S.A.Y.E. scheme is a fresh departure from the principle and, having made the breach, we can no longer pretend that this principle is of major importance in our taxation system.
      Thirdly, the hon. and learned Gentleman who replied to the debate pointed out that if savings are withdrawn in large lump sums and taxed in the year of withdrawal, the saver would find himself in a higher tax bracket and might even be elevated into the surtax bracket. I am interested that the Chief Secretary did not advance this argument tonight, and there are two very obvious answers to the question which must have occurred to the Government since that date. The first is that if the reasoning of the hon. and learned Gentleman were correct it would deter savers from making large withdrawals so as to avoid suffering the penalty of these very large tax deductions and thus there would be an increase in the total amount saved because of this deterrent. The other argument is
      that one cannot say in the same breath, as the hon. and learned Gentleman did, that the cost of the scheme would be disproportionate to the volume of savings if at the same time one is claiming that this disincentive exists.
      Finally, the criticism was made that the Clause favoured only one of many different kinds of savers. In our view, this is the essential merit of the proposal, because Liberals want to spread the ownership of shares as widely as possible, as does the hon. Member for Farnham. We are eager to use fiscal means of encouraging this kind of saving. If in doing so it is necessary to have discrimination as between one kind of taxpayer and another, we are happy to accept that. This is a very important principle which fits in with the Liberal idea of spreading ownership of industry among as wide a section of the population as possible.
      In view of the Chief Secretary's discouraging reply to our proposal and that sponsored by the Wider Share Ownership Council, we recommend our hon. and right hon. Friends to carry the new Clause in the Division Lobby.
      Question put,That the Clause be read a Second time:—
      The Committee divided: Ayes 152, Noes 221.

      Division No. 128.]

      AYES

      [10.37 p.m.

      Alison, Michael (Barkston Ash)

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

      Hordern, Peter

      Allason, James (Hemel Hempstead)

      Dodds-Parker, Douglas

      Hornby, Richard

      Amery, Rt. Hn. Julian

      Eden, Sir John

      Howell, David (Guildford)

      Archer, Jeffrey (Louth)

      Elliot, Capt. Walter (Carshalton)

      Hunt, John

      Astor, John

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

      Iremonger, T. L.

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

      Errington, Sir Eric

      Jenkin, Patrick (Woodford)

      Awdry, Daniel

      Eyre, Reginald

      Johnson Smith, G. (E. Grinstead)

      Baker, Kenneth (Acton)

      Farr, John

      Kaberry, Sir Donald

      Batsford, Brian

      Fisher, Nigel

      Kershaw, Anthony

      Bennett, Dr. Reginald (Gos. & Fhm)

      Fletcher-Cooke, Charles

      Kimball, Marcus

      Biffen, John

      Foster, Sir John

      King, Evelyn (Dorset, S.)

      Biggs-Davison, John

      Fry, Peter

      King, Tom

      Birch, Rt. Hn. Nigel

      Gibson-Watt, David

      Kirk, Peter

      Blaker, Peter

      Gilmour, Sir John (Fife, E.)

      Kitson, Timothy

      Boyle, Rt. Hn. Sir Edward

      Glover, Sir Douglas

      Knight, Mrs. Jill

      Bryan, Paul

      GorJber, Rt. Hn. J. B.

      Lancaster, Col. C. G.

      Buck, Antony (Colchester)

      Goodhart, Philip

      Lane, David

      Burden, F. A.

      Gower, Raymond

      Langford-Holt, Sir John

      Campbell, B. (Oldham, W.)

      Grant-Ferris, Sir Robert

      Lawler, Wallace

      Carlisle, Mark

      Grieve, Percy

      Legge-Bourke, Sir Harry

      Chataway, Christopher

      Griffiths, Eldon (Bury St. Edmunds)

      Longden, Gilbert

      Chichester-Clark, R.

      Hall, John (Wycombe)

      MacArthur, Ian

      Clark, Henry

      Hail-Davis, A. G. F.

      Maclean, Sir Fitzroy

      Clegg, Walter

      Hamilton, Michael (Salisbury)

      Macleod, Rt. Hn. Iain

      Cordle, John

      Harrison, Col. Sir Harwood (Eye)

      McMaster, Stanley

      Crouch, David

      Hawkins, Paul

      Macmillan, Maurice (Farnham)

      Crowder, F. P.

      Heart, Rt. Hn. Sir Lionel

      McNair-wilson, Patrick (NewForest)

      Cunningham, Sir Knox

      Heseltine, Michael

      Maginnis, John E.

      Davidson, James(Aberdeenshire, W.)

      Higgins, Terence L.

      Marples, Rt. Hn. Ernest

      Dean, Paul

      Holland, Philip

      Maude, Angus

      Maxwell-Hyslop, R. J.

      Pym, Francis

      Tilney, John

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

      Ramsden, Rt. Hn. James

      Turton, Rt. Hn. R. H.

      Mills, Stratton (Belfast, N.)

      Renton, Rt. Hn. Sir David

      van Straubenzee, W. R.

      Miscampbell, Norman

      Rhys Williams, Sir Brandon

      Vaughan-Morgan, Rt. Hn. Sir John

      Mitchell, David (Basingstoke)

      Ridley, Hn. Nicholas

      Waddington, David

      Monro, Hector

      Ridsdale, Julian

      Wainwright, Richard (Colne Valley)

      Montgomery, Fergus

      Scott-Hopkins, James

      Walker, Peter (Worcester)

      More, Jasper

      Sharpies, Richard

      Walker-Smith, Rt. Hn. Sir Derek

      Morrison, Charles (Devizes)

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

      Ward, Christopher (Swindon)

      Mott-Radclyffe, Sir Charles

      Sinclair, Sir George

      Weatherill, Bernard

      Munro-Lucas-Tooth, Sir Hugh

      Smith, Dudley (W'wick & L'mington)

      Wells, John (Maidstone)

      Murton, Oscar

      Smith, John (London & W'minster)

      Whitelaw, Rt. Hn. William

      Nabarro, Sir Gerald

      Speed, Keith

      Wiggin, Jerry

      Neave, Airey

      Stainton, Keith

      Williams, Donald (Dudley)

      Noble, Rt. Hn. Michael

      Steel, David (Roxburgh)

      Winstanley, Or. M. P.

      Nott, John

      Stoddart-Scott, Col. Sir M.

      Wolrige-Gordon, Patrick

      Page, John (Harrow, W.)

      Summers, Sir Spencer

      Wood, Rt. Hn. 'Richard

      Peel, John

      Tapsell, Peter

      Worsley, Marcus

      Percival, Ian

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

      Peyton, John

      Taylor, Frank (Moss Side)

      TELLERS FOR THE AYES:

      Pike, Miss Mervyn

      Temple, John M.

      Mr. Eric Lubbock

      Prior, J. M. L.

      Thorpe, Rt. Hn. Jeremy

      and Mr. Peter Bessell.

      NOES

      Abse, Leo

      Edwards, William (Merioneth)

      Lewis, Ron (Carlisle)

      Albu, Austen

      Ellis, John

      Lomas, Kenneth

      Allaun, Frank (Salford, E.)

      English, Michael

      Loughlin, Charles

      Alldritt, Walter

      Ennals, David

      Lyon, Alexander W. (York)

      Allen, Scholefield

      Evans, Fred (Caerphilly)

      Lyons, Edward (Bradford, E.)

      Anderson, Donald

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

      McBride, Nell

      Archer, Peter (R'wley Regis A Tipt'n)

      Femyhough, E.

      McCann, John

      Armstrong, Ernest

      Finch, Harold

      MacDermot, Niall

      Ashley, Jack

      Fletcher, Raymond (Llkeston)

      Macdonald, A. H.

      Ashton, Joe (Bassetlaw)

      Fletcher, Ted (Darlington)

      McElhone, Frank

      Atkins, Ronald (Preston, N.)

      Foot, Rt. Hn. Sir Dingle (Ipswich)

      Mackenzie, Gregor (Rutherglen)

      Atkinson, Norman (Tottenham)

      Ford, Ben

      Mackie, John

      Bagier, Gordon A, T.

      Forrester, John

      Maclennan, Robert

      Barnes, Michael

      Fowler, Gerry

      McNamara, J. Kevin

      Barnett, Joel

      Fraser, John (Norwood)

      MacPherson, Malcolm

      Baxter, William

      Freeson, Reginald

      Mahon, Peter (Preston, S.)

      Beaney, Alan

      Galpern, Sir Myer

      Mahon, Simon (Bootle)

      Bence, Cyril

      Gardner, Tony

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

      Bennett, James (G'gow, Bridgeton)

      Ginsburg, David

      Marks, Kenneth

      Bid well, Sydney

      Golding, John

      Marquand, David

      Binns, John

      Gray, Dr. Hugh (Yarmouth)

      Marsh, Rt. Hn. Richard

      Bishop, E. S.

      Greenwood, Rt. Hn. Anthony

      Mellish, Rt. Hn. Robert

      Blackburn, F.

      Grey, Charles (Durham)

      Mendelson, John

      Blenkinsop, Arthur

      Griffiths, Eddie (Brightside)

      Millan, Bruce

      Boston, Terence

      Hamilton, William (Fife, W.)

      Miller, Dr. M. S.

      Bottomley, Rt. Hn. Arthur

      Hamling, William

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

      Bray, Dr. Jeremy

      Hannan, William

      Molloy, William

      Brooks, Edwin

      Harper, Joseph

      Morgan, Elystan (Cardiganshire)

      Brown, Rt. Hn. George (Belper)

      Harrison, Walter (Wakefield)

      Morris Alfred (Wythenshawe)

      Buchan, Norman

      Haseldine, Norman

      Morris, Charles R. (Openshaw)

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

      Hattersley, Roy

      Morris John (Aberavon)

      Butler, Mrs. Joyce (Wood Green)

      Henig, Stanley

      Mulley, Rt. Hn. Frederick

      Callaghan, Rt. Hn. James

      Hilton, W. S.

      Cant, R B.

      Hooley, Frank

      Murray, Albert

      Castle, Rt. Hn. Barbara

      Howarth, Robert (Bolton, E.)

      Neal, Harold

      Coe, Denis

      Huckfield, Leslie

      Newens, Stan

      Coleman, Donald

      Hynd, John

      Norwood, Christopher

      Concannon, J. D.

      Irvine, Rt. Hn. Sir Arthur

      Oakes, Gordon

      Craddock, George (Bradford, S.)

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

      Ogden, Eric

      Crawshaw, Richard

      Jackson, Peter M. (High Peak)

      O'Halloran, Michael

      Crossman, Rt. Hn. Richard

      Janner, Sir Barnett

      Orme, Stanley

      Dalyell, Tam

      Jay, Rt. Hn. Douglas

      Oswald, Thomas

      Davidson, Arthur (Accrington)

      Jenkins, Hugh (Putney)

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

      Davies, Dr. Ernest (Stretford)

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

      Palmer, Arthur

      Davies, S. O. (Merthyr)

      Jones, Dan (Burnley)

      Panned, Rt. Hn. Charles

      de Freitas, Rt. Hn. Sir Geoffrey

      Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

      Parker, John (Dagenham)

      Dempsey, James

      Jones, J. Idwal (Wrexham)

      Parkyn, Brian (Bedford)

      Dewar, Donald

      Jones, T. Alec (Rttondda, West)

      Pavitt, Laurence

      Diamond, Rt. Hn. John

      Kelley, Richard

      Pearson, Arthur (Pontypridd)

      Dickens, James

      Kenyon, Clifford

      Pentland, Norman

      Doig, Peter

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

      Perry, Ernest C. (Battersea, S.)

      Driberg, Tom

      Kerr, Russell (Feltham)

      Perry, George H. (Nottingham, S.)

      Dunn, James A.

      Latham, Arthur

      Prentice, Rt. Hn. Reg.

      Dunnett, Jack

      Lawson, George

      Price, Christopher (Perry Barr)

      Dunwoody, Mrs. Gwyneth (Exeter)

      Leadbitter, Ted

      Price, Thomas (Westhoughton)

      Eadie, Alex

      Lee, Rt. Hn. Frederick (Newton)

      Price, William (Rugby)

      Edelman, Maurice

      Lee, John (Reading)

      Probert, Arthur

      Edwards, Robert (Bilston)

      Lewis, Arthur (W. Ham, N.)

      Randall, Harry

      1386

      1387

      Rees, Merlyn

      Slater, Joseph

      Wellbeloved, James

      Rhodes, Geoffrey

      Small, William

      Wells, William (Walsall, N.)

      Roberts, Albert (Normanton)

      Spriggs, Leslie

      White, Mrs. Eirene

      Roberts, Rt. Hn. Goronwy

      Steele, Thomas (Dunbartonshire, W.)

      Whitlock, William

      Robertson, John (Paisley)

      Strauss, Rt. Hn. John

      wilkins, W. A.

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

      Swain, Thomas

      Willey, Rt. Hn. Frederick

      Rodgers, William (Stockton)

      Taverns, Dick

      Williams, Alan (Swansea, W.)

      Roebuck, Roy

      Thomas, Rt. Hn. George

      Williams, Alan Lee (Hornchurch)

      Rogers, George (Kensington, N.)

      Tinn, James

      Williams, Clifford (Abertillery)

      Rowlands, E.

      Tuck, Raphael

      Willis, Rt. Hn. George

      Shaw, Arnold (Llford, S.)

      Urwin, T. W.

      Wilson, William (Coventry, S.)

      Sheldon, Robert

      Walden, Brian (All Saints)

      Woof, Robert

      Shore, Rt. Hn. Peter (Stepney)

      Walker, Harold (Doncaster)

      Wyatt, Woodrow

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

      Wallace, George

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

      Watkins, David (Consett)

      TELLERS FOR THE NOES:

      Silkin, Rt. Hn. John (Deptford)

      Watkins, Tudor (Brecon & Radnor)

      Mr. Alan Fitch

      Silkin, Hn. S. C. (Dulwich)

      Weitzman, David

      and Mr. R. F. H. Dobson

      Sillars, J.

    Clause 35

      SAVINGS BANKS INTEREST RATES
      Question proposed,That the Clause stand part of the Bill.
      10.45 p.m.
      Mr. Higgins: We have already had a wide-ranging debate on savings, and I do not wish to go over the same ground in speaking on the Question, " That the Clause stand part of the Bill ". As the Chief Secretary has rightly pointed out, it is common ground that savings are vital to the good health of the economy. The difference between us is over the policies which are likely to encourage or discourage savings.
      One has only to look at the figures for the period 1959– 64 showing the annual average change in constant prices per head per cent. to see that in that period the figure was plus 13·8 as compared with the figure for 1964– 69 of minus 0·1. That is a fitting commentary on the value of money under a Conservative Government as compared with the situation under a Labour Government.
      Having said that, there are some more specific points we wish to raise on the Clause and two specific questions we wish to ask the right hon. Gentleman. We have recently debated Trustee Savings Banks on two occasions, the Trustee Savings Banks Bill in 1968 and the Trustee Savings Banks [Lords] Bill in 1969. This Clause alters the procedure which was set out in those Measures. In particular, they set out limits on the rates of interest which were to be paid, first, by the Trustee Savings Bank to its depositors— this is altered in paragraph (b) of Clause 35— and, secondly, the rate which the Government paid to the Trustee Savings Bank movement through the fund for the banks' savings.
      That being so, on a former occasion we sought to raise the limits, because we felt that the rates of interest were unrealistic. We appreciate that the Chancellor of the Exchequer should feel that they need to be raised in order to continue to attract savings in the Trustee Savings Bank and the Savings Bank movement. Clearly when we have a rate of inflation of over 5 per cent. per annum it requires a rate of interest which is a
      1390
      good deal higher than that for any real return to be obtained by savers. Under this Government, the Exchequer has paid a rate of interest which in real terms is often negative.
      We appreciate the Chancellor's point in his Budget Statement, though he phrased it in terms of the rate not being immutable. But we cannot understand why the limits are now being eliminated both on the rate which can be paid by depositors and the limit on the amount the Government pay to the Trustee Savings Bank movement through the fund for the banks' savings.
      The second figure was intended to be a differential reflecting the cost of operation of the Trustee Savings Banks, and quite rightly a limit was imposed on it so that they should remain cost-effective. Apparently this is no longer to apply, and I hope that the Chief Secretary will tell us why that should be so and why the principle should be changed in that respect. We appreciate the point about the change in the limit on the deposit rate that the banks can pay to their depositors.
      The second point that we want to raise concerns the timing. We are rather concerned at the Chancellor's statement that the change in the rate would be a major administrative exercise and that the earliest point at which it could now become operative would be in respect of interest credited for the year 1971. That expression, " credited for the year 1971 " is somewhat ambiguous, and we would be grateful if the Chief Secretary could say what it means.
      As we understand it, there is a difference in the way in which interest is calculated on the one hand by the National Savings Bank and on the other hand by the Trustee Savings Banks. The National Savings Bank, whose year runs from 1st January to 31st December, calculates its interests in arrears. On 31st December, 1971, it would add interest at the new rate on accounts which were operated during the previous 12 months. The Trustee Savings Banks, whose year runs from 21st November to 20th November, calculate interest in advance. On 21st November, the interest for the ensuing year is calculated on the current balance, and an adjustment is made on 20th of

      1391
      each month to allow for a change in the balance.
      Given the difference between the two systems, this may give rise to difficulties unless the Government make clear what they propose by at least November, 1970. If an announcement is not made until the end of 1971, which is what the Chancellor's statement suggests, the Trustee Savings Banks will lose a whole year's interest at the new rate unless a complicated readjustment on their procedure takes place, and then they will have to brief staff, draw up new interest tables, and so on.
      While we appreciate that it will not be the present Government who will need to make the decision, it is important that the Government now should give an undertaking to inform the Trustee Savings Banks of what is intended in adequate time for them to carry out their procedures and ensure that both the Trustee Savings Banks and the National Savings Bank can make the necessary adjustments to the interest payable.
      We believe that we are entitled to an explanation from the Chief Secretary on those two points.
      Mr. Diamond: I am only too happy to give the hon. Gentleman the explanation for which he asks, and I thank him for accepting the general purpose of the Clause.
      I will deal, first, with the second point which relates to dates. What my right hon. Friend the Chancellor of the Exchequer said was right, but perhaps in shorthand form, because 1971 is precisely accurate in relation to the National Savings Bank, but not precisely accurate in relation to the Trustee Savings Bank. The Trustee Savings Bank starts its year, as the hon. Gentleman correctly said, on 21st November, 1970, so there will be a lag of five weeks, which is not an important matter.
      We are now in touch with both organisations and arrangements will be made in adequate time for any necessary increase to be made. If the new rate is approved by the House—it is subject to negative Resolution—it will apply for the year 1971 in the case of the National Savings Bank and the year commencing 21st November, 1970, in the case of the
      1392
      Trustee Savings Bank. The fact that one bank chooses to do it at the start of the year and another chooses to do it at the end of the year—let us assume that the two years are coterminous and there is no five weeks difference—does not alter the fact that the rate applicable for that particular year in both cases will be the rate which is agreed by the House. Whether the bookkeeping is done at the start, during, or at the end of the year, does not affect that fact. I hope that I have answered that question to the hon. Gentleman's satisfaction.
      I gather that the hon. Gentleman recognises that there may be a need to raise the rate paid by the Savings Bank on deposits in ordinary accounts, but he has difficulty in recognising the need for the rate paid by the National Debt Commissioners to the Trustee Savings Bank to be altered. But that is merely the costs, the overheads, plus the basic rate. Therefore, if the basic rate at the moment of 2½ per cent. goes up, the £3 13s. per cent. per annum may need to go up. It may not need to go up by the same proportion or by the same absolute difference, but there will be a need for it to go up if the major element within it goes up. All that we are saying is that the Order that we put before the House will cover both rates.
      Mr. Higgins: We debated this point at considerable length in Committee in 1968. The argument put forward was that the £3 13s. limit, which was then established, was essential to ensure that the costs were only just covered. I concede that it could have been argued at that time that there was no need for the limit, but that was not what the Government argued. The right hon. Gentleman now, under Clause 35(2), is arguing that there should be no limit whatsover. I appreciate that he can argue this, but it is a change of policy.
      Mr. Diamond: It is just to give the same flexibility in the second rate that is required in the first rate. I do not think it right at this stage to say that it will necessarily be the same figure or the same proportion. It will be for the House to decide at the right time. This is only an empowering Clause. I am glad to note that it meets the general view of both sides of the Committee that the

      1393
      time may have come when 2½ per cent. is no longer a sensible rate.
      Question put and agreed to.
      Clause 35 ordered to stand part of the Bill.
      To report Progress and ask leave to sit again.—[Mr. Diamond.]
      Committee report Progress; to sit again Tomorrow.

      THE MIDLANDS (REMAND HOME ACCOMMODATION FORM WOMEN)
      Motion made, and Question proposed, That this House do now adjourn.—[Mr. Armstrong.]
      11.0 p.m.
      Mrs. Jill Knight:I am initiating a debate on the subject of Brockhill for the second time, and I am doing so because my hon. Friend the Member for Bromsgrove (Mr. Dance), who had intended to raise the matter, has met with an accident and has sustained several broken ribs. Many times in this House my hon. Friend and I have raised the question of the untimely closure of Brockhill remand home to women and the effect that this has had in the Midlands area. Brockhill is in Bromsgrove, which is my hon. Friend's constituency, and he has been tireless in his efforts to remedy the situation with regard to this remand home.
      The facts of the matter are that years of experience in the Midlands courts convinced magistrates, Home Office officials and the police that it was necessary to provide remand home accommodation for women in the Midlands. In May, 1965, a special wing for females was opened at Brockhill. One would have thought that that would have been the end of the matter, but with the Home Office one never knows. Two years later someone nameless, in some anonymous corner in the Whitehall mausoleum, perhaps on a slow day, in a fit of boredom or pique, decided that Brockhill remand centre should close to women.
      The decision was taken, but not because anything was wrong with it. In fact, during a debate in the House on 22nd July, 1968, the Minister said:
      1394
      " It is…a purpose-built establishment providing first-rate accommodation and medical facilities…".
      It was not closed because anyone locally was dissatisfied. It was closed solely because not enough nurses could be found to go to Brockhill. In fact, however, this was never a problem, because three doctors were always available, experienced prison staff were on duty all the time, and any woman in Brockhill who was sick was sent to hospital at once.
      The staff at Brockhill, who bore the responsibility if any woman was ill, were themselves most anxious for Brockhill to be kept open, and they were not the only ones. So were the police, the probation service, the Magistrates' Association, the Birmingham City Council and other local authorities, the Birmingham Law Society, the National Council for Women, the Chairman of Worcestershire Quarter Sessions, and the Chairman of the Visiting Committee of Brockhill. But, alas, it was not to be. In the same debate on 22nd July, the Minister said:
      " In view of our inability to retain the necessary nursing staff, there was no alternative but to close the wing."—[OFFICIAL REPORT, 22nd July, 1968; Vol. 769, c. 233–4]
      The next instalment of this gripping drama came when we discovered that Brockhill need never have been closed at all. There was no rule in existence which said that nurses should be present. Some of us who were anxious to find out the truth of the matter got in touch with no less an authority than the University of Cambridge Institute of Criminology, and the Professor said in his letter:
      " I have been looking into the question of the State Registered Nurses at remand centres. I am still looking, but so far I can find no provision which expressly refers to S.R.N.s. The relevant statute is the Prison Act 1962, Section 7, which merely says ' every prison in which women are received should have a sufficient number of women officers…' "
      The rules say quite clearly that only that part of a prison used for women
      " shall be in charge of a woman officer ".
      It is not surprising that there has been a steady stream of Parliamentary Questions on this matter ever since. On 7th November, 1968, I asked:
      " Will the hon. Gentleman admit that there was absolutely no statute and no rule which forced him to close Brockhill to women? Bearing in mind the need for accommodation and the grievous suffering inflicted on women without this accommodation being available,

      1395
      will he now say that he was wrong and will consider reopening it to women? "
      The only answer that I received was:
      " We were forced to close it not by statute but by circumstances."—[OFFICIAL REPORT, 7th November, 1968; Vol. 772, c. 1068.]
      I know no more now about these circumstances than I did then. After constant badgering and a resolution passed by the Magistrates' Association the Government, I think, now agree that there is a need for remand home accommodation for women in the Midlands. In a letter to my hon. Friend the Member for Dudley (Mr. Donald Williams) last week the hon. Lady intimated that while the need existed the matter may not perhaps be treated as urgent. This is possibly because she has been lulled into believing that all is well by the most recent report of the work on prisons. On page 7 the report says:
      "The problem of staffing female establishments, particularly those in isolated locations, continued to be felt and during 1968 it became necessary to close the women and girls' wing at Brockhill remand centre owing to the impossibility of recruiting sufficient nursing staff.… In an attempt to ease the burden of long escorts which have to be undertaken by women's establishments separate overnight accommodation has been set aside for women prisoners and their escorts at Swansea, Exeter, Shrewsbury and Birmingham."
      It would seem from this that all was well—they need not make the long trip to Holloway or anywhere else because they would be looked after in Birmingham. There is accommodation in Winson Green prison. It is in " G Wing " of the old hospital block where padded cells and two strong rooms have been converted for women prisoners. I do not know what the cost was. Incidentally, one bathroom and one lavatory were made specially for the prisoners and one bathroom and lavatory specially for the staff. There have been three women there in the last two years.
      I spoke today to a leading magistrate in Birmingham, Lady Burman, and when I asked her whether Winson Green accommodation was used as a remand home she said that it was no use whatever because there were no women staff. Whatever the report says, it is not true to imagine that the problem has been solved by the provision of accommodation at Winson Green. The only people who use it are women
      1396
      on trial for murder who have to be in court daily. If a woman is remanded too late in the day at Birmingham to go to Holloway she has to be put into Steelhouse Lane police lock-up, which is a very unsatisfactory state of affairs, because the cells which the women use are adjacent to the men's cells, which are constantly used by drunks and layabouts.
      Since the closure of Brockhill in June, 1968, until March of this year, 681 women and one baby have been shunted to and fro from Holloway or Shrewsbury. The round trip from Birmingham to Holloway is 220 miles and to Shrewsbury 86 miles. The House will agree that this is a waste of time and money and a thorough nuisance for everyone. Incidentally, of these 681, 327 women plus the baby stayed overnight in Steelhouse lock-up.
      If a woman is on a murder charge she is always in custody. If this happens she is sent down to Holloway, probably, and must travel up every eight days simply to be remanded, which takes only a few minutes. That is rather annoying to all concerned. Another point is that reports are brought up with the remanded woman and are not available until the day of the hearing. The probation officer does not see them in advance and really cannot conduct the case properly since the documents have only just become available.
      At Brockhill the probation officers visit regularly and were up to date with the reports. The Brockhill women's wing lay empty for one year after it was closed to women. It was purpose-built for women and cost a great amount of money. It is now used by boys. I do not know how much it cost to reconstruct it or whether that was necessary. It is true that the boys were crowded in the other part of Brockhill and from that point of view they are less crowded now. The women should be considered too. Boys are marginally better off, but women are very much worse off. The journeys are tiring, especially at a time of emotional stress, and usually they must make an early start to be in court on time. Many of the women are needlessly worried because they are too far from home to receive visits from their husbands or relatives. Their children are often cared for by the local authority and women are often not able to get news of them.

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      Concern over this matter has been expresed by hon. Members in all parts of the House. Midlands hon. Members of every party are united on this issue. There is an impressive weight of outside opinion to the effect that the Brockhill decision was wrong and that it should be reversed. I do not know if that is possible. It is worth bearing in mind that Birmingham has always been a city which has taken hostels very much under the wing of the local authority and is an area in which there are many big old houses which could be used to overcome this problem. Could the difficulty be solved in this way?
      Not one body, association or individual connected with or used to dealing with women on remand in the Midlands is happy with the present situation. Not one thinks that nothing should be done. Not one denies the urgency of the matter. I trust that the Minister takes the same view.
      I have been brief because I know that some of my hon. Friends are anxious to speak on this issue, if only for a moment or two. I have had time only to place the bones, as it were, of the matter before the House and I hope that I may leave it to the Minister to do something to overcome this urgent problem.
      Mr. Donald Williams: Only last week I spent a considerable time with the police in my constituency, and they wholeheartedly support every word my hon. Friend has said about the need for such a remand home in the West Midlands.
      Mrs. Knight: I am grateful for that. The Minister will recall that the Magistrates' Association recently expressed exactly that view. I beg the hon. Lady to give the matter her most urgent consideration.
      11.13 p.m.
      Mr. Fergus Montgomery: I am grateful to my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) for allowing me a couple of minutes in which to comment on this important subject, the facts of which she ably put forward.
      I am sure that all hon. Members will endorse what she said about the campaigning which has been done by my hon. Friend the Member for Broms-
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      grove (Mr. Dance) on the subject of this remand centre, which is in his constituency. It is regrettable that, because of his recent accident, he cannot be here tonight.
      The attitude which the Government have taken on the closure of this remand centre has been disgraceful. All we have had from the Government in reply to Questions on this issue is a lot of pious promises, and the present Government are very good at making promises of that kind.
      I feel sorry for the Minister tonight because while I have the greatest respect for her—she is one of the few hon. Members opposite for whom I have any respect—she is on a sticky wicket if she tries to defend the Government's action in closing this centre.
      Like my hon. Friend the Member for Dudley (Mr. Donald Williams), I spent a couple of days with the police in the West Midlands during the Easter Recess. I endorse what he said about the police being unanimous in feeling strongly about the closure of Brockhill remand centre and urging that something should be done urgently.
      My hon. Friend the Member for Edgbaston pointed out what a tremendous waste of time and money is involved in sending women on remand to all parts of the country, since escorts must be sent with them. Recently in my constituency a woman on remand was in great emotional distress because she was remanded at Risley, near Manchester, and this involved her in a great deal of travelling, which I suppose made it difficult for her family to visit her.
      In view of these difficulties, I hope that the Minister will give us some good news, and perhaps announce that the Government intend to do something to remedy the situation which exists in the West Midlands.
      11.15 p.m.
      The Minister of State, Home Office (Mrs. Shirley Williams): This is not the first time by a long chalk that the House has discussed the question of remand accommodation for women in the Midlands. I am nevertheless grateful to the hon. Members for Birmingham, Edgbaston (Mrs. Knight) and Brierley Hill (Mr. Montgomery) for their concern about the matter, which is equally our concern.

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      I recognise that it has aroused the interest and concern of a number of organisations in the Midlands, including the Magistrates' Association, since my right hon. Friend the Home Secretary decided in the first half of 1968 that he could no longer continue to use the women's wing that formed part of Brockhill remand centre. I recognise the concern that has been expressed about the present situation and I shall explain some of the reasons connected with considerations which no responsible Government could ignore.
      I want to emphasise first that perhaps the greatest problem, although in some ways it is perhaps a favourable aspect of the problem we face, is that there are at any one time a very small number of women and girls in custody. At any time that number would vary between 200 and 250 in the country as a whole, which is rather less than one-thirtieth of the men. This arouses particular problems because women have proportionately rather more specialised needs than men. Because of the peculiar nature of remands for women we find that a far larger proportion need one form of medical or psychiatric care than another compared with the number of men on remand.
      The hon. Lady was perfectly correct in saying that there is no rule laid down about this, but in practice there is a requirement laid upon the Home Office about a woman who might be disturbed. It is reckoned that at any one time up to one-third of the women on remand are seriously disturbed. We would feel very irresponsible were we not to provide the remand cover which such a person requires. Because of the difficulty of providing adequate staff and specialised staff whatever may be done about the Midlands, we have to provide only a limited number of remand centres. There are women remand prisoners from areas such as East Anglia, the South and Wales for whom it would be impracticable to provide specialised local remand accommodation because we should be dealing with perhaps only half a dozen women prisoners at a time.
      It is true that, as the hon. Lady said, there was a remand centre in the Midlands opened in 1965 so that for three
      1400
      years thereafter provision was made without the travelling required by the present arrangements. Women and girls now have to travel either to Holloway or Risley, near Manchester, or, in the case of those remanded by courts in Worcestershire and elsewhere, to Puckle-church, near Bristol. I will explain why my right hon. Friend in 1968 reached the decision he did. I go back to the early sixties when the then Government decided that they should improve remand accommodation for men and women. They were concerned in particular about women under 21 and felt that they should not be kept in ancient Victorian prisons and not crowded together with adult prisoners. They looked for suitable sites, which was not easy for that Government as it is not for us. It will be appreciated that sometimes the most suitable sites are objected to on local planning grounds.
      I do not think that anyone would say that Brockhill was the idea situation, but it was chosen because it was on land owned by the prison authority and would not have the objections made if it were private property or land owned by other public authorities. It was a perfectly suitable choice for a remand centre for young men, but we found it difficult— I am sorry to stress this point, as the hon. Lady said I would—to find cover for adequate nurses at Brockhill.
      I have not the time to go into detail, but I want to stress, because I believe that this is not fully appreciated by hon. Members who have raised the point, that the Home Office is peculiarly responsible if any woman prisoner commits suicide, does damage to herself, or in any other way is harmed while held in remand. This is why it is crucial for us in the case of somebody who is mentally disturbed or physically unwell to have adequate nursing cover, because we could not defend the position if we did not provide such cover.
      In the period of time that we had a remand centre at Brockhill, which was approximately two and a half years, no fewer than seven nursing staff resigned, mostly on the grounds that the centre was too remote and that they could not easily get to shopping centres and elsewhere. Nine women and girls had to be transferred in a matter of hours to Holloway or Risley because we could not provide

      1401
      adequate medical cover. We strongly felt that we must provide such cover, and it was because we simply could not satisfy ourselves that we could get it that we abandoned Brockhill.
      The decision over that establishment was unavoidable. This was partly because it was an isolated spot. We feel increasingly in the prison service that we must move from the concept of the prison, particularly for women, to the concept of something which is much closer to a hospital. This is why we are redesigning and replanning Holloway, our main women's prison, to be in effect what will be a secure hospital; because we find that emotional and mental disturbances are much more often at the bottom of women who fall outside the law than any other explanation. That was broadly why we closed the centre at Brockhill.
      For some of the areas that Brockhill covered, though admittedly not Birmingham, Risley is an equally convenient centre. I recognise that there are serious problems about travel. I recognise that for many women the strain of doing so adds to their already existing very considerable worries, another worry which is perhaps one which we should not ask them to undertake.
      I want to refer to two questions that the hon. Lady asked before turning to what I hope might conceivably be a solution. The first—I mention this only for the facts of the case and not because I think that it is a crucial part of the argument—is simply the additional cost that there will be from the closing of Brockhill. Our estimate suggests that this is about £10,000 a year, though in saying that I am referring to the extra time involved for police and prison staff.
      On a financial basis—but I stress that I do not believe that this is the central issue—there is no doubt that the extra costs involved in escorting women from Holloway and Risley is much less than that involved in running Brockhill. I accept what hon. Members opposite will say if I press this argument—which is a perfectly fair point—that one does not measure human concern or even human suffering in terms of pounds, shillings and pence. I say that only because there has been some dispute about the facts.
      The second point I want to make is about the overnight accommodation
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      available at Winson Green prison. The hon. Lady is right about the fact that this accommodation has not been very much used. Her colleague who commented to her that it is not used because there are no women staff has not quite got the right end of the stick, because the staff come with the prisoner. Any prison officer or nurse who may be required will be financed by the Home Office to travel up with the woman remand prisoner to the accommodation and spend the night there. So this is not an objection.
      We have said that in any case where a medical officer recommends that on medical grounds a woman prisoner should travel up and stay overnight at Winson Green this will be done. If there are any individual cases that the hon. Lady would like to raise with me, I shall be more than happy to look into them, because we have made it quite clear that that is the rule under which such overnight accommodation will be used.
      Mrs. Knight: Would the hon. Lady reassure me about the nurses? Does she think that anyone going there would have a nurse in attendance all the time and an escorting officer? Would there be two people or more? Where would they be brought from?
      Mrs. Williams: Any woman staying overnight at Winson Green would have with her a woman prison officer, who would be sent from Holloway, Risley or Pucklechurch according to which remand centre she was permanently remanded to. In addition, if there were medical grounds for her attendance, she would be attended by a nursing officer. It would depend on the individual case and she would bring with her one member of staff, and in some cases two.
      The re-starting of a full remand centre for the number of women that Midlands courts produce as remands would be financially difficult to accommodate. It is this that I must stress because, at present, if we are to convert part of Winson Green for a women's remand centre, we reckon that we would have to lose at least 40 male cells, which, owing to the present overcrowding at Winson Green would mean the loss of about 120 places.
      We do not feel, in terms of the effect on the male prisoners and the Birmingham Prison that we could justify such a

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      step, so we are thinking in terms of a different solution. The right sort of solution for the relatively small demand from the women's courts might be that, while we cannot justify immediate priority for a remand centre because of its heavy demands on professional staff and finance, we would be and are willing to consider a different solution.
      The one which we have in mind was mentioned by the hon. Lady. That is, if we could find a suitable property, possibly in Birmingham or in the general West Midlands conurbation, which might house 20 or 30 women in secure hostel conditions, which means the conversion of a suitable house, this might give us an answer much more rapidly than by trying to provide a purpose-built remand centre for the very small number of remand prisoners.
      This means that we must recruit a number of nursing staff—the problem which we have had at the Brockhill centre—but if we could find such a house for conversion relatively near the centre of Birmingham or another Midlands town, it would be much easier to recruit nursing staff than when it means either a long time spent on travelling or removal of the entire family. We are now looking for suitable premises which could be adapted in this way. No violent or dangerous woman prisoner could be kept in such a hostel, but the great bulk of them—the vast majority—do not fall into that category, and there would be nothing for West Midlands people to worry about in such a home.
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      We would need the co-operation of local authorities in the West Midlands to establish such a hostel. We need to get at least the agreement of the local community but, as the hon. Lady said, Birmingham has an outstanding record in this respect. In the after-care of prisoners, it has shown liberalism which the Home Office should pay tribute to, as should those concerned in assisting prisoners after they leave prison.
      Therefore, if I can count, as I am sure I can, on the support of West Midlands Members and we can find suitable premises, which can be economically adapted and satisfactorily used for this purpose, and if we can get planning clearance—I am sorry to apply all these conditions—we would be willing to give such a scheme early and sympathetic consideration.
      Mr. Donald Williams: We should all like to know when the Home Office had this change of heart and for how long it has been looking for such accommodation.
      Mrs. Williams: I am not sure that a change of heart was required. It was with regret that the Brockhill centre was closed and it was because we face insuperable problems of staffing, especially medically qualified staff—
      The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
      Adjourned at half-past Eleven o'clock.

      Second Reading Committee
      Wednesday, 13th May, 1970
      [MISS HARVIE ANDERSON in the Chair]

      The Committee consisted of the following Members:

      Miss Harvie Anderson (Chairman)

      Albu, Mr. Austen (Edmonton)

      Ginsburg, Mr. David (Dewsbury)

      Allaun, Mr. Frank (Salford, East)

      Gray, Dr. Hugh (Yarmouth)

      Bennett, Sir Frederic (Torquay)

      Griffiths, Mr. Eldon (Bury St. Edmunds)

      Biggs-Davison, Mr. John (Chigwell)

      Hazell, Mr. Bert (Norfolk, North)

      Braine, Mr. Bernard (Essex, South-East)

      Herbison, Miss Margaret (Lanarkshire)

      Conlan, Mr Bernard (Gateshead, East)

      Luard, Mr. Evan (Joint Under-Secretary of State for Foreign and Commonwealth Affairs)

      Davies, Mr. Ifor (Gower)

      Dodds-Parker, Mr. Douglas (Cheltenham)

      Faulds, Mr. Andrew (Smethwick)

      Marten, Mr. Neil (Banbury)

      Fisher. Mr. Nigel (Surbiton)

      Walters, Mr. Dennis (Westbury)

      Fitch, Mr. Alan (Wigan)

      Wood, Mr. Richard (Bridlington)

      Miss J. Beston,Committee Clerk.

      DIPLOMATIC PRIVILEGES AND INTERNATIONAL ORGANISATIONS BILL
      10.30 a.m.
      The Joint Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Evan Luard): I beg to move,
      That the Chairman do now report to the House that the Committee recommend that the Diplomatic Privileges and International Organisations Bill be read a Second time.
      It would be rash ever to suggest that a Bill on privileges and immunities is wholly uncontroversial, because I know that this is a subject which arouses strange passions in the breasts of some hon. Members, but I think it is true that this Bill is of an unusually uncontroversial nature. It supplements our present legislation in regard to the privileges and immunities of diplomatic missions and international organisations. Two of the three main Clauses—Clauses 1 and 3—
      1406
      simply tidy up the existing situation. In fact, they merely put on a statutory basis some financial reliefs which are already being given administratively.
      The need for Clause 2 has arisen because of the establishment of the Caribbean Development Bank, of which the United Kingdom has become a member. We require statutory authority in the Bill to enable us to confer on the Bank privileges and immunities of broadly the same kind as those which have been accorded to other similar international organisations.
      Clause 1 provides for the refund of the customs duty paid on hydrocarbon oils— that is, petrol and fuel oils for heating systems—bought by diplomatic missions and certain persons connected with them

      1407
      and by the Commonwealth Secretariat. If these persons or bodies imported hydrocarbon oils directly for their own use, exemption from customs duty would be accorded under existing law—that is, the Diplomatic Privileges Act, 1964 and the Commonwealth Secretariat Act, 1966. However, in practice it is obviously not convenient for them to claim and demand exemption each time the oil is imported. Therefore, they have been obtaining refunds for the amount of the duty.
      At present, the authority for these refunds is through the Appropriation Acts alone. The main purpose of this Clause is to substitute for these individual Appropriation Acts a general statutory authority for making refunds of this kind. When the Consular Relations Bill was before Parliament in 1968, the then Under-Secretary of State told the House that it was the intention to seek specific statutory authority for refunds to diplomats for customs duty paid on hydrocarbon oils.
      This Clause fulfils that assurance. It amends the Diplomatic Privileges Act 1964 and the Commonwealth Secretariat Act 1966, so as to bring them into line with the Consular Relations Act 1968 and the International Organisations Act 1968.
      Refunds are at present made by the Foreign and Commonwealth Office. When this Clause becomes law, it is proposed to change the system and to transfer the administration of all these funds to the Department of Customs and Excise. Refunds will then be made out of revenue instead of out of voted money.
      I must emphasise that the privilege of duty-free petrol is one which is already given to our diplomatic missions and consular missions abroad. Under Clause 1 it will be possible for us to withdraw the privilege from the mission of any country which fails to give similar privileges to our diplomats abroad.
      Clause 2, as I said, is necessary because of the establishment of the Caribbean Development Bank. If the members of the Bank included foreign States it would not be necessary for us to include this Clause in the Bill, because it would have been covered in other legislation. As at present all the members of the Caribbean Development Bank are Common-
      1408
      wealth countries, it is necessary for us to include a special provision in the Bill to give them the appropriate privileges and immunities of an international organisation.
      The purpose of the Bank is to provide capital for the economic development of Caribbean countries and to improve the standard of living of their people. The British Government have supported this project from the outset, along with other States and territories within the Commonwealth. We ratified the Caribbean Development Bank agreement on 23rd January. This enabled us to be represented at the inaugural meeting of the Governors of the Bank, when important decisions about the future of the Bank were taken.
      The Agreement contains provisions for the reciprocal granting of privileges and immunities, but these are of a relatively restricted character. They are not the full privileges and immunities which are often accorded under other arrangements or for diplomats in general.
      I must point out the obvious fact that the Bank will not have its offices permanently established in London. Therefore, to a large extent, this is a theoretical provision to cater for certain contingencies— for example, for meetings which might be held here. The privileges and immunities will apply mainly in the territory where the Bank is situated.
      We had hoped to be able to confer the privileges and immunities on the Bank by means of an Order in Council under the International Organisations Act, 1968; but, because there are at present no foreign countries as opposed to Commonwealth countries which are members of the Bank, it is necessary to introduce this Clause into the Bill.
      When we ratified the Agreement, so that we did not cause any unnecessary delay we entered a reservation that
      " none of the immunities, exemptions and privileges conferred in the Agreement shall be granted in the United Kingdom until such time as the necessary legislation shall have been enacted."
      This is the necessary legislation to which we were then referring.
      Clause 2 therefore seeks to extend Section 1 of the International Organisations Act to make it applicable to the Bank and to enable an Order in Council to be made to give effect to the Agreement. If

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      the Clause becomes law, we will lay before Parliament a draft Order in Council conferring the necessary privileges and immunities. This will require a Resolution of each House, and will provide an opportunity for hon. Members to debate the details of the privileges and immunities in the Agreement.
      I repeat that the privileges here granted are more limited than in the case of other comparable regional organisations, largely through the efforts of the United Kingdom delegation in the negotiations. It is also relevant to note that the Bank is operating in the Caribbean area and is not expected to have either offices or staff in Britain. The practical effect of the Clause in terms of granting new privileges and immunities to people based in London will be very small.
      Clause 3 has the effect of amending Section 2 of the International Organisations Act, 1968 to provide statutory authority to grant exemption from vehicle excise duty to the senior staff of I.M.C.O. —the Inter-Governmental Maritime Consultative Organisation—a U.N. specialised agency which has its headquarters in London. In fact, it is the only specialised agency which has its headquarters in London and, therefore, is of particular concern to us as regards the according of privileges and immunities.
      This Clause is a logical corollary of the special privileges for these officers which were given by Parliament in Section 2 of the 1968 Act. It was the general intention of that Section to confer diplomatic financial privilege on those staff of I.M.C.O. whose rank is comparable to that of a diplomatic agent, but at present it makes no provision for exemption from vehicle excise duty, although such an exemption is a normally accepted element in the privileges and immunities of people of that rank. This Clause remedies that omission.
      I.M.C.O. was led to understand that the privilege would be given, and in fact it has been accorded administratively until now. The amount of duty involved is comparatively small—about £625 a year at present. If the Clause becomes law, the Headquarters Agreement between the United Kingdom and I.M.C.O. will be amended to include a reference to vehicle excise duty, which is not at present included, and a draft Order to give effect
      1410
      to the amendment will be laid before Parliament.
      I commend the Bill to the Committee as a useful Measure making necessary adjustments in our legislation.
      10.40 a.m.
      Mr. Richard Wood: Until recently—in fact, until the Bill was ordered by the House of Commons to be printed on 22nd April—I and a number of my hon. Friends were naturally rather apprehensive that there had been a breakdown in the production of these regular biannual diplomatic privileges Bills, which this Bill purposes to supplement.
      The Under-Secretary explained that, necessary though this Bill may be, it is not a particularly solid or weighty piece of legislation. The hon. Gentleman suggested that it, perhaps, is not acutely controversial. On the whole, we would agree with him. Indeed, if the Bill had been acutely controversial, it might not have been remitted to this Second Reading Committee.
      It seems to me to be certainly sensible that the refund of customs duty on hydrocarbon oil should not only be made by the Department of Customs and Excise, as I believe it is at present, but that the Foreign and Commonwealth Office and the Department of Customs and Excise should be made " honest " Departments, as it were. The Bill fulfils the pledge which was given in a Committee on which I served, by one of the hon. Gentleman's predecessors.
      Second, it would be illogical to oppose the eligibility of the Caribbean Development Bank for the privileges and immunities which we have earlier agreed to confer on comparable organisations.
      I do not think that we can decently haggle over the proposed additional exemption from the vehicle excise duty which is provided for in Clause 3. I have, perhaps to no one's surprise, no unanswerable objections to Clause 4.
      Therefore, I am conscious that I am giving more or less enthusiastic consent to each of the Clauses. However, I am left with a general feeling of anxiety about Bills of this type which, I suspect, is shared not only by some members of this Committee, but by many others outside Parliament. I speak of the conviction which I think is held by many people

      1411
      that diplomatic privileges have already gone far enough, if not too far.
      In spite of this conviction, it is always very difficult to argue against granting them in a particular case. It seems rather fussy and, to coin a word, parvanimous— the opposite of magnanimous—to suggest that the process should be stopped at any particular point. In fact, it is difficult to suggest any particular point at which the process should be stopped.
      One principle on which earlier Committees have generally been agreed, and to which the Under-Secretary gave tacit assent, is that of reciprocity. My hon. Friends and I are very anxious to know whether we are giving under the Bill any privileges to members of the specialised agencies or diplomatic missions or members of the Caribbean Development Bank which are not completely universal.
      Section 3(1) of the Diplomatic Privileges Act, 1964, which is one of the parents of this Bill, enshrines the principle of reciprocity and expresses very clearly the willingness of the people of this country to grant privileges in Britain to the extent, but only to the extent, that those privileges are matched in other countries by similar privileges to comparable British representatives abroad. That Section allows for the withdrawal of privileges in this country if those conditions are not fulfilled. Therefore, before my own approval of the Bill, and the extension of privileges that it contains, can be as wholehearted as I should like, I would be grateful if the hon. Gentleman could answer two questions.
      Under Clause 3, have there been occasions when privileges which we have granted have been withdrawn? If the answer is, as I suspect, that there have not been, will the hon. Gentleman assure us that the absence of any occasions when privileges have been withdrawn means that complete reciprocity exists in all cases?
      If the Minister is able to give us satisfactory answers, I will willingly ask my hon. Friends to support the Bill.
      10.45 a.m.
      Dr. Hugh Gray: My reservations are similar to those which have ben expressed by the right hon. Member for Bridlington (Mr. Wood). My experience of inter-
      1412
      national organisations—as an employee of them—goes back to the five years which followed the last war. However, from conversations that I have had with friends who are still employed by such organisations, I have no reason to think that the situation has changed in relation to diplomatic privileges. Therefore, I hope to hear from my hon. Friend some clear definition of the way in which one arrives at a rank comparable to a diplomatic agent.
      In the post-war period, far too many employees enjoyed diplomatic immunity when they were not performing any kind of diplomatic job. International organisations generally have two categories of employees: those recruited locally, and others recruited in their countries of origin. These differences of category can always be stretched, and many people are recruited in the countries in which they will be working and treated as though they had been recruited in their countries of origin. It is often held out to such people as an additional attraction that diplomatic immunity will go with the job and that they will enjoy certain privileges. In my view, we should look into who exactly in international organisations is given diplomatic immunity, and why. I should like, for example, to hear why certain officials in the Caribbean Development Bank are to be given diplomatic immunity. Why is their rank considered to be comparable or equivalent to that of a diplomatic agent?
      There have been extensions of diplomatic privileges since the war which are quite unjustified, and these multiply in time. Often it is decided to establish a new post in a mission of a United Nations agency in a given country, and it is thought that diplomatic privileges should go with it. Negotiations take place with the Government of the country in which the post is to be established. Once that Government has agreed that the United Nations agency has a strong case, if the mission is then transferred to another Country it says to the Government of the new country that the post carried diplomatic privileges in London and obviously it should continue on the same basis. In this way a multiplication takes place which is not justified. I hope to hear that close scrutiny is given to any official of an international organisation to whom it is proposed to grant diplomatic privileges,

      1413
      and I repeat my hope that my hon. Friend will say how rank comparable to that of a diplomatic agent is established.
      10.48 a.m.
      Mr. Eldon Griffiths: Miss Harvie Anderson, may I seek your advice? I am not familiar with the procedure in Second Reading Committees. Are Clauses taken one by one? Some of my points would be more conveniently expressed when we consider individual Clauses.
      The Chairman: Our procedure is comparable with that of a Second Reading in the House. The Committee will not go through the Clauses individually. There will be a vote at the end of the debate in the normal way.
      Mr. Griffiths: Do I take it that the Clauses will be considered afterwards?
      The Chairman: No. The Committee stage will follow later, and Clause points would be more appropriate then. However, it is unlikely that the hon. Gentleman will be out of order in making passing references to them at this stage.
      Mr. Griffiths: I am much obliged.
      Like my right hon. Friend the Member for Bridlington (Mr. Wood), I give a general welcome to the Bill since, having benefited from the hospitality and help of our missions abroad, I accept the principle that we must afford to the diplomatic and other missions of other countries and international organisations the same facilities in Britain as our missions are afforded abroad. I welcome the Bill on that ground alone.
      I also welcome the fact that we seem to be succeeding in attracting to this country a number of international organisations. We have the wheat organisation, and mention has been made of I.M.C.O. this morning. I am sure that the trend is a good one. As British power recedes from some parts of the world, it is slightly comforting to know that London remains a world capital in the sense that there are a number of international organisations represented here. Nor am I blind to the fact that the presence of these international organisations in Britain provides us with valuable foreign exchange. It is well worth while to attract them here.
      As the Minister rightly said, the principal purpose of Clause 1 is, to put it
      1414
      rather crudely, to make the Foreign Office " an honest woman ". During the Second Reading of the Consular Relations Bill, I drew the Minister's attention to Clause 8, and we discovered that the concesssion on hydrocarbons being made to foreign consulates in this country arose from the fact that the House gave general approval to the Foreign Office Vote. But there was no specific approval in that Vote for the concession. The hon. Gentleman's predecessor gave an undertaking at that time that the matter would be put right. I am glad that this Bill puts it right. However, it underlines the necessity for Committees considering even small Bills of this kind to show diligence towards detailed points. It is good that this detailed point, which was recognised by my right hon. Friend and others at that time, is now put right in legislation.
      The Minister said that he was seeking here to put the Caribbean Development Bank and various other international organisations on exactly the same kind of footing as the other organisations which benefit under the Diplomatic Privileges Act and the Consular Relations Act. I have studied those measures carefully, and the fact is that under our law we do not treat diplomats or consuls in this country in the same way under the various Acts. There are considerable technical differences in our approach to them.
      I have examined the four relevant Acts —the Commonwealth Secretariat Act, the Consular Relations Act, the Diplomatic Privileges Act and the International Organisations Act. I can assure the hon. Gentleman that a study of the Sections and Schedules shows that there are marked differences in our approach to the employees and agents of the various organisations in this country. A time should come one day when we consolidate in a single Bill all the rules and regulations concerning foreign agents and diplomats in this country.
      I will give one example. The Schedule to the Diplomatic Privileges Act, which is at the heart of this Bill, says specifically in Article 36 that there shall be relief from taxation on

      " (a) articles for the official use of the mission;

      (b) articles for the personal use of a diplomatic agent or members of his family forming part of his household…"

      1415
      That is a clear power in the Diplomatic Privileges Act.
      In the Commonwealth Secretariat Act, however, the concession is confined to an exemption from duties on
      "…goods necessary for the official use of the Secretariat and directly imported by it…".
      That is a much narrower power than that contained in the Diplomatic Privileges Act. I mention that by way of illustration and to suggest that a time should come when we should consolidate the various provisions.
      I have a number of other points, but it might be better to make them when we consider the Clauses.
      10.56 a.m.
      Mr. Douglas Dodds-Parker: Clause 1 refers to hydrocarbons and the repayment of duty on them, and that brings one to the position of the drivers and junior staff in diplomatic missions.
      As time goes on, I find that public opinion, and certainly my own, is adverse to what, when it started, was a reasonable concession. A very wide group of individuals are granted diplomatic privileges especially those employed as chauffeurs, who need not be privileged at all. I am thinking mainly of those from the Soviet bloc countries and others who are here, to put it bluntly, probably as spies in one form or another. The huge size of the Eastern European embassies has annoyed public opinion. I know that the Foreign Office has tried to cut them down on a number of occasions: I hope that the Minister will be able to say with what success.
      We all know that reciprocity is the basis of these arrangements, and we want to protect our people in those countries against undue discrimination and, possibly, harsh treatment if they commit driving offences. However, a great number of the drivers employed in those countries are recruited locally. In this country, we find a great many " imported " drivers using these large quantities of hydrocarbon oils who, if they are involved in road accidents in these increasingly dangerous days, get away Scot free. Can the Minister say the extent to which protests have been successful in cutting down the staffs required
      1416
      to use these large quantities of hydrocarbon oils?
      Like my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths) I regret that we do not have more international organisations in London. Obviously, we must give them the same privileges as those given in other countries if we wish to attract them here. I hope that this will be another of those Bills which encourages the right sort of international organisations to come here, and that we will give these bodies reasonable treatment. At the same time, this is another case where it should be made clear to the public that a lot of undesirable people are not getting away with it.
      10.58 a.m.
      Mr. Luard: The right hon. Gentleman the Member for Bridlington (Mr. Wood) asked a number of general questions about whether diplomatic privileges had gone too far, whether the time had not come to call a halt, and, in particular, whether there was reciprocity in every case. The whole principle on which such legislation is based is reciprocity. It is open to us to withdraw privileges and immunities from representatives of a country which is not providing them on the same scale for us. On certain occasions we have withdrawn privileges on those grounds. We have a list of the countries which have failed to provide particular kinds of privileges and immunities, and certain action has been taken by us against representatives of those countries.
      It is the aim of the international community as a whole to try to establish a regular practice on matters of this kind. One of the purposes of the two Vienna Conventions on Diplomatic and Consular Relations was to try to establish a considerable degree of uniformity in this respect among all nations. There is much greater uniformity in the granting of privileges and immunity today than there has been at any time. The time when there was a large number of bilateral agreements between individual Governments granting certain scales of privileges to each others' diplomats is to a large extent now at an end. The purpose of the two Conventions and the legislation introduced to implement them has been to create a large degree of uniformity.

      1417
      My hon. Friend the Member for Yarmouth (Dr. Gray) asked how certain officials of international organisations were assessed for the right to particular privileges or immunities. The main point here is that only an officer who is the equivalent of a diplomatic agent is qualified to enjoy these immunities, and it depends on the individual organisation how many people it appoints to a sufficiently senior rank to qualify in this way.
      Schedule 1 of the International Organisations Act talking about privileges and immunities, says that a member of the official staff " who is recognised by Her Majesty's Government in the United Kingdom as holding a rank equivalent to that of a diplomatic agent" shall be entitled to the privileges and immunities set out in Section 2(2) of the Act. I have already explained that it is not expected that the Caribbean Development Bank will have staffs based in London: it will not have its headquarters in London. Therefore, it will be very unusual for any of the privileges and immunities we are talking about to be granted by the British Government to officials of that organisation, though this could happen if there were a conference or something of that kind in London.
      Mr. Griffiths: The hon. Gentleman earlier made it clear that the Bank will not have its headquarters here. Therefore, the provision is really quite modest. He is virtually saying that officials will have concessions during the time they happen to meet in London. There are all kinds of international meetings in London lasting for two or three weeks. There is a question here whether there might logically be a request that the privileges extended to members of the Caribbean Development Bank coming here for meetings be extended to those who attend other kinds of international meetings here. There is a logic here that needs to be considered.
      Mr. Luard: Examination of the text of the Agreement shows that the privileges and immunities apply only to the official acts of officials of the organisations. Therefore, their coming here for a meeting of another kind would not entitle them to privileges and immunities. Similarly, they will get no personal privileges or immunities. For example,
      1418
      immunity from proceedings will concern only acts done by them in an official capacity.
      I wanted in further reply to my hon. Friend to point out how limited on the whole are the number of those belonging to organisations based in London who qualify. There are only 10 " high officers " based in London of the various organisations such as N.A.T.O., I.M.C.O., Western European Union and so on. Such privileges and immunities are given because they are based in London Of those 10, three are of British citizenship and therefore do not qualify. There are 35 senior officers and 271 other officers, making a total of 316, so that is a fairly limited number. In Paris there are 669 members of staff of international organisations who qualify for the privileges and immunities in Rome 246; in Geneva 7,440; in New York, 5,500, and in Brussels 8,000. This comparison of international capitals shows that it cannot be said that we have extended very lavishly to members of the staff of international organisations privileges and immunities of this kind.
      Mr. Wood: My hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths) made a point which the Minister has not satisfactorily answered. He has explained that although the Caribbean Development Bank will not have its headquarters here its members or representatives might be here on official business from time to time. In the sense that the Bill aims to protect them, he raised the point of other organisations which do not have their headquarters in London but whose members might be here on official business, and suggested that there might be considerable pressure for an extension of these privileges to those members here on their official business. The hon. Gentleman has explained that they would not be protected if they were here for some other purpose. But if they were here for an official purpose, though their headquarters is in another country, is there not likely to be pressure to extend the concession now being given to the Bank a good deal further to many other organisations?
      Mr. Luard: There is nothing new in these privileges and immunities. They are on a very restricted scale. They are a much smaller set of privileges and immunities than are given, for example, to diplomats

      1419
      in embassies in London. Therefore no precedent is being set that would be particularly dangerous in regard to any other international organisation. There is nothing in the Bill that will provide new privileges and immunities for members of other organisations, whether coming here for a meeting or for any other purpose. Clause 2 relates entirely to the Caribbean Development Bank, and that Bank alone.
      Mr. Griffiths: I am sorry to pursue this point, but it seems relevant. Let us consider how this would work in practice. An official of the Bank, not normally resident in London but possibly resident in Kingston, may come to Britain for three or four weeks to take part in meetings of his Bank, or any agency of it, with particular reference to this country. The Minister is saying that during the three or four weeks he is here he will not be taxed on his petrol. I should have thought that that would be rather difficult administratively to achieve, but let us suppose that it can be achieved. How can we reasonably say to officials of Western European Union, which also has its headquarters in London, or to officials of N.A.T.O. or any other organisation, that when they come to a meeting in London arising from W.E.U. they shall not be given the same privileges?
      Mr. Luard: The position in relation to officials of W.E.U. or N.A.T.O. is not affected in any way by anything laid down in the Bill. This might already be the case. Members of the Caribbean Development Bank would acquire these rights only if they were here on official business for a meeting of the Bank. There is nothing in the Bill that will extend the rights which a member or official of N.A.T.O., W.E.U. or any other organisation might acquire. Those organisations with offices of a kind in London already benefit in a much more material sense from the according of particular privileges and immunities than any official of the Caribbean Development Bank.
      Mr. Wood: The point worrying my hon. Friend and me is: on what basis will the Foreign Office refuse to extend the privileges to people who will be in a position very comparable with that of the people in the Bank visiting London for three or four weeks? What is the basis
      1420
      on which this extension of privileges would be refused?
      Mr. Luard: I repeat that the basis would not be changed in any way by anything in the Bill. Under the existing legislation, such as the International Organisations Act, which covers organisations such as W.E.U. and N.A.T.O., it might be possible for officials if they were here on official business to claim privilege and immunity. There is nothing in the Bill that will alter the position concerning other organisations.
      I should like to try to answer some of the points which the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) raised earlier. He said that there are different scales of privileges and immunities laid down in different legislation, or sometimes in different agreements. It is a fact that the Government have entered into specific agreements with particular Governments in regard to diplomats. If those agreements were entered into before the Vienna Convention on Diplomatic and Consular Relations, and before the legislation resulting from it in this country. it may be that some of the privileges and immunities afforded are not exactly in line with those laid down in that Convention. It is also the case that there are variations in the privileges and immunities accorded, for example, to consular personnel and staff of particular organisations.
      The hon. Gentleman pointed out that that can be seen from the text of some of this legislation. This will remain the case. It has never been suggested that every official who qualifies for privileges and immunities qualifies for exactly the same scale. What is now beginning to come about is a considerable degree of uniformity in the scale of privileges and immunities accorded by different governments to officials of a similar level and scale, or of a similar organisation. In this respect Her Majesty's Government have, by implementing legislation such as that which we have been discussing, joined in the process of regularising the according of privileges and immunities and bringing about a greater degree of uniformity.
      The hon. Gentleman suggested that consolidating legislation might be desirable at some stage; legislation which

      1421
      laid down in very general terms the kinds of privileges and immunities that would be accorded to officials of different kinds and of different organisations, and presumably he also meant diplomats and consular staff. This might be possible at some time in the future, but there is inevitably still quite a considerable variation in the privileges and immunities accorded. Recent legislation, such as the International Organisations Act and the Diplomatic Privileges Act, has gone a considerable way towards the kind of aim the hon. Gentleman has in mind of laying down in statutory form what privileges and immunities should be awarded in particular cases.
      The hon. Gentleman the Member for Cheltenham (Mr. Dodds-Parker) spoke of his general concern at the increase in privileges and immunities accorded, and particularly in regard to exemption from tax on hydrocarbon oils and the fact that certain embassies had very large staffs and benefited from this very considerably. The Government are concerned about the size of the staffs of some embassies in London, and we have indicated our desire to see some of them reduced. In so far as they are diplomatic staff, they must clearly benefit from the same scale of immunities and privileges as other comparable staff. The only way in which the problem can be solved is by trying to ensure that all the staffs of embassies, and of international organisations which bene

      THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

      Anderson, Miss Harvie (Chairman)

      Gray, Dr.

      Albu, Mr.

      Griffiths, Mr. Eldon

      Allaun, Mr. Frank

      Herbison, Miss

      Braine, Mr.

      Luard, Mr.

      Dodds-Parker, Mr.

      Wood, Mr.

      Fitch, Mr.

      fit, should be kept down to reasonable numbers.
      I hope that I have answered most of the points raised during this brief debate. On the whole, the proposals in the Bill are not of a controversial character in the scale of privileges and immunities which they cover in respect of the Caribbean Development Bank. The Bill covers only privileges and immunities of a restricted kind and should not be of great concern to hon. Members. It will be possible, as you, Miss Harvie Anderson, have pointed out, for the scale of privileges and immunities to be discussed at the Committee stage, but I hope that there will be no disagreement on the general principles laid down in the Bill which, I hope, will receive a Second Reading.
      Question put and agreed to.
      Ordered,
      That the Chairman do now report to the House that the Committee recommend that the Diplomatic Privileges and International Organisations Bill be read a Second time.
      The Chairman: Perhaps before our proceedings end, hon. Members will allow the Chair to go outside the rules of order to the extent of remarking that for the first time this Committee has had a woman as its Chairman and a woman as its Clerk.
      Committee rose at sixteen minutes past Eleven o'clock.

AGRICULTURE, FISHERIES AND FOOD
  Factory Farming
  Factory Farming
  Dogs (Quarantine)
  Dogs (Quarantine)
  Agricultural Census Returns (Staff)
  Agricultural Census Returns (Staff)
  Price Review
  Price Review
  Dog Licence Fee
  Dog Licence Fee
  Tomato Exports (Republic of Ireland)
  Tomato Exports (Republic of Ireland)
  Fertilisers
  Fertilisers
  Chlorinated Hydro-Carbon Residues (Sea Dumping)
  Chlorinated Hydro-Carbon Residues (Sea Dumping)
  Straw
  Straw
  Milk (Price)
  Milk (Price)
  Dairy Herds
  Dairy Herds
  South-West Region (Farm Holdings)
  South-West Region (Farm Holdings)
  Milk Producers
  Milk Producers
  Upland Farms
  Upland Farms
  Brucellosis (Eradication Scheme)
  Brucellosis (Eradication Scheme)
  Bacon Pigs (Production)
  Bacon Pigs (Production)
  Food (Price Increases)
  Food (Price Increases)
  Tenant Farmers (Rents)
  Tenant Farmers (Rents)
  Tied Cottages
  Tied Cottages
  Metric System
  Metric System
HOUSE OF COMMONS
  Photocopying Machines
  Photocopying Machines
  Public Gallery (Information)
  Public Gallery (Information)
  SOUTH AFRICAN CRICKET TOUR
  SOUTH AFRICAN CRICKET TOUR
SCOTLAND
  Timber Production (British Standard Time)
  Timber Production (British Standard Time)
  Hospitals, Edinburgh (Hepatitis)
  Hospitals, Edinburgh (Hepatitis)
  Housing Subsidies
  Housing Subsidies
  Sugar Beet, Cupar
  Sugar Beet, Cupar
  Cairngorm Mountains (Access)
  Cairngorm Mountains (Access)
  Fee-Paying and Selective Schools
  Fee-Paying and Selective Schools
  West European Fishing Conference, Aberdeen
  West European Fishing Conference, Aberdeen
  Unpaid Fines
  Unpaid Fines
  School Building
  School Building
  Livestock (Haulage)
  Livestock (Haulage)
  Murders (Released Prisoners)
  Murders (Released Prisoners)
  Schools (Designation)
  Schools (Designation)
BOARD OF TRADE
  Shipping (United Nations Committee Meeting)
  Shipping (United Nations Committee Meeting)
  Footwear (Exports)
  Footwear (Exports)
  Companies (Registrations and Bankruptcies)
  Companies (Registrations and Bankruptcies)
  Oil Pollution (Liability for Damage)
  Oil Pollution (Liability for Damage)
DEFENCE
  Cammell Lairds and Vickers
  Cammell Lairds and Vickers
  Northern Ireland
  Northern Ireland
  British Standard Time (Costs)
  British Standard Time (Costs)
  Polaris and Fleet Submarines
  Polaris and Fleet Submarines
  Submarines (Weapons)
  Submarines (Weapons)
  Portsmouth Dockyard
  Portsmouth Dockyard
NATIONAL FINANCE
  Income Tax and Surtax
  Income Tax and Surtax
  Money Incomes
  Money Incomes
  Consumers' Expenditure
  Consumers' Expenditure
  Social Security Expenditure (Unemployment)
  Social Security Expenditure (Unemployment)
  Inland Revenue Statistics
  Inland Revenue Statistics
  Public Expenditure
  Public Expenditure
  Selective Employment Tax
  Selective Employment Tax
  Income Tax
  Income Tax
  Gross Domestic Product
  Gross Domestic Product
  Domestic Credit Expansion
  Domestic Credit Expansion
  Purchase Tax
  Purchase Tax
  Taxes (Revenue)
  Taxes (Revenue)
  Industrial Investment
  Industrial Investment
  Distribution of Incomes
  Distribution of Incomes
  Public Expenditure
  Public Expenditure
  Tax Rates
  Tax Rates
  Northern Ireland (Exchequer Contributions)
  Northern Ireland (Exchequer Contributions)
  Overseas Debt
  Overseas Debt
TECHNOLOGY
  Investment Grants
  Investment Grants
  Development Grant Capital
  Development Grant Capital
  Metrication Board (Report)
  Metrication Board (Report)
EDUCATION AND SCIENCE
  Public Expenditure
  Public Expenditure
  Nursery Education (Wales)
  Nursery Education (Wales)
FOREIGN AND COMMONWEALTH AFFAIRS
  Middle East
  Middle East
HOME DEPARTMENT
  Road Accidents (Newham)
  Road Accidents (Newham)
HOUSING AND LOCAL GOVERNMENT
  Elderly People
  Elderly People
  British Standard Time
  British Standard Time
  Municipal Houses (Under-occupation)
  Municipal Houses (Under-occupation)
POSTS AND TELECOMMUNICATIONS
  Colour Television (Mid-Wales)
  Colour Television (Mid-Wales)
PUBLIC BUILDING AND WORKS
  Footbridge, St. James's Park (Floodlights)
  Footbridge, St. James's Park (Floodlights)
SOCIAL SERVICES
  Strikers (Payments)
  Strikers (Payments)
WALES
  Newport-Shrewsbury Trunk Road
  Newport-Shrewsbury Trunk Road
  University Hospital Group, Cardiff
  University Hospital Group, Cardiff

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

OTMOOR: SALE OF REQUISITIONED LAND
LORD WELLS-PESTELL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether the Ministry of Defence is selling by auction in June of this year, 656 acres of Otmoor in Oxfordshire which were requisitioned by the Air Ministry in 1920; and if so:—

1. Who were the owners of the land at the time it was requisitioned;

2. Whether the land has been offered back to the former owners;

3. Whether the land was common land at the time it was requisitioned; and

4. Whether this land should not be established as a Nature Reserve in view of its rare flora and fauna.]

THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR DEFENCE, R.A.F. (LORD WINTERBOTTOM): My Lords, some 563 acres of Ministry of Defence land on Otmoor will be offered for sale by public auction, probably this autumn. Another 93 acres of privately owned adjacent land is on offer and will be sold at the same auction because this is likely to be of mutual benefit to both vendors. The 563 acres were purchased between 1931 and 1933 to provide a bombing range for the Royal Air Force. There were eight former owners. One was the Ecclesiastical Commissioners, and another the Parish of Horton-cum-Studley; and the other six were private persons. All eight, or their successors, were offered back their land, and three expressed no interest.
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Of the remaining five, three dropped out on grounds of price, and the other two for other reasons. In accordance with the Crichel Down procedure, the land will be offered on the open market, and the former owners will be able to bid. The land was not common land when the Air Ministry purchased it in the early 1930s, although there is historical evidence that it was until the Inclosure Acts of the late 18th and early 19th centuries.
My Lords, the scientific importance of this land has been assessed by the Nature Conservancy, now a component body of the Natural Environment Research Council, who have powers under the National Parks and Access to the Countryside Act 1949, as amended by the Science and Technology Act 1965, to establish and maintain nature reserves. In their view, it is an interesting area of marshland which serves as a feeding ground for a variety of birds and contains some examples of locally rare flora, and accordingly about 2,000 acres of land on Otmoor were notified in 1952 as a site of special scientific interest under the Act. It is not considered that the scientific importance of the site is sufficiently high in the national context to qualify for its establishment as a national nature reserve.
LORD WELLS-PESTELL: My Lords, I am much obliged to my noble friend for such a full reply. May I ask him whether, in the event of former owners not wanting to bid for the land, it would be possible to offer it—notwithstanding what he has said—to the National Trust or the Nature Conservancy Board, in view of the flora and fauna and the historic association which this part of Otmoor has with the rest of Otmoor?
LORD WINTERBOTTOM: My Lords, under existing procedures the land must be offered at public auction. It cannot be sold privately. However, I believe that the only development that the local authority would be likely to permit would be agriculture or forestry, and this would not interfere with the usage which the noble Lord wishes to see preserved.
LORD WELLS-PESTELL: My Lords, in view of that, if the land is put up for auction and it is sold, are there likely to be any restrictions on the use and development of the land?
LORD WINTERBOTTOM: My Lords, that is of course for the local authority to decide. But, as I have said, it is improbable that anything except agriculture or forestry would be permitted.
LORD OAKSHOTT: My Lords, assuming that I am right in understanding that this land is being offered back to the former owners (who may or may not have shown interest, but who may have second thoughts), may I ask the noble Lord whether he recognises that this is a most welcome development in the preservation, as it were, of the so-called Crichel Down procedure, and that this procedure should be maintained unless a proper public announcement is made beforehand?
LORD WINTERBOTTOM: My Lords, I am grateful to the noble Lord. We are very mindful of the need for following the procedures correctly, and although most of the owners, or their descendants, have in fact renounced provisionally their interest in the land in order to enable them to bid at public auction, the land is being offered in the original parcels and will not be lumped together without their specific agreement.
EARL FORTESCUE: My Lords, could the Minister inform the House whether or not it is a fact that in any case the three projected routes for the continuation of the M.40 all go across Otmoor?
LORD WINTERBOTTOM: My Lords, that is another question.

HERRING FISHING IN THE NORTH SEA
2.40 p.m.
LORD BOOTHBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether any progress has been made at the international conference which is now considering the preservation of herring stocks in the North Sea.]
LORD BESWICK: My Lords, at its annual meeting, which ended on May 11, the North East Atlantic Fisheries Commission decided to recommend to member Governments that during 1971 fishing for herring
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in the North Sea and Skagerrak should be prohibited during May and from August 20 to September 30 inclusive. The recommendation provides for the exemption from the prohibition of herring unavoidably taken as a by-catch in some other fishery and also of limited quantities of herring for human consumption when this is necessary to avoid special difficulties. This recommendation will be reviewed by the Commission next year in the light of progress towards the introduction of a catch quota system which many countries would prefer. While the recommendation does not go as far in cutting back fishing effort as the scientific advice suggests is necessary, it is clearly a step in the right direction and Her Majesty's Government believe that in the circumstances the Commission did well to reach this measure of agreement.
LORD BOOTHBY: My Lords, may I just say to the noble Lord that his statement will have been received with great satisfaction?
LORD DERWENT: My Lords, may I ask the noble Lord whether legislation will be necessary in each country before the recommendations are brought into effect?
LORD BESWICK: My Lords, some form of legislation will be necessary. In this country it will be in the form of an Order, which will be introduced after the 90-day period during which countries can lodge objections.
LORD CLIFFORD OF CHUDLEIGH: My Lords, since the Danes are the villains in both cases, could the noble Lord do something now to save our salmon?
LORD BESWICK: My Lords, I am afraid the noble Lord's choice of language does not commend itself to me.

GIBRALTAR AND SPAIN
LORD MERRIVALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether there is any truth in the article, of the Madrid daily ABC of March 22,

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1970, under the heading "Spain—Great Britain 1970; Two Countries and a Rock", and particularly:

(a) regarding mutual concessions made by Her Majesty's Government and the Spanish Government;

(b) as to pressure brought to bear by Her Majesty's Government on the Council of Europe so that a Motion on Gibraltar, presented by Mr. Robert Edwards, M.P. and others, was not proceeded with;

(c) concerning the statement that "London is disposed to make other concessions";

and if there is, to what extent Gibraltar has derived any benefit, especially with regard to frontier restrictions.]
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD SHEPHERD): My Lords, this is a long and specific Question. It arises from a long article on United Kingdom and Spanish relations, with parts of which there could be no dissent, some parts of which we could approve, others which are factually incorrect, and some which, because of interpretation, I could not agree. As to the particular points raised by the noble Lord, it is the case that since the new Spanish Government was formed last November it has been possible to achieve a general lowering of tension. There is no question of pressure having been brought to bear by our Parliamentarians on the Council of Europe not to proceed with the Motion of Mr. Edwards on Gibraltar. Their decision to postpone the Motion sine die was their own.
So far as the future is concerned, we should naturally like to make further progress over Gibraltar. The key lies; in a start being made to the lifting of Spanish restrictions. The Spanish Government are well aware that we regard this as an essential part of any fundamental improvement in Anglo-Spanish relations. We continue to impress this upon them. Meanwhile, it is Her Majesty's Government's declared policy to see the people of Gibraltar through the difficulties they now face. In our informal diplomatic exchanges we have made it clear that the sovereignty over Gibraltar or any part of it is not under discussion.
LORD MERRIVALE: My Lords, I thank the noble Lord for that Answer. If it is true that our Ambassador in Madrid is in continuous contact with the Spanish Foreign Minister on the subject of Gibraltar, will the noble Lord confirm that the question of joint operation of the airport has not been discussed between them? Also, referring to the article, will Her Majesty's Government be prepared to withhold any economic concessions to Spain until the Gibraltar frontier restrictions have been lifted?
LORD SHEPHERD: My Lords, I am not quite certain what the noble Lord means when he talks about having discussions. We have had exchanges, through our Ambassador, with the Spanish Government, and I can assure him that we have certainly made no proposals about the airport. As to the future, we hope to see an improvement in Anglo-Spanish relations. But clearly there can be no improvement until the restrictions which the Spanish authorities have placed on Gibraltar have been removed.
LORD CARRINGTON: My Lords, since the Spanish Government know of the conditions which Her Majesty's Government have imposed about the sovereignty and about the withdrawal of the restrictions, and since all of us want a settlement of this issue, would it be better not to debate these matters in public?
LORD SHEPHERD: My Lords, I think that I would agree on this occasion with the noble Lord the Leader of the Opposition.
LORD MERRIVALE: My Lords, may I ask one more question? In view of Spain's continuing suppression of access to Gibraltar by land, will Her Majesty's Government make every effort to develop air and sea communications to and from Gibraltar?
LORD SHEPHERD: My Lords, naturally we wish to see an improvement of air communications between this country and Gibraltar, and the load factor, of which the noble Lord is aware, is being urgently considered by B.E.A. and by my own Office.

SIMONSTOWN AGREEMENT AND U.N. ARMS RESOLUTION
LORD FRASER OF LONSDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they are now carrying out the undertaking to supply the vessels which were part of the Simonstown Agreement.]
LORD WINTERBOTTOM: My Lords, under the Simonstown Agreement the South African Government announced its intention of ordering in the United Kingdom a number of naval vessels. The supply of these vessels has been completed, and Her Majesty's Government consider that its obligations under this section of the Simonstown Agreement have been discharged.
LORD FRASER OF LONSDALE: My Lords, can the noble Lord say what degree of consultation persists now between our Minister of Defence and the South African Minister of Defence to protect this vital route?
LORD WINTERBOTTOM: My Lords, I cannot say the degree, but consultations do take place.
THE EARL OF SWINTON: My Lords, I regret that I was unable to be here yesterday, but I have of course made myself familiar with all the answers which the noble Lord gave. I notice that he said he could not be held responsible for the French Government. I should like to ask him this simple factual question which is not concerned with responsibility. He stated that we could not supply any arms to South Africa because of a resolution of the United Nations which binds us. May I ask the noble Lord whether the French Government dissociated themselves from that resolution which prevents us from sending arms, but which apparently does not prevent the French from doing so?
LORD WINTERBOTTOM: My Lords, I should be most grateful to the noble Earl if he would put down a specific Question to that effect. I cannot give him an answer.
THE EARL OF SWINTON: But, my Lords, I have put down the Question over and over again. I have asked the noble Lord over and over again. Surely the Government can answer a simple factual question of that kind.
LORD WINTERBOTTOM: My Lords, I regret not without notice, because I am not fully clear about subsequent attitudes of various national States in response to the United Nations resolution in question.
LORD FRASER OF LONSDALE: My Lords, may I ask the noble Lord whether he is aware that the noble Earl below me on the Benches here asked exactly the same supplementary question last week, and was then asked to put down a Question. The Question on the Order Paper standing in my name is really a question that I have asked on his behalf.
LORD WINTERBOTTOM: My Lords, the point is simply that the two questions are not the same.
LORD CARRINGTON: My Lords, will the noble Lord tell the House whether the Government are continuing to supply ammunition for the ships which they have sold to South Africa under the Simonstown Agreement?
LORD WINTERBOTTOM: My Lords, we are continuing to supply training ammunition.
LORD CARRINGTON: My Lords, does that mean that the Government have refused to supply ammunition, ordinary ammunition, live ammunition, for the ships which they have sold to South Africa?
LORD WINTERBOTTOM: No, my Lords. I said that we are continuing to supply training ammunition.
LORD CARRINGTON: My Lords, what does that mean? Does that mean that the noble Lord is not supplying live ammunition or that he is?
LORD WINTERBOTTOM: Yes, my Lords. You have to have live ammunition to train.
LORD CARRINGTON: My Lords, with great respect to the noble Lord, Lord Winterbottom, I think he is really not behaving according to the traditions

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of this House in answering these questions. He knows perfectly well what I mean. Are the Government continuing to supply ammunition for these ships, or is the noble Lord calling it "training ammunition" because the Government are not facing up to calling it "ammunition".
LORD WINTERBOTTOM: My Lords, obviously this question awakens great interest in the House. Would it not be wise to have a short debate on this subject when all these points can be gone into?
LORD BOOTHBY: My Lords, may I ask the noble Lord this question? He has repeatedly said to this House that he is not responsible for the decisions of the French Government. But can he, for the benefit of the House, obtain some information, for which he has been asked again and again, as to what the French Government are actually doing?
LORD WINTERBOTTOM: My Lords, if the noble Lord will put down a Question I will answer it with pleasure.

BOOTLE CORPORATION BILL [H.L.]
Read 3a, and passed, and sent to the Commons.
BOLTON CORPORATION BILL
Read 3a, and passed.
HAMPSHIRE COUNTY COUNCIL, BILL
Read 3a, and passed.
LOCAL AUTHORITY SOCIAL SERVICES BILL
Brought from the Commons yesterday, and printed (pursuant to Standing Order 45); read 1a.
FILMS BILL
Returned from the Commons yesterday, with certain of the Amendments agreed to, and another Amendment disagreed to, with a Reason for such disagreement: the said Amendment and Reason printed (pursuant to Standing Order 45).

DEFENCE ESTIMATES
2.52 p.m.
THE LORD PRIVY SEAL (LORD SHACKLETON): My Lords, before my noble friend Lord Winterbottom opens this debate, may I, in the fight of the very large number of speakers whose names are down, draw the attention of the House to the First Report from the Select Committee on Procedure of the House? Not all noble Lords will have seen it, but the House accepted it yesterday. The Committee drew attention to the fact that on a previous occasion the House had agreed that speeches in this House should be shorter, but doubted whether that Resolution had had the desired effect, and suggested that, as occasion arose, the House should be reminded of its terms. I hope that your Lordships will forgive me for reminding you of its terms.
LORD WINTERBOTTOM LORD WINTERBOTTOM rose to move, That this House takes note of the Statement on the Defence Estimates 1970 (Cmnd. 4290). The noble Lord said: My Lords, on behalf of my noble friend the Lord Privy Seal and Leader of the House, I beg to move the Motion that is before your Lordships. On the occasion of our similar debate last year I gave your Lordships a full tour d'horizon and recounted a substantial shopping list of equipment projects. In the intervening twelve months, many items on the list have emerged from the shopping basket on to the table. In order to avoid wearying your Lordships this year with the amended list, however, I should like to take advantage of the fact that only a couple of months ago there were in another place six days of debate on Defence matters—concentrated, as one honourable Member pointed out, into a fortnight, rather like the elk-shooting season. Within the OFFICIAL REPORT of that other place noble Lords will therefore find a plethora of facts deployed quite recently by Ministers on Defence

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matters, and many of those who are to speak after me will, I know, have digested those debates already. I shall therefore confine myself to an account of the highlights of the Services' equipment programmes before moving on to discuss, first, the matching of men and women to these machines, and then the main function of the Services which will in future lie in NATO. My noble friend the Lord Privy Seal, when he comes to wind up our debate, will be dealing in particular with the questions of the Far East and Northern Ireland.
The first equipment highlight with which I shall deal is the Anglo-French helicopter package, which is to provide all three Services with the helicopters they require. As the House is aware, the French have been considering a reduction in their requirements for the SA 341 and have asked for a revision of the cost-sharing of the SA 341 and WG 13 development programmes. I am glad to say that we have been able to reach agreement with the French on keeping these adjustments within modest proportions. The way is now clear for the Anglo-French helicopter programme to continue without any serious effect on the balance of advantage to the United Kingdom. Both we and the French remain convinced that the package offers the best means of meeting our respective helicopter requirements. The links between the United Kingdom and French firms provide the basis for a strong and highly competitive helicopter industry in Europe. I am confident that noble Lords will share the satisfaction of Her Majesty's Government at the continuation of this important collaborative project.
Turning to purely naval equipment, I would remind the House that three major new classes of ship have already been announced which will make up the main surface Fleet of the future. These are the destroyers, carrying Sea Dart; the new frigates, which will succeed the "Leanders"; and the new cruiser. This cruiser will succeed the converted ships of the "Tiger" class and will have three main functions: to deploy the large Sea King anti-submarine helicopters, to carry the command afloat, and to contribute to the air defence of naval forces with its Sea Dart weapon system. The cruiser
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will have a through deck to provide the most effective means of operating her complement of helicopters, and will also be designed so as to provide the option of operating V/STOL aircraft. Whether this option will be taken up is not yet known; more studies will have to be done before we shall be in a position to decide whether the advantages are worth the extra cost involved.
The Sea King is worthy of separate mention. Its speed, range, weapon system and great flexibility of operation place it among the most advanced anti-submarine helicopters in operational service to-day, and the Royal Navy are well pleased with it. In view of the large fleet of submarines now operated by the Soviet bloc, I need not stress the importance of the Sea King's role. An Intensive Flying Trials Unit having begun its work last year, the first operational Sea King squadron formed in February at Culdrose, and a second squadron will form in June; the two squadrons will embark in the aircraft carriers "Ark Royal" and "Eagle" in the course of the year. In due course, the Sea King will also be deployed at sea in the converted "Tiger" class cruisers, and later, as I have said, in the new cruisers. It is thus destined to be the Royal Navy's main antisubmarine helicopter during the 1970s, complementing the Royal Air Force's long-range maritime reconnaissance aircraft and the Royal Navy's own destroyers, frigates and nuclear Fleet submarines. It is of course these submarines which, together with the shore-based maritime aircraft of the Royal Air Force, will provide the main striking force—and that a significant one—against surface ships and submarines by the time the carriers phase out. Three—"Dreadnought", "Valiant" and "Warspite"—have already entered service and a fourth, H.M.S. "Churchill", will be accepted into service later this year. The fifth and sixth Fleet submarines have been launched, and a further two are now being built. An order for a ninth submarine is currently being negotiated.
The Army equipment programme continues to make satisfactory progress. During the year we shall take further deliveries of Chieftain for the Royal Armoured Corps. These tanks will incorporate recently-developed items which have improved the life and reliability of

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what is already an outstanding vehicle. Units in Germany will also be receiving Swingfire fitted on the chassis of the armoured personnel carrier. These two weapon systems, together with our helicopters which are fitted with the SS.11 guided missile, will provide a valuable increase in B.A.O.R.'s anti-tank capability. We are also at the start of a programme to provide the Army with a very substantial improvement in its surveillance and night fighting capability. This year we start taking delivery of a new reconnaissance drone system and a ground surveillance radar, for use within the battle group; in addition, image intensification weapon sights, driving aids and observation devices are all included in our programme. One more highlight in the Army programme is that an order has recently been placed for the first members of a family of lightweight, well-armed, tracked reconnaissance vehicles; the first two vehicles are Scorpion, fitted with a 76 mm gun, and Scimitar, fitted with the 30 mm Rarden cannon.
The Royal Air Force has welcomed the arrival of its new combat aircraft and, with its accustomed professionalism, is getting on with the tasks of developing the most effective techniques for their maintenance and operation. The first squadrons of Phantoms and Harriers have been in service with Air Support Command for some time now. Both types are well liked by their crews and have already participated in overseas detachments—the Harrier to the Mediterranean, and the Phantom to the Mediterranean and Scandinavia—and have provided valuable training and useful demonstrations of the ability of these aircraft to reinforce the flanks of NATO. Further squadrons of both types are due to deploy to R.A.F. Germany shortly; like those already formed, they will all be committed to NATO. When fully deployed, this force will represent a very powerful ground attack and tactical reconnaissance capability—a major advance in capability compared with the position before we began to replace the Hunter.
Here I should like to stress the unique capability which the Harrier provides. The full extent of its potential will become apparent only as we gain more experience and evolve operational tactics and techniques in collaboration with the ground forces. Nevertheless some major advantages are already clear. First, and
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perhaps most important, the Harrier is not tied to airfields. When one knows that one will never be in the position of striking the first blow, this is of enormous benefit. It means, for example, that, in a period of tension, aircraft can be dispersed to sites well away from main airfields, thereby reducing the risk of losses from a pre-emptive attack and the expense of providing aircraft shelters on the airfield; and of course, with its V/STOL capability, the Harrier is not lied to concrete runways which may also be vulnerable to enemy attack. If I may-put the point the other way round, dispersal increases enormously the difficulties with which an enemy would be faced in attempting to seek out and destroy our aircraft on the ground. The second great advantage lies in the ability to operate the Harrier from sites which can be very close to the ground forces which it is supporting. This will offer an immediacy and intimacy of close support which will be of very great value to the Army commander in the rapidly changing battlefield situation. Again, as I illustrated earlier, and as was shown dramatically in the Transatlantic Air Race last year, the Harrier has long legs and can be rapidly deployed to NATO'S northern and southern perimeters should the need arise. Thus the Harrier offers a unique degree of flexibility and versatility; moreover, the uprating of the Pegasus engine, mentioned in the Statement on the Defence Estimates, will greatly enhance the aircraft's performance.
I have dwelt a little on ground attack, since this is where the re-equipment of the R.A.F.'s combat forces is furthest advanced. In other roles too, however, the R.A.F. is getting the equipment it needs. The first Phantom and Buccaneer squadrons for maritime air defence and strike have formed, and more will form as the carriers phase out. In the meantime the R.A.F. will be able to develop, in conjunction with the R.N., the tactics and organisation necessary for it to carry out its wider responsibilities in maritime operations. Later this year it will get the first of the Buccaneer 2s from new production. The plan is for the first aircraft of this type to deploy to R.A.F. Germany next year to start to take over from the Canberras. Lastly, but by no means of least importance, there is the Nimrod. Training is going well and the first squadron will form shortly. The

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Nimrod will succeed the Shackleton in the long-range maritime reconnaissance role in the NATO area over the next year or so and will represent a powerful increment to our maritime capability.
So much, my Lords, for the highlights of the Services' equipment programmes. They illustrate two points in particular: first that the Services to-day are to a large extent capital-intensive; and, secondly, that the problems of planning, developing and procuring the sophisticated machines of modern defence forces to a timescale and to a budget are being brought increasingly under control. It would be folly, my Lords, if we were unable to match men to machines in both quality and quantity. I am glad to be able to say that I find the recruiting picture encouraging. During 1969–70 there has been a steady improvement in the figures over those for the previous year. The total number of male other ranks recruited for all three Services is likely to be of the order of 35,250. This is an increase of about 22 per cent. Certainly there is leeway to make up; our requirement had to include the deficit inherited from previous years and was about 48,000. Nevertheless, we are more hopeful that, despite some adverse demographic trends, the gap can be closed. All changes in the pattern of recruiting are inevitably fairly gradual, but there are reasons to expect that the upward trend in our recruiting will be supported by factors now operating in our favour. Among these are of course the new deal on pay, to which I shall refer in a moment, and the increasing recognition by those who influence the selection of careers that there are rewarding and interesting jobs in all the Services.
One of the major difficulties to be overcome is the fact that the number of young men in the 15–19 age group available for employment is slowly diminishing. This year's figure is about 1,100,000 and by 1974 this is expected to drop by about one-eighth to around 960,000. Against a background of increased opportunities in civilian life, we must therefore recruit to the Armed Forces a larger proportion of the available young men. To this end, ways and means of improving our methods of recruiting and conditions of service are constantly being examined.
One indication of the challenging and worthwhile careers open to young men is the consistently high re-engagement rates in all three Services. In the Royal Navy, about one-third re-engage after nine years, and more than a half at the twelve-year point. In the Army, re-engagements exceed 50 per cent., and in the Royal Air Force, 45 per cent. at the five-year point and 60 per cent. at the nine-year point. In the context of recruiting and in other ways the Cadet Forces play a most valuable part. There is a total of nearly 140,000 cadets in the Combined Cadet Force, the Sea Cadet Corps, the Army Cadet Force and the Air Training Corps. Former cadets continue to provide a considerable contribution to the recruit intake of the three Services, and it is interesting to note that the wastage rate from such ex-cadets in regular service is less than for other recruits; this is particularly the case in the more highly skilled trades.
My Lords, I have already made mention of pay, a subject to which we have referred more than once in this House in the past year. I shall not rehearse again the details of the new pay structure which was introduced from April 1 following the Government's acceptance of the recommendations of the National Board for Prices and Incomes, but the changes then introduced were of course of a major kind. For the first time the Serviceman is to be given a salary representing the rate for the job, whether he is married or single; the appropriate salary has been determined by a process of job evaluation, and an X-factor has been added to take account of the obligations and conditions different from those undertaken by any civilian counterpart.
I had hoped to give your Lordships some information about the impact of the military salary on recruiting and re-engagement, but I find that it is really to early to be able to do so. I am pleased to say, however, that so far as we can tell there has been a generally favourable reaction in the Armed Forces to the new levels and concepts of pay. Naturally, some are more satisfied than others, but this is inevitable where the changes in structure produce greater or lesser benefit. There are of course a few teething troubles. The noble Lord, Lord Napier and Ettrick, has been kind enough

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to mention some of them to me before the debate. These troubles and the uncertainties which they have engendered in the minds of some Servicemen are in the areas where we expected them and a considerable effort is being mounted to deal with these points and to tie up some loose ends which remain.
Pay is far from being the overriding factor in recruiting, but it is an important one. Although it is too early to say what the impact of the new pay rates will be on the level of recruiting, there is some indication that the pay is influencing young men, and the parents of those young men, who are considering joining the Forces. With the introduction of the military salary, substantial increases have also been made in retired pay, pensions and gratuities, beginning on or after April 1 this year. The percentage increases in these non-effective benefits correspond to the real percentage increases in pay for each rank under the new pay code. These true increases have been calculated by comparing the new military salary with the former basic pay, marriage allowance and ration allowance, taking into account also the increase in quartering charges.
Turning from the overall personnel picture to a few points on the individual Services, I would mention that the Royal Navy is about to introduce a new scheme which will allow graduates to enter as seaman or supply and secretariat officers for an initial commission of four years, with a gratuity at the end, but with the option to transfer to a full career on the General List at any time after they have completed one year's satisfactory service. We are hopeful that most of them will exercise this option. If they do so, they will be treated in all respects as though they had entered on the General List in the first place. A similar scheme for qualified engineers has existed for some years.
Noble Lords will recall that last April the Army's three-year engagement, formerly restricted to the Household Cavalry and Household Division, was made available to recruits into most arms of the Army. The response to the extended three-year engagement has been very satisfactory, and in the financial year which ended on April 1 it attracted over 4,000 male adult recruits. It is tempting to attribute the entire upswing in recruiting
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to the existence of the three-year engagement. This is misleading, since many men who would have joined in any case chose the shorter engagement initially; they will, we hope, later prolong their service by transferring to the six- or the nine-year engagement. We shall not be able to see the full results of the change until the first batches of recruits who joined last year have served the full three years; but experience of these men indicates that at least 40 per cent. of them will prolong their service; and, up to now, 80 per cent. of those prolonging have transferred to the nine-year engagement in preference to the six-year engagement.
My Lords, we are making a number of changes in the officer structure of the Royal Air Force. In the past there have been two liste of officers in each branch of the Service, the General List and the Supplementary List. The former list comprised officers with the potential for a full career in the Service to the higher ranks, and officers filling command and staff appointments were drawn from this list. Officers on the Supplementary List had a more limited career. Although there were opportunities for Supplementary List officers to gain transfer to the General List, in the main the type of career available to an officer was determined at the time of his entry into the Service.
We now propose to merge the General and Supplementary Lists into a single list for each branch. Selection for promotion to the rank of squadron leader, and hence for suitability for command and staff appointments, will not take place until officers have had the opportunity to prove their ability and to demonstrate their potential. In future, therefore, officers will no longer enter upon a career to the age of 55 from the beginning of their service; intially they will serve on an engagement to a mid-career point—about 16 years' service or to age 38—and those who have by then been promoted to squadron leader will automatically have the opportunity of a full career of service to the age of 55. A number of the remainder who do not gain promotion will nevertheless be offered further service to 55, with limited prospects of promotion. These new arrangements will benefit the Royal Air Force by delaying the selection of full career officers until they have demonstrated their potential, and will at the same time

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remove any divisiveness caused by the existence of two main categories of officers. The new arrangements were introduced in the General Duties branch on April 1, and we hope to extend them to the remainder of the R.A.F. in the near future.
In the General Duties branch, many officers who fail to reach the rank of squadron leader by the mid-career point will still be essential to the operational efficiency of the Service, and a number of them will be invited to join the specialist aircrew stream at the conclusion of their initial engagement and to serve in that capacity until the normal retiring age of 55. Specialist aircrew officers will receive higher rates of flying pay, with the result that their pay will be comparable to that of a squadron leader. There will still be opportunities for promotion for the exceptional specialist aircrew officer. We hope that these measures will enable the R.A.F. to retain the services of many experienced aircrew who have hitherto been leaving at the mid-career point. Their retention will lighten the training task and reduce costs.
I should also like to say a few words about the Royal Air Force's Graduate Entry Scheme which is intended to replace the traditional Cranwell cadet entry. About a quarter of our officer intake will be drawn from this source. The remaining three-quarters will include a large number of young men who do not reach graduate status but who will none the less make first-class officers. First-rate career opportunities exist for them, and also the possibilities of promotion to the highest ranks. The R.A.F. has a need for graduate officers, but I should not like it to be thought that there is no longer a place for the non-graduate.
It is essential that an officer in the General Duties branch should complete his academic training at the outset of his career, so that he can proceed without interruption through flying training to his first operational tour. This led the R.A.F. to discontinue giving degree courses in the Service. Thus, whereas in the past boys have gone straight from school to Cranwell, in future they will proceed from school to university and thence into full-time service. Boys who
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want to join the R.A.F. as officers with permanent commissions should concentrate on reaching a sufficiently high academic standard to be accepted at a college or university to read for a degree. They will then be eligible, as at present, for the award of a cadetship.
By the end of 1969, there were 266 cadets in residence at universities, compared with 137 at the end of the previous year. In addition, 65 direct-entry graduates were recruited, compared with 46 in 1968. There are, therefore, grounds for believing that we are moving satisfactorily towards our eventual annual target of 250 graduate entrants by the time our last flight cadets pass out of Cranwell in 1974. At that stage we expect that the cadet population at universities and colleges will have risen to about 600. This illustrates the increasing importance of the already extremely valuable work of the university air squadrons; they have an essential role to play in the maintenance of the Graduate Entry Scheme. I am sorry to see that my noble friend Lord Longford is not in the House at this point, since it was from his wife's recent book that I learned that the idea of an all-graduate entry was favoured by the first Duke of Wellington—an encouraging lesson to those of us who become impatient when our bright ideas are not accepted with the speedy acclaim which we are confident that they merit.
My Lords, I have spoken of matching men to machines, but I should not like to leave the subject of personnel without mentioning the role of women in the Services. The Women's Services form an integral and important part of the Royal Navy, the Army and the Royal Air Force, for whom they provide valuable support both at home and abroad.
In the W.R.N.S. there are some 25 different types of jobs, including for example, computer programmers, radio operators, dental surgery attendants, stewards and cooks. In fact, a W.R.N.S. cook recently won the Gold Medal in the Open Competition at Hotelympia. Members of the W.R.N.S. also work as weapon analysts, welfare workers and education assistants, for whom there are no Service male equivalents.
The W.R.A.C, too, work in a wide variety of jobs, including clerks, cooks and switchboard operators, and so release

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valuable manpower for the Army's "teeth" arms. But in addition to these perhaps unspectacular though certainly essential jobs they are also engaged in highly skilled work as, for example, radar operators and photographic interpreters.
W.R.A.F. officers are trained at a joint Officer Cadet Training Unit with R.A.F. officer cadets and at professional training schools with R.A.F. officers, and most of them are posted to fill appointments established for R.A.F. officers. They serve in appointments of the ground branches of the R.A.F. Airwomen are recruited, with a few exceptions, into the same trades as men, receive exactly the same trade training and work alongside airmen in posts established for airmen. There are many jobs in the R.A.F. which can be done equally well by men or women: indeed, there are some that, because of the nature of the work, are more suited to a woman's temperament. In addition, there are some jobs that can be done only by women. For example, W.R.A.F. air quartermasters are essential members of the aircrew when families are being carried in R.A.F. transport aircraft.
The Nursing Services nurse the Serviceman and his dependants, wherever they are stationed, at home and overseas. This service is, of course, an essential part of the medical services of the Forces: its traditions in the Army genuinely stem from the days of Florence Nightingale. Since those days, the nurses with the Forces have developed a reputation for skill as well as devotion. There are many opportunities available to develop special skills—for example, in midwifery, mental nursing, children's nursing and operating theatre work. At the more basic level, young girls are trained to obtain civilian nursing certificates, such as S.R.N.s, as S.E.N.s and as medical hospital clerks and dental hygienists. In the past year, 5,070 women were recruited into the three Women's Services and 1,000 into the three Nursing Services.
As for their pay, the National Board for Prices and Incomes took the view that the Services' objective should be in line with the Government's intention to eliminate discrimination between the pay of men and women in civilian life by 1975. The Board did not feel, however, that equality in pay in the general sense need mean equality in the X factor
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element since there are differences between Servicewomen's conditions of service and those of men. For the present, therefore, the Servicewoman's pay is fixed at 90 per cent. of the man's basic rate, plus one per cent. for the X factor element in her case, as against the addition of 5 per cent. in his. This maintains the differentials between men's and women's pay much the same as they were before. The Government's intentions are now reflected in the Equal Pay (No. 2) Bill, which provides that there will be no distinction between men and women in the Armed Forces as regards pay, allowances or leave unless this is fairly attributable to differences between the obligations which they undertake.
My Lords, standards in the Women's Services are high, and I should like to put on record to-day the very considerable contribution which they make to the efficiency of our Forces. I hope we shall be able to increase their numbers still further.
Having talked of the Services' equipment and manpower, I should now like to discuss their main function, which in future will be to help in guaranteeing peace and security for Europe. One certain thing is that none of the European countries can conceivably defend itself on its own against the Warsaw Pact. The only way in which we can achieve security is collectively; and in terms of practical politics that means NATO, and it means a NATO with America as a full and active partner. For the last 20 years this has worked. It is fashionable in some circles to "knock" NATO and to question its credibility. But for 21 years Western Europe has depended on it for its survival, and I, for one, would not have given Western Europe much of a chance of surviving otherwise. But it is essential that NATO'S credibility should be maintained, and that we should not grow either complacent or unrealistic about NATO'S capabilities and aims. In the early days when the United States had an overwhelming nuclear superiority, trip-wire was a horrifying but wholly credible strategy, and it remained so for many years. But when the Soviet Union achieved something approaching nuclear parity it really was no longer credible to think of massive nuclear

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retaliation in each and every circumstance. Recently President Nixon has underlined this by pointing out that:
"the prospect for the 1970s is that the Soviets will possess strategic forces approaching and in some categories exceeding"
those of the United States. In such circumstances it is clearly nonsense to have a massive nuclear retaliation as the only option.
For this reason NATO has hammered out—with the United Kingdom taking a prominent role—the new strategy of flexible response. This has been explained too often for me to go over this ground again in detail. Its aim is simple: to meet aggression with the appropriate response. To make sense of this we need a wide range of capabilities, from the conventional to the nuclear, so that we are able—and are seen to be able—to select from our armoury the response appropriate to the scale of aggression. In the conventional sphere NATO aims either to halt the aggression or, in the face of an all-out assault, to give time for sanity to prevail on the other side or for a considered nuclear response to be made by our side. It is of course in this process that the question of the use of tactical nuclear weapons under the new NATO concept comes into play. And it is this, perhaps above all other things, which has been, I would go so far as to say deliberately, misunderstood in some sections of the Press and elsewhere.
Under the old strategy, there was an assumption that in so far as tactical nuclear weapons were used they would be used in very large numbers; they would be used, in fact, to fight and to win the battle in Europe. This is not how we see things to-day. What we should hope to do is to use these weapons in such a way that they would persuade the enemy that if they had assumed that nuclear weapons would not be used they had gravely erred in their calculations and that the consequences of their continuing with their aggression would be escalation. At the time, the use of tactical nuclear weapons would be most carefully controlled, so as to ensure that further escalation would not be automatic, as it almost certainly would have been following the massive use of these weapons under the old strategy.
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Thus the purpose of this use would be to restore the credibility of the ultimate deterrent, and it would perform this function not only by showing that we were ready to escalate if the enemy did not cease his attack, but also by showing that we could stop escalating if the enemy decided to call a halt. This is what the Nuclear Planning Group of NATO has been considering and what has resulted in the guidelines which have been developed for the initial tactical defensive use of nuclear weapons.
My Lords, what I find so incredible in dealing with this problem is that, now that we have reached a situation where the massive use of nuclear weapons is no longer envisaged as the immediate and automatic response to a Warsaw Pact attack, we are faced with headlines such as those in the Daily Telegraph of April 8 quoting my right honourable friend the Secretary of State for Defence as promising "H-bomb to stop Russian attack". It is as if the policy which has been evolved in NATO over the past few years was not merely an extrapolation of the old, but an exaggeration of it. Criticisms of this kind, which are based on fancy rather than fact, not only are completely misleading but provide no helpful contribution to the discussion of a subject which all of us must regard as of the greatest importance.
This is not to say that NATO does not need strong conventional forces as well as strong nuclear ones. But in talking of conventional forces one must remember two things: first that NATO'S objective is not primarily to fight a war, but to prevent one; and secondly, that the strategy of flexible response does not necessarily require an ability to fight a long conventional war. Indeed, if NATO tried to build up its capability to fight such a war, the credibility of our nuclear deterrent and of our will to use it in the last resort would be in danger of disappearing. Moreover, it would involve long periods of conscription in all the NATO countries, including Britain; it would require a massive increase in defence expenditure, which is out of the question politically for any European NATO country; and our European allies—especially Germany—would find the consequences of a lengthy conventional war fought on their soil as distasteful

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as the selective use of tactical nuclear weapons to bring an early halt to the invasion. We therefore have to make a nice calculation of the number of troops needed on the ground to make flexible response a convincing strategy. At the moment we reckon to have the answer about right, but for that reason NATO's conventional strength cannot be reduced unilaterally without threatening the credibility of NATO strategy.
Let us all be quite clear that the threat from the Warsaw Pact remains. As the Defence White Paper pointed out, the Warsaw Pact has half a million men in its navies, 1 million men in its air and rocket forces, and 3 million men in its armies. There are 30 Russian divisions in the four countries opposite the central region of ACE and 1,900 tactical aircraft. The Russian western fleets alone include some 250 submarines, 400 strike and reconnaissance aircraft, and 90 sizeable surface ships.
This represents an enormous potential threat, especially when one considers that all the initial advantages of surprise would lie with the Warsaw Pact. They could initiate a build-up with the secrecy that is possible only in a closed society; they could effect it swiftly over internal lines of communication; and they could choose their moment to attack. By contrast NATO, being a defensive alliance, could only react to Warsaw Pact threats, and many of its reinforcements would have to come by sea and air. In these circumstances there can clearly be no better alternative to having forces in being on the ground ready to face any potential threat. The noble Lord, Lord Wigg, has suggested that the current force levels would be incapable of waging a conventional defence for more than 24 hours. My Lords, NATO's capability is greater than that and the Alliance has sufficient forces of all kinds to make flexible response a reality. But we must in no circumstances allow a unilateral erosion of NATO's overall military capability. We should certainly seek to lower the tension in Europe while retaining the present degree of security for both sides, and NATO has offered, indeed repeated, an invitation to the Warsaw Pact countries to engage in a serious study of mutual force reductions designed to achieve this. So far, the Warsaw Pact countries have declined to respond to NATO's invitation.
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We, for our part, fully realise that it would be foolhardy of NATO to lower its conventional force levels without a genuine reciprocal and balancing measure from the other side, subject to proper verification.
In the context of the threat from the Warsaw Pact and the European Defence Effort, I have seen repeated fairly often recently the thought that it really is nonsense for 300 million rich West Europeans to rely on 200 million Americans to defend them against 350 million relatively poor members of the Warsaw Pact. This sounds immediately compelling, but it does not, I submit, stand up to very close scrutiny. Whatever strategy NATO adopts, in the last analysis it will rest upon a nuclear capability as the ultimate deterrent, and the only nation capable of counterbalancing the nuclear capability of the U.S.S.R. is the United States. As President Nixon has pointed out, 95 per cent. of the nuclear capability of the West lies with the Americans; but, joined to that, the presence of United States forces on the ground is not only of direct military importance but also of enormous psychological importance, not merely because, as is sometimes crudely said, they underwrite the United States nuclear guarantee, but because their presence here is a visible demonstration of the United States' commitment to the Alliance.
The other major consideration is that, when we look at NATO Europe's efforts, we must be clear that in making a direct comparison with the efforts of either the United States of America or the Union of Soviet Socialist Republics we are simply not comparing like with like. The totality of the G.N.P.s of a number of different countries can never provide the margin for defence spending that can be found from the equivalent G.N.P. of one large country, any more than a total population of 300 million provided by 13 different countries can support armed forces as big as those from a single country of a roughly equal population. In the West we are an alliance of independent partners. In the East the position is quite different, with strong central control and direction. If we had a Federated Europe and a truly European Army to defend it, then the comparison might be a fair one, but that is hardly an immediate prospect. Certainly at present, with most of

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the NATO nations each preserving all the options and maintaining separate armies, navies and air forces, we are a very long way from an integrated defence force. Even in the field of Defence procurement there are still too many of us trying to do too much on a purely national basis, with the result that we are dissipating both technological effort and money.
Nevertheless, we in Europe have obviously got to make it abundantly clear that we take our own defence seriously. Clearly, our entry into the E.E.C. will make a European Defence identity easier to achieve. So would closer political ties. But that does not preclude us from trying to achieve such an identity now, nor does it remove the need for Europe now to look for ways of taking on a larger share of the defence burden. As I have said, we have a long way to go, but at least we have made a start. A lot of effort is being made to increase European co-operation and this is beginning to have results. The multi-role combat aircraft and many other projects have shown that the United Kingdom is a front runner in collaborative effort.
But this does not mean that we can be complacent or that Europe cannot make further efforts towards co-operation in order that all of us can obtain the maximum value from the resources that we are able to put into defence. These things take time, and it is perhaps inevitable that we must start with relatively limited, though none the less tangible, projects in the logistic and procurement areas. But, given successful and widespread co-operation, we are convinced that we can get more for our money, that we can make a bigger collective contribution to NATO defence, and that we can continue to make a reality of flexible response.
My Lords, defence is a subject which awakens deep emotions. A majority of our people agree that expenditure on defence is justified, but some say we spend too much, and some, too little. A minority say we should abdicate and spend nothing, for reasons which may be moral, or subversive, or may be an expression of despair. We all feel strongly on it; all we can reasonably ask is that our decisions be based on reason and not on emotion. And when we try to grasp the sense of the meeting, as
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we are trying to do to-day, we must not forget those Servicemen who are buying time for us while we reach the right decision. Your Lordships may remember A. E. Housman's Epitaph on an Army of Mercenaries. The last two lines go:
"What God abandoned, these defended,
And saved the sum of things for pay."
This is what our professional Servicemen have done and are doing now. My Lords, I beg to move.
Moved, That this House takes note of the Statement on the Defence Estimates 1970 (Cmnd. 4290).—(Lord Winter-bottom.)
3.37 p.m.
THE EARL OF DUNDEE: My Lords, my noble friend Lord Jellicoe had been very greatly looking forward to taking part in this debate, but unfortunately he is indisposed. We all sympathise with him in his disappointment, and I sympathise with your Lordships in being obliged at the last moment, and at such short notice, to listen to me. The noble Lord, Lord Winterbottom, has introduced in his usual frank and friendly manner this Motion concerning the Defence Statement, and if I may be allowed to do so I should like to compliment him on the thoroughness and care with which he has expounded this report.
I cannot altogether extend to the Statement itself the same degree of approval as I do to the noble Lord's speech, because I think that in some respects the Statement records something of a decline in the effectiveness of British defence policy. Since the war all political Parties, or the leading political Parties, in this country have been in general agreement about our defence policy, except for the question of the British independent nuclear deterrent, which was strongly opposed by the Labour Party while they were in Opposition but whose warheads are now being sharpened, or improved, by the present Minister of Defence in order that they may be more capable of penetrating the anti-ballistic defences of Russia.
This Statement begins with the familiar account of NATO strategy which we all know so well, both the nuclear and the conventional. The noble Lord, Lord Winterbottom, said that it has now progressed a little because we are now trying to substitute a flexible response for a tripwire: and I hope he is right. I

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would only suggest that our forces in Germany will have to be a good deal more mobile, and differently disposed from what they are now, if we want to use them for a flexible response. But I will not go any further than that because I do not know enough about the present disposition of our troops in Germany. Then on page 7 the Statement goes on to say, under the heading, "Security in the Seventies":
"We look forward to the Seventies as an era of negotiation between the opposing alliances."
I should like to say one word about this "era of negotiation" which is being held out to us in this Statement, and then I should like to conclude by mentioning one or two points in the Statement which may cause particular anxiety to some of your Lordships.
On the matter of negotiation, for the past 25 years we have incessantly been either negotiating or seeking to negotiate with Russia and her Communist satellites in order to try to get an agreement on disarmament, and also an agreement either through the United Nations or collaterally with it, that would prevent war in all parts of the world and allow people to live without being in fear of the kind of situation which now exists in Vietnam. We have been trying that for 25 years; and except for a few rather inconsiderable crumbs of consolation, like the Nuclear Test Ban Treaty of 1961, we have achieved exactly nothing. We all know the reason: the Communist Powers, the Communist philosophy, do not recognise the same human values as we do. They do not believe in human freedom; they do not recognise the desirability of the four freedoms: the freedom from fear, the freedom from want, the freedom of speech and the freedom of religion. They think it a good move if you can bring it off, to conquer a country by military invasion and take away its freedom; also that you should falsify truth to any extent if, by so doing, you can advance the advent of a world Communist dictatorship. And that is why we cannot get any agreement.
We must go on persevering patiently, in the hope that some day, either through the germination of more liberal ideas in Russia, or perhaps through the spectacle of the growth of Chinese military potential, the rulers of Russia may see that it
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is in their own interests to have genuine co-operation with the free West, and to make a real, sincere effort to establish world peace, instead of using every disarmament conference as a sounding board for Communist propaganda and nothing else. We have learned not to be deceived by our diplomatic adversaries in this matter, and I hope that we shall be equally careful not to deceive ourselves—because when you want something very badly it is so easy to persuade yourself that you are nearer to your goal than you really are. If the Communist Powers were to think we were slackening, through despair, frustration and inability to get any results, and that our will to defend ourselves was weakening, then the hope of freedom would be gone for ever.
There are one or two particular matters which seem to me to give cause for anxiety arising out of this Statement on which I should like to ask the Government for a little more information. It is important not only for our own physical defence but for the psychological effect that it may have on our present adversaries, whom we have to convince that we are not going to yield to aggression. The first point that I should like to ask about is the growing disparity between the Royal Navy, which is declining in strength, and the Russian Navy, which is increasing in numbers and power by leaps and bounds. I should like to know whether the figures I have are correct. I am told that the Russians now have a fleet of 380 submarines, of which 60 are propelled by nuclear power. The noble Lord, Lord Winterbottom, mentioned 250 in the West alone. Russian naval units are now stationed all over the world—in the Atlantic, the Mediterranean, the Pacific, the Arctic and the Antarctic.
We have read in the newspapers—I do not know if it is the case—that last year, when 11 Russian destroyers left the Mediterranean, the only British naval unit that could shadow them was one single destroyer, which in any case had to be at Gibraltar, and that there are sometimes not more than two British frigates in the whole of the Mediterranean. I am particularly anxious to know the Government's views on this matter. The noble Lord the Leader of the House will remember that six years ago, in the 1964 Election the Prime Minister, speaking at

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Plymouth, said that the British Navy was not strong enough and that its number and power ought to be increased. At that time we had, I believe, 180 vessels in service and 170 in reserve. I should like to know what the comparative figures are now, and, if there are fewer ships, whether there are any reasons for saying that they are more powerful or more efficient in speed or fire power, and how our position compares now with our position then. This is a very grave situation for all of us, because if there were to be what is called a "conventional" war, which some wise observers of human affairs seem to think possible, in which neither side would take the risk of using nuclear weapons of mass destruction, these 380 Russian submarines could do immeasurably more damage than was done to our food and other supplies by the U-boats in the last two world wars of this century. Parliament ought to have all the information the Government can give it (without, of course, giving away classified information) as to what measures are being taken to protect ourselves against this very grave menace.
The next point which has given anxiety to many of your Lordships is the decision to withdraw from South-East Asia—"East of Suez" as it is called. We have heard all the arguments so often that it is not necessary to go through them again now. The arguments for and against have both been stated by the Prime Minister—arguments for staying there before 1966, and the arguments for withdrawing after 1966. I do not think anybody could have put the arguments better than the Prime Minister on both occasions. The decision now has been to withdraw, and this decision, I feel, is a mistake. It is a great pity that we have decided to withdraw, and it may turn out to our disadvantage. Your Lordships may have heard the broadcast a week ago to-day by the Minister of Defence, in which he repeated what seems to me to be the silliest and stupidest gimmick I have ever heard in my forty years' experience of both Houses of Parliament, that if we do not withdraw from Suez we shall have to impose conscription. I should have thought that it would be far more true to put it the other way round, because one of the greatest incentives to recruiting is the
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desire to see distant parts of the world. I should have thought one could far more reasonably argue that if we withdraw from Suez it will have so bad an effect on recruiting that conscription may become more necessary.
The noble Lord, Lord Winterbottom, referred to the improvement in recruiting, which I was delighted to hear about, from page 13 of this Defence Statement. The noble Lord will of course be aware (although he did not actually read it out) that, according to this Statement, although the figure will rise to about 35,000,
"this would still be well short of our requirements".
I also think it is an equal mistake to withdraw from the Gulf. The reason against withdrawing from these places is not only that we have very large investments there, although I know they are very big. The main reason is that there are people who live there—quite a lot of people still in South-East Asia—who are in free and independent countries and do not want to be invaded and conquered by the Communists, and who know that they are very much less likely to be invaded and conquered by overwhelming Communist military power if there is, not a very large British force, but a British presence there which will to some extent deter the aggressor from taking action. In the case of the Gulf, the same argument applies. If we had not been there, Iraq, which is now a satellite of Russia, might well have seized the very small State of Bahrein. Now that we have gone there is nothing to prevent that from happening, except perhaps the counter seizure by Persia. But, by going away, it seems to me that a dangerous vacuum is being created which is a great encouragement to the Russian policy of encirclement, of gaining control over the whole of the Arab world, the whole of the Middle East.
I have been, not very convincingly perhaps, telling your Lordships ever since I came to this House in 1954 that one of the cardinal objectives of Russian foreign policy was to arm the Arabs against Israel so that Russia, pleasing the Arabs in this way, would gain control of the whole of the Middle East. I think that up to now they have shown no signs of abandoning that policy which has paid them with some very great successes. My noble friend Lord Napier and Ettrick,

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who is going to speak in this debate, had an Unstarred Question relating to this matter on the Order Paper recently. I do not know whether he means to return to the subject again or not. But it seems to me that the Russians have in no way abandoned, but rather intensified, their policy, and that they are now embarking upon a considerably more serious scale on an attempt to overthrow all the Arab Governments which are not willing to become subordinates of Russia, and to turn the whole of the Arab world into a Soviet satellite area.
The last point I wish to raise is that of our Reserves. The present Regular Army is extremely well equipped, well trained, highly mobile; it is doing an admirable job whenever it is called upon to do one. But it is pretty tightly stretched, and if it had to do two things at once—not go to Ulster for one year and to Africa for another, keeping troops in Germany all the time, but had to do two or three of these things which might happen to come at the same time—it would be pretty hard put to it without larger Reserves than we have now. That is one reason why I strongly deplored the Government's decision to abolish the Territorial Army, which was subsequently modified by a kind of stay of execution; or at least the Territorial Army was put on to a kind of care-and-maintenance basis.
What I should like to ask the noble Lord the Leader of the House is a little more about the Territorial and Army Volunteer Reserve, about which we are given some information in Chapter V of this Defence Statement. On page 45, in paragraph 8, it is stated that the strength of the Territorial and Army Volunteer Reserve on January 1 of this year was 47,000 and that last year its strength was 40,000. I have seen a little of this force, and it is incomparably more active, more professional and better trained, of course, than the former Territorial Army. But it is nothing like so numerous. I am a little puzzled to understand how it can have such a large nominal strength as 47,000. In Scotland, at any rate so far as I know, there is only about one battalion of this Army Volunteer Reserve in place of one division which used to be there in the same area a few years before. Unless there are a tremendous number of non-regimental or auxiliary troops attached
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to it, I find it difficult to see how it can amount to so large a figure as 47,000. Perhaps the noble Lord will be good enough to enlighten me on this point when he comes to reply.
May I mention, too, a Civil Defence matter which comes into this Statement on the next page, page 46, on Home Defence? I have never seen any prominence given to the Royal Observer Corps, or any mention made of it in any newspaper, or hardly ever in conversation. It is doing a very fine bit of volunteer work. If there were a nuclear attack, it would save probably millions of civilian lives by giving warning in time. It is operating now on a pitifully small margin with, in my view, very inadequate funds and very inadequate equipment. It is making an excellent job of what it has. I should like the Government to consider whether it would not be a good measure of insurance to spend a little more on giving rather better tools to this very fine body of volunteer Civil Defence, paramilitary workers.
The noble Lord, Lord Winterbottom, concluded his speech by referring to the fact—as indeed is true—that the United States is still producing 95 per cent. of the Free World's nuclear power. I do not think that our own country, in comparison with other free countries, need reproach itself in any way because of its contribution to the defence of the Free World. During the war for a whole year we fought alone, without any ally whatsoever; and in six years of fighting we spent more than all of our overseas resources, leaving us with nothing to continue on. Since the war we have spent more than our share on the joint protection of the Free World. Yet if we now consider Western Europe as a whole, including ourselves, its freedom after twenty-five years is still dependent on American protection, although America has a population of only 200 million, compared with 250 million people in Free Europe, whose economic potential is considerably greater than that of the United States.
The noble Lord, Lord Winterbottom, rightly said that we must have better military integration. However, it is not only a question of military integration; it is a question of economic integration, too, if we want to make proper use of this potential. If we want war to be

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prevented, and peace to be made impregnable, we must work for a much greater economic unity and also for greater sacrifice, among those countries who want to remain free.
4.1 p.m.
LORD GLADWYN: My Lords, once again we debate the rather depressing subject of national defence—depressing because there never seems to be any adequate answer to the intractable problems that it raises. Before the nuclear age there were, after all, certain concepts which were sustainable as regards the amount of expenditure which one could and should deploy in certain circumstances to achieve national defence. But now we could virtually double our expenditure on national defence without rendering the possibility of total defeat, and indeed of annihilation in war, any less likely. So we remain, as it were, in the realm of the imponderable, and short of total pacifism—which I think most of us in this House would reject—it is difficult to be dogmatic on any of the defence problems with which in present circumstances the British Government have to grapple.
Of course, what we should have is a proper Defence Commission in both Houses, or perhaps one might even go as far as to suggest a Joint Committee or Commission, in which these great issues could be sensibly debated and before which the Government would have to expound their general defence philosophy, no doubt often in camera, and be subjected to expert criticism. I believe we are about the only democracy in which nothing of the kind exists. It is also something for which the Liberal Party has pressed consistently for many years, and now, at long last (as so often happens) I believe we are being joined in pressing it by distinguished Members, in another place at any rate, of both the Labour and the Tory Parties.
My Lords, one sad fact is that what we now do or do not do has little effect on the so-called "balance of terror" on which our security, as we all know, principally rests. It is true that we can affect this balance slightly. For instance, if we became neutral and left NATO we should make it much more difficult for the Americans to maintain their military
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presence in Europe, and if they did weaken their conventional position unduly in this part of the world there is no doubt that, perhaps indirectly, the Soviet power would be extended westwards and that the balance would be dangerously upset. So it is thus, as an auxiliary of the American power, that our defensive effort is at present principally—and rightly—exerted. The same applies to the Eastern Mediterranean, where the confrontation of the super Powers is now in danger of becoming almost as direct as it is on the line of the Elbe River.
There remains the whole area of the Indian Ocean, and here the Liberal Party is as firmly convinced as it was when I first made the suggestion in March, 1965—and was, I may say, derided by both Parties in this House for my pains—that existing bases are entirely counter-productive and that nothing should be done to delay their proposed rundown by the end of 1971. Here, I may say, we differ totally from the general philosophy which has just been expounded by the noble Earl, Lord Dundee.
My Lords, the fear that if these bases are phased out the Soviet Government will in some way seize the oil supplies of Europe and the West is one of the more extraordinary delusions. Of course if there was a war between the super Powers, even if it were conducted by conventional means, which seems wildly improbable, Western Europe would certainly be involved and would be blockaded (as has been mentioned this afternoon) by the enormous fleet of Soviet submarines, largely nuclear-powered and operating far out into the Atlantic. Let us hope that the allied anti-submarine forces, and in particular the helicopters referred to by the noble Lord, Lord Winterbottom, would be able to overcome this menace, but it is clear that they would have a dreadfully difficult task.
The point I was trying to make is that it would not be the presence of tiny garrisons, or even aircraft carriers (if we have such things) in the Persian Gulf or in the Indian Ocean which could protect our oil supplies in such circumstances. But if there is no war, how can some Soviet naval vessels succeed in preventing the Arab States and Persia from exporting their oil to Western Europe, or anywhere else, if they continue to find it in their

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interests to do so? No doubt the huge extension of the Russian naval power and the evident aim of the Russians to "show the flag" in the Indian Ocean area, corresponds to the general Soviet intention of demonstrating that if it ever did come to war with America—even a non-nuclear one—the Soviet Union would be able to act as a real world Power and therefore perhaps induce certain African and Asian nations, if not to side with them at any rate to declare their neutrality. Presumably that is the point of the whole thing.
But that is not something that we, who have consciously abandoned an imperial role, can prevent, and our role of auxiliary to the United States of America will not be changed by a small British presence in Bahrein or even by the possibility of flying out at short notice a tiny force to Singapore, acceptable though that might well be in certain circumstances to Lee Kuan Yew and the Government of Malaysia. Incidentally, though I may be wrong, I believe I saw in the paper the other day that the Shah of Persia has recently made it clear that he would in no way welcome a reversal after the coming General Election of the present British policy of withdrawal from the Gulf. Could the Government confirm that?
In our central role of American auxiliary in Western Europe, there is no doubt that we, together with our European allies, should increase our conventional forces to fill any serious gap in our defences that may be caused by a substantial withdrawal of American troops, to which distressing possiblity I rather think the noble Lord, Lord Winterbottom, did not refer. What in theory would seem to be a good thing would be sufficient men and anti-tank weapons, together with a great development of the Harrier programme, the whole of which could suffice to hold up a Russian conventional drive to the German North Sea ports and to the Rhine. There is no doubt that such a conventional defence could be constructed, and even if there was—as there should be—a standardisation of European weapons and a common European arms procurement policy, it would cost a good deal of money. However if there were such a policy the expense might not, after all, be prohibitive. Whether it would
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involve some form of national service in this country, as any serious reversal of the policy of the running down of bases in the Indian Ocean area, in spite of what the noble Earl, Lord Dundee, said, very well might, is arguable. But since the emphasis in Western Europe would be largely on improved technical defence we might perhaps be able to make good any manpower deficiencies by increased financial inducements. Who knows? And in any case we all know that conscription is not now acceptable to any of the three political Parties in this country.
However, if there is no such intention in Britain, if there is no prospect, either, of Western European co-operation on armaments in Western European Union or elsewhere, nor any serious intention to fill the gap caused by the probable withdrawal of United States troops from Western Europe in the comparatively near future, then one thing is certain—and here I think I follow the general line of argument of the noble Lord: that the NATO forces in the Central European area will be compelled to rely increasingly for their defence on the 7,000 so-called tactical nuclear weapons of various sizes now at the disposal, under the "two key" system, of all the allied divisions and air contingents in Germany with the sole exception of the French. For, unless such weapons were employed, there is little doubt that the vastly superior and highly efficient Soviet armoured divisions, which recently proved their worth in the occupation of Czechoslovakia, backed up by greatly superior air power, would arrive in Hamburg and Frankfurt, and even I think in Munich, within days rather than weeks. This is a pretty ghastly thought, but it is not alarmism: it is a generally accepted fact.
Therefore it is no good saying, as some do in this country, perhaps chiefly in the noble Lord's Party, "These tactical nuclears could never be used. Many are larger than the Hiroshima bomb, and in order to get German consent for their use they would have to be targeted way back on junctions and concentrations near the Oder, or even in Poland, which would mean that nuclear war could hardly fail to be generalised. Besides, if they ever were used, the adversaries would reply by dropping similar devices on the North German ports and in the Palatinate; in

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other words, in far more heavily populated areas where the damage and mortality would be quite unacceptable." All this is true. But it is also true that both the threat and the intention to employ tactical nuclears must be made absolutely clear unless, especially after any United States withdrawals, and in default of a common European defence effort, the Russians are going to be informed in advance that they would easily win World War III. For that is what would happen, the only real deterrent to attack on the West lying in the increasing, but after all long-term, potential threat from China.
This is, of course, an appallingly dangerous and thoroughly undesirable situation. For there is always the possibility that the Russians would consider that the threat to use the tactical nuclears, just as that to press the button unleashing general nuclear war, was a bluff. They might even think that their formations, which are fully equipped for nuclear war, could advance through a nuclear barrage and still arrive on the Rhine, the Allied Forces, thrown back across the river or in process of being rounded up, finding it impossible to regroup under nuclear attack and the war being won by the Russians on the assumption that it did not degenerate into a complete nuclear exchange, in which case, of course, we should all be dead.
It would be infinitely preferable, therefore, I repeat, to enable our forces to have some prospect of holding the Russians with conventional armaments. But if the Western democracies are keener on preserving their standard of living than on their survival, the tactical nuclear deterrent, as indeed Mr. Healey has repeatedly said, is the only one that makes the slightest intellectual sense; and this in spite of the fact that, as in so many other instances, it is a complete reversal of the policy on which the present Government was elected.
Supposing that we do adopt it—and I take it from what the noble Lord has said and from the White Paper that this is so—are there nevertheless any chances of arriving at some troop withdrawals, not only on one side but on both sides of the Iron Curtain, and even at some nuclear-free zone on both sides of the
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dividing line, perhaps as the result of some European security conference, which the Russians and their friends have been asking for for a considerable time, though perhaps a little less insistently now than formerly? I do not want to be pessimistic, but I should have thought that there is very little chance, if only because the Russians, though anxious to weaken the connection of Western Germany with her European Allies and with the whole Western World, are determined to prevent Eastern Germany from getting into any real touch with the Federal Republic. So they must have a large number of divisions in the D.D.R. to achieve this end. And in any case a nuclear free zone, pushing back, as it would, the tactical nuclear weapons of NATO beyond the western frontiers of Germany, might destroy the sole deterrent on which, as we have already seen, peace now largely rests. Besides, any mutual reduction of forces, on a man for man basis, might well, unless we took great care, result in an even greater proportional advantage of the East over the West than exists at the present moment.
The real hope, of course, must be that recent happenings in China will induce the Russians to agree to a settlement with America and consequently in Europe. If the Strategic Arms Limitation Talks are successful, a great advance will have been made in this direction. If they fail—and, after all, the extension of jungle bombing in South-East Asia is not a very good omen—then we may expect another stepping up of the cold war with quite unpredictable results. But supposing that limitation does one day make a political settlement conceivable, what should we hope for in Europe? Can we in any way escape from our otherwise inevitable role of satellites of the one super-Power or the other? Always supposing that the coming negotiations for what is after all, the eventual formation of some valid European political entity do not founder on the fury of the outraged housewife, we must at least contemplate the possibility of some indigenous European contribution to defence.
How could discussion of this best be set on foot? Well, one would have thought that the most sensible thing to do, now that France has happily returned to the Western European Union,

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would be to discuss it there. But if, owing to inhibitions connected with the old and now largely abandoned Gaullist policy, and with the unjustified suspicions of the Eurocrats in Brussels that the intention would be to set up some kind of rival machine to the European Economic Community, makes all this impossible, then in practice the talks à sept or à dix might take place, as it were, on the edge of the so-called political discussions that the Six have now agreed to conduct among themselves; and they should certainly not exclude the delicate but essential problem of how best to co-ordinate, in a European framework, the respective small nuclear deterrents of Britain and France. The great thing is that these talks should start somehow and soon, and if they are to have any success they must start on the assumption that the intention of all the Governments concerned is to take the first steps towards a harmonised foreign policy and the organisation of a common defence.
This is not the time to outline the ways and means whereby this could be done, or even the direction in which a beginning could be made. Once the will exists it will probably be not more difficult but more easy to agree on the standardisation of a tank than on a common price for butter. Certainly fewer passions will be involved. Not that we would begin by standardising tanks. Once we suceed in standardising anything, even buttons, we shall have started off on the right path. As for harmonising policy in a general way, the technique is already clear; indeed, I can assure your Lordships that it is accepted by a considerable number of French politicians. It rests on the general idea of an Independent Commission, or some reinforced secretariat—independent, that is to say, of Governments—whose function, though only advisory, would be to consider intractable problems from the point of view not of any individual nation, but from the point of view of the group. That is the way to start.
If we come to any conclusion on defence generally, then I hope it will include in the first place an admission by the Government of the evident urgent desirability of making progress with the organisation of a genuinely common defence in Western Europe; in the second place, confirmation (which I think has
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already been given) of their intention, in the absence of National Service, to rely principally on the threat of the employment of tactical nuclear weapons for the defence of Western Europe; and in the third place, a restatement of their firm intention to proceed with the phasing out of bases East of Suez in accordance with the present plan, so that, abandoning old imperial delusions, and pending the emergence of a united Europe, we may, to use the unequivocal and, I should have thought, indisputable phrase of the Duncan Report, fulfil our true present role as "a major Power of the second order".
4.22 p.m.
VISCOUNT BRIDGEMAN: My Lords, if I understood the noble Lord, Lord Gladwyn, aright, that he was advocating the revival of some form of a Committee of Imperial Defence, I should strongly agree with him.
LORD GLADWYN: My Lords, I was not actually suggesting that, although it might be a good thing. I was suggesting that there should be a Defence Committee of the House of Commons, and of the House of Lords, or perhaps a Joint Committee of both Houses, as in France or Germany.
VISCOUNT BRIDGEMAN: My Lords, I should be quite satisfied with that. But I hope the noble Lord will forgive me if I do not follow him in the other remarks that he made, because I mean to confine myself to the much more limited problem of manpower. I shall come back to some of the things that Lord Gladwyn said on that matter in a moment or two. When I started to read the Defence White Paper I found myself in trouble at once because I found it very difficult to understand exactly what was meant by the three words "overall military capability". Of course those words are, in their own way, jargon but that is not the point that I wish to take up; I will leave that to my noble friend Lord Conesford, if he returns to the Chamber. I felt, however, that they conveyed the impression, to me at least, that whereas the general scene, looked at from a distance, was reasonably satisfactory, if one came to look more closely at the details one would find a good many imperfections which would become

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more and more evident the more closely one looked.
So in order to satisfy myself as to exactly what was the main approach made by Her Majesty's Government in this Defence Statement, I started to try to write a paragraph which I thought expressed it. It reads like this:
"The problems of the Minister of Defence are made difficult by the need for him to work within two limitations. First, he, the Minister, is allotted a certain percentage of national expenditure which cannot be exceeded, however strong the case might be to do so. Secondly"—
and I will come back to this in a moment—
"whatever may be the demand for manpower, and however great the shortage of those obtained by voluntary enlistment, any proposal which involves any form of National Service is not to be considered."
Then the statement, as I drew it, went on
"Within these two limits those responsible have done a first-class job; and they have been fortunate in that the conditions during the last year have fallen just short of the degree of overstrain which, if it had taken place, would have exposed the dangers of imposing these two limitations."
If that had been said I should have agreed with it; and I very much agree with what my noble friend Lord Dundee said about the state of the Regular Army.
The Regular Army I believe to be in as high a state of professional efficiency and morale as anybody now alive has ever known it or can remember. The TAVR II has been pretty well treated over equipment, and very well treated over training facilities and in the funds made available for them to travel to train overseas with the Regular troops. All that has paid off. I am talking about the Army and will leave other people to talk about the other Forces. If the numbers available in those two respects in the Regular Army and the TAVR could do all that is necessary, then all would be well. But I am afraid I do not take that view. Little and good the Forces may be; but I think the truer way to put it would be to say that they are good but insufficient.
I listened most carefully to what the noble Lord, Lord Winterbottom, said about manpower, and I shall read it again in Hansard to-morrow. Before I go on to something else, I should like to say
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how much those concerned with the pre-Service forces will have appreciated his reference to the cadets: I say that as one who at some time has been President of the Army Cadet Force Association. As the noble Lord knows, there is sitting in the Ministry of Defence now a Committee which I hope will result in the making of proposals which will not only increase the efficiency of the A.C.F. as a pre-Service organisation but also establish it more firmly as one of the major youth movements, because I firmly believe that these two things go together when you are dealing with boys.
To come back to the figures, I am sorry to say that I have the feeling, which was not dispelled by the noble Lord's speech or by my attempts to read the manpower figures in the Statement, that, however it is put, the numbers are not enough; and the numbers can only be made to look as if they are enough by excluding requirements which anybody who has had anything to do with this subject professionally (and perhaps I may include myself as one of those) knows perfectly well must be there. By that I mean that at the moment we require men for a number of different purposes. We require them to make good the shortage in the Regular Forces on the peace establishment, which I think is admitted somewhere in the White Paper to exist. Then we need them to make up the difference between the peace establishment and the war establishment if the troops have to be put on active service conditions. I might here remind the noble Lord, Lord Winterbottom, that that figure will include the replacement of a number of people who, in peace time, can be civilians, but under active service conditions have to be enlisted men. Then, not least, there are reinforcements to provide for the wastage of so many months—it used to be three months—during which time the measures taken by the Government on the outbreak of war come to fruition and produce the flow of recruits.
I must come back to what I said last year, that I have never heard it said, or seen it written anywhere in the last two Defence White Papers, that any provision has been made for the requirements of home defence. I repeat what I said last year, that this, to my mind, is a very serious matter. Here again, I am not speaking completely without experience,

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because I have very strong recollections of the time when I was closely connected with the security measures which were needed for the concentration of forces under Field Marshal Montgomery and General Eisenhower ready to go over the Channel on D-Day. It is certainly true to say that there is no means whatever at the moment, either in existence or planned, so far as I know—although it may be secretly planned—of doing anything to meet that need. I said all this last year, and being mindful of the request of the noble Lord the Leader of the House to make short speeches, I am not going to repeat it. I will only say that events in Northern Ireland, and that strange story that the headquarters of the so-called "Welsh National Army" was found in a dental laboratory in one of the Command Headquarters, have done nothing to make me feel that what I said last year was wrong, and so I should like it to be taken that I have said it all again.
I realise that anybody who has been talking about these things for as long as I have may easily lay themselves open to a charge that they are taking a "Blimpish" or bow and arrow view of the situation, and that the kind of situation that I have in my mind is a situation which would not arise if a new crisis occurred. I do not think that is so, because these calculations about reserves are constant; once you have decided on the numbers you want, so far as I can see the other calculations follow. Whether that is true or not, I was very much fortified in my own views when I read the NATO Letter for March, and there found an article by the Dutch Minister of Defence, Mr. den Toom, who produced a new phrase for me, "crisis management ". Whether or not I am taking a "Blimpish" view, I found that what I thought the Dutch Defence Minister meant by "crisis management" is exactly what I am trying to put over in this House this afternoon. I suppose that "crisis management" is another aspect of what the noble Lord, Lord Winter-bottom, called "flexible response" just now. The point I want to make is that it is not possible to manage a crisis, or to produce a flexible enough response at the time when it is wanted, unless there are enough men as well as enough weapons
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and so forth. That is something I want to say as strongly as I can.
I should like now to make the most earnest plea for a really genuine and honest stocktaking of manpower; the manpower required for our present commitments as they really are, and not based on a figure from which you can work backwards and satisfy yourself that the men you are going to get under present arrangements are just around the corner. I do not believe that they are around the corner, for however well the new salary structure may work—and I should like to say that I think it is well abreast of the times and I wish it all success—the fact of the matter is that many of these figures are very resistant to change, particularly in a time of full employment, because historically the number of people who will recruit for the Regular Army, or for a militia type of enlistment, or for the Territorial type of enlistment (a fortnight's camp and so many drills), or indeed for things like Civil Defence or the ambulance corps, remains very static despite any attempt, however well planned and well paid for, to increase those numbers. I hope that these things will work, but what the noble Lord, Lord Winterbottom, has said we have heard so many times before from people of both Parties over the years, and I think that the "Hunting of the Snark" is the best description that one can give to it.
Of course there are various marginal ways of getting over this difficulty. The noble Lord, Lord Winterbottom, mentioned making more use of women; and he also mentioned that the Duke of Wellington had been the first one to advocate the graduate entry. I wonder whether the noble Lord knows that the first person to advocate women's service was Dr. Johnson, in an essay written during the Seven Years' War. If he does not know that, I shall be glad to find the essay for him.
To come back to my main theme. I feel that if there is anything in what I have said, and if it is right to have a proper and honest stocktaking of manpower, then we must take one more step and realise that it is our clear duty to face the issue to which that stocktaking will give rise, even if it means the introduction of some form of compulsory service. Otherwise, we must say out loud, and to the world, that, whatever

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the need, no such step can be taken; and I believe that that would be utterly wrong. Of course, none of us knows whether any serious study of this question has been undertaken, and I should like to make it quite clear that I am certainly not advocating the introduction of National Service in the Forces for all. After all, one of the things that be-devilled National Service in the time of the last Labour Government was the fact that, because they wanted to be egalitarian, there were always, at any given time, something between 30,000 and 35,000 bodies in the Service for whom no work could be found. One of them, in fact, got so bored in my own county that he went off and murdered someone on a Friday evening.
It would be a question not merely of deciding whether it was inevitable to introduce some form of service, but of deciding what should be the form. Selective service has been introduced in Australia and New Zealand. I am not drawing the American comparison because I do not believe that comparisons of this sort with America are of any value. But I think that comparisons with Australia and New Zealand are useful. It is my own feeling that any scheme of selective service is capable of very fine adjustment. It is also my own strong feeling that if any Party took the view that if a case was made for some form of National Service the country would reject it, such a view would be quite wrong. If the case was made out, the country would do no such thing. That is only my own opinion, but no one can go beyond an opinion because the matter has not been put to the test.
Before I sit down, I should just like to finish by reminding those of your Lordships who have been good enough to listen to me that I have not advocated the immediate introduction of National Service. What I have said is that the situation about manpower is, in my opinion, so serious that an honest stocktaking ought to be made, and if that stocktaking gives rise to the conclusion that some form of service in the Forces is necessary, then whoever sits on the Bench opposite should face it; and it is my firm belief that if they do they will be supported by the country.
4.39 p.m.
LORD BOURNE: My Lords, I should like to commence by saying that I entirely agree with the noble Viscount, Lord Bridgeman, in his expert remarks about manpower, a subject on which I shall say very little. In the interests of the appeal that we all received earlier, I am "scrubbing" the beginning of my speech and diving straight in to discuss, not defence policy, which I have done the last few years, but whether the forces that are being described in the Statement that we are debating meet the requirements of this Government's present defence policy—that is to say, support of NATO.
The Statement refers to the historic decision which has been taken largely as a result of devaluation and, although I do not happen to agree with it, it is the policy which we are now engaged in carrying out. I do not think that writing in a British Defence White Paper of a historic decision to support NATO necessarily alters the direction of the threat, which I maintain is from Asia. The defence of Europe lies not in itself, but outside. In pursuit of the policy which we are carrying out, the Services are being cut by about 25 per cent. in manpower and equipment. Apart from teeth and spectacles, nearly all the other cuts in January, 1968, immediately after devaluation—which was a very painful process—were in fact postponements, but this was not the case in regard to the Services. The Services are loyally enforcing those defence cuts, and the number of mergers and disbandment parades taking place is pretty frightening, not only in the Army, but in the other Services too.
Before I make some remarks about the individual Services, I think we ought to remind ourselves of one or two nuclear facts, and I shall give a couple of opinions. The noble Lord, Lord Gladwyn, referred at some length to this nuclear business. I find it easy to write down the position as follows. First of all, the scientific gap is widening—that is to say, the two super-Powers are going ahead. They have colossal anti-ballistic systems, which are very expensive, and that is the underlying reason (because they both want, if possible, to cut their costs) why they are having these SALT talks. We in Britain cannot hope to keep up, and I think we should recognise that. The

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second fact about nuclear weapons is this. In Europe the stakes are the highest, and the nuclear deterrent has remained as a deterrent. Consequently, there has been no war in Europe over the last 25 years. In Asia, where it has been unthinkable to use nuclear weapons, the deterrent value is, to all intents and purposes, zero, and we have had 25 years of war, of one kind or another.
I have two opinions about nuclear weapons, which I offer in case any of your Lordships agree with them. First of all, I should like to deal with the clear distinction between strategic and tactical weapons. There is only one clear distinction, in my opinion, and that is not the distinction between those two, but between the strategic weapon and the conventional weapon. As the noble Lord, Lord Wigg, who I am sorry to say is not here to-day, has put it, it is impossible to imagine the use of tactical nuclear weapons without killing a great many civilians. The Secretary of State for Defence put it another way when, in discussing the guidelines policy, he said that the difficulty in NATO is to persuade allies who do not have nuclear weapons. My opinion, for what it is worth, is that the definition of "guidelines" will escape us, and that it is a hopeless exercise.
My last point on this aspect is that there is a suggestion that if the Americans withdraw from Europe on the conventional side we ought eventually to drift towards an Anglo-French nuclear European deterrent. I feel that that would be unworkable for three reasons. First of all, France, I am sorry to say, has proved an unreliable ally in NATO. Secondly, the veto remains with each country—and we know our own veto after the Nassau agreement. If you want an Anglo-French deterrent you must have an Anglo-French Government, or, better still, a European Government, because you cannot have a single control system without a single Government, and that is a long way off. Lastly, if the present system under which we live, whereby the trigger remains in the hand of the President of the United States (a point that was referred to by the Prime Minister several years ago) is for any reason cancelled, then in my opinion NATO will fall apart.
May I turn to the conventional forces? First of all, I do not think that our
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general capability will be very effective. It will be a promise instead of a presence. That was referred to in Kuala Lumpur not long ago, and it is not likely to be relied upon by our friends and allies. The much advertised Exercise "Bersatu Padu", which is beginning to take place, is a good example of this. It takes six weeks to fly the forces out and to acclimatise them. But if your Lordships can imagine six weeks' warning of every possible emergency, I cannot. Following that, when the British forces eventually arrive their land element will be only lightly equipped. If it is an operation of any seriousness at all, they will probably run out of ammunition after about a fortnight, having no base and only aeroplanes to support them. Ships, tanks and heavy ammunition cannot arrive for six weeks, at the earliest. In other words, the operations carried out by the so-called "general capability'', on which considerable emphasis is laid in the White Paper, are going to be not only inefficient but also quite expensive—and a good deal more expensive than the present system. That is sometimes forgotten.
I now come to the Navy. I cannot find a word in any of the Defence White Papers since this Government came into power about maritime strategy or defence of sea communications. The only conclusion I can come to is that the defence of sea communications—and we have nearly lost two world wars through lack of it—comes under the heading of "NATO". As the noble Lord, Lord Chalfont, said in the debate initiated by the noble Earl, Lord Glasgow, in June, 1968,
"… we must protect our sea lines of communication … as an alliance; not as individual nations.—[OFFICIAL REPORT, 12/6/68, col. 186.]
Of course we all agree with that. We are in an alliance for that purpose. But if your Lordships will look at the list at the back of this White Paper you will find that the strength of the Navy is 143 ships, only 57 of which are capable of escort work. I consulted an Admiral on this point. Those 57 escort vessels, with nine in reserve or in for refit—and they are always bound to be there in about that proportion—have to compete with 380 Soviet submarines, more than 40 of which are nuclear propelled. It simply is not enough. A force of that kind, with

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our American allies, may protect the North Atlantic trade route, but it certainly would not be able to protect the Cape route to the Far East and Australia.
I suggest that the other weakness of the Royal Navy at the present time is in the Mediterranean. Many of our friends have villas in the Mediterranean now. They look at every naval ship that passes, but they have not seen a British ship for quite a long time. They have seen Russians, by the way. There is no resident naval population at all in Malta. There are, at the most, about six ships going in and out, and it simply is not enough. On top of that, the Russians, pursuing their pro-Arab policy, have been able to creep along and get considerable influence not only in Egypt itself but in Libya, in Tunisia and in Algeria, all of them Arab countries, all of them ready to hand over airfields to the Russians, and one has to remember that no seagoing fleet has been able to survive in a lake dominated by enemy airpower, as we very well found out during the war. So I say that the Navy is not up to the job, though its morale is very high, especially when it is at sea.
Now I come to the Army, where the position is straightforward. The biggest thing about the Army is the fact that the 50,000 men in B.A.O.R.—I think it is 48,000 at the moment—are not ready to fight. There are three divisions of them, so-called—and 12 headquarters, by the way, for three divisions. They are not ready to fight on a war footing until reinforced by the TAVR—another 47,000 at the present moment, or call it 50,000. To be effective in its role, B.A.O.R. has to be over 100,000 strong, which it is not. Home defence, as we have heard, is at zero. In Strategic Command we have three divisions, or three brigades, and two parachute battalions. They are primarily committed to NATO, but they are also part of that general capability which I mentioned earlier.
Admittedly, the situation in Northern Ireland may have been a bit unexpected. There, incidentally, the Army is acting instead of the police: it is in the wrong role, but is doing its best. The question I should like to ask is: if there is an emergency overseas, really overseas, what could Strategic Command do at the
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moment? It is supposed to be able to send one, two or three brigade groups overseas. I am inclined to doubt whether at the moment it could send even one. That is a question to which I should like to know the answer.
When we come to recruiting, which is dealt with on page 13, we all of us hope that the increase in military salary will prove a success, but it remains to be seen whether or not it will. We have heard about the three-year engagement, although there is a catch to that, of course: people go quicker, even if some of them re-engage. The requirement, according to the noble Lord, Lord Winterbottom, is either 35,000 or 48,000 a year—I am not quite clear which. Anyway, it is distinctly problematical whether or not we shall meet that requirement; and the Northern Ireland episode is by no means good for recruitment. I was talking to two young platoon commanders who were in Londonderry for four months. They were on the streets an awfully long time; and it is not much fun having stones, broken bottles, knives, bricks and so on thrown at you. Northern Ireland is having a very bad effect on recruitment. The question of reserves has already been touched on, and the only point I should like to add is that all our allies have Territorial battalions. The French, for example have 60 T.A. battalions. As General Beaufie put it very recently, you must have the "capacity of swift expansion without reorganisation"; this is essential. We do not have that capacity. So my conclusion about the Army is that the overstretch is as bad as ever, and 47 battalions is simply not enough.
When it comes to the Air Force, before any of the things which the noble Lord, Lord Winterbottom, described in some detail, fairly encouragingly, can be done, you have to win a thing called air superiority. Now air superiority has been handed to us on a plate very nearly since D-day in 1944. We have not had to fight for air superiority. The second best aeroplane will simply not do for the R.A.F., any more than the second best tank will do for the Army or the second best frigate for the Navy. The TSR 2 was cancelled because it was too expensive. It was very good. Its replacement, the F.111, was not quite so good, of course, but in the end

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it proved a failure, and anyway we cancelled it. The R.A.F. must be wondering what is coming next.
I know we shall be told that the M.R.C.A. is an arrangement with Germany and Italy, and it will come along in 1975, but these arrangements with other European countries are not absolutely foolproof. I cannot help wondering—and it is a question I should like to ask—whether there is any possibility of a purely British fighter. The R.A.F. must be wondering, because every time they order a good aeroplane to suit their requirements it gets cancelled for one reason or another. If, with their allies, they had to fight for air superiority now, they would be fighting against the Mig 23, which so far as I know is at least as good as if not better than the Phantoms and Lightnings which we have to use at the present time. I am not mentioning the Buccaneers, because they are for other purposes. Anyway, they were naval aircraft to start with, and the R.A.F. have never liked them.
The last point I come to is a question of organisation. I am sorry to see that the noble Lord, Lord Gladwyn, has had to leave the Chamber, but for, I think, three if not four years running I have pressed for the establishment of an all-Party Armed Forces Committee of both Houses to discuss big questions of defence policy which we are not capable of discussing at length in either of the two Chambers but which should be thoroughly threshed out, as they are in nearly every other country. The U.S.A., incidentally, has had such a committee for 170 years. I feel very strongly that these things ought to be discussed dispassionately, so I press again for the setting up of such a Committee. Since this Government came into power, in my opinion there have been at least four questions which ought to have been dealt with by such a committee. The TSR 2, first of all; then the question of the aircraft carriers; then the withdrawal from East of Suez—which admittedly was pushed through for political and financial reasons but not, I think, for defence reasons—and now, if recruiting does not come up to expectations, the question of National Service ought to be discussed dispassionately, before we suddenly have to take an awkward decision. I still think that it would be a good scheme to
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set up such a Defence Committee, and I should like to ask the noble Lord who is winding up the debate whether he is favourable to this suggestion.
LORD SHACKLETON: My Lords, I wonder whether I may interrupt the noble Lord? I was listening with great interest, having also been very interested in the past in the idea of such a committee. Can he explain how it would have operated in relation, for instance, to the cancellation of the TSR 2? The noble Lord presumably would assume that the Government have to take the decision at the end. Is such a committee in order to influence the Government, or is it in order that the Government may have more facts? Because the Government poured out an awful lot of facts at the time.
LORD BOURNE: My Lords, of course I appreciate what the noble Lord, Lord Shackleton, says, and perhaps the TSR 2 may not be a very good example. But certainly the question of National Service, or conscription, is a matter of great public interest. So far as the cancellation of the TSR 2 is concerned, a great deal went on privately in Government circles about it, and quite rightly the Government had to take the decision in the end. The fact that they took the wrong decision has absolutely nothing to do with it. But I think that the Government would have been helped by a dispassionate discussion of the kind I suggest. Such an all-Party Armed Forces Committee of both Houses would, of course, have to be properly vetted. We could not have any doubtful quantities sitting on it.
The conclusions I come to are three. First of all, that the British weakness in conventional forces, which I hope I have described adequately, is coming at a very bad time, when NATO has already suffered losses from the French withdrawal and from the Canadian withdrawal—and now it seems very possible, even probable, that the United States will withdraw some of their 300,000 conventional forces. Incidentally, the United States are not likely to be encouraged by our withdrawal from South Asia and the Gulf. Secondly, maritime strategy does not even rate a mention in any of the Defence papers and the Navy is simply not strong enough for its responsibilities. Lastly, no defence policy is

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worth the name of defence policy without a reserve to meet the unexpected—in other words, I think we have overdone the cuts.
5.0 p.m.
THE EARL OF GLASGOW: My Lords, it is rather a special honour to follow the noble Lord, Lord Bourne: it has happened to me before. I agree with almost every word he said, and he may well have shortened my speech. Like the noble Earl, Lord Dundee, I found the very clear and able speech by the noble Lord, Lord Winterbottom, very much more encouraging than the White Paper, Statement on the Defence Estimates, which I found sombre and depressing.
I think that what I found most offensive about it was the smug satisfaction with which it recounted the steady reduction of our Armed Forces—and it does this all in the name of economy—but, understandably, does not record the 77,000 additional civil servants taken on since this Government came into power. I disagree with the abandonment of our commitments outside the NATO area, and even within the NATO area; and much of the self-congratulation is empty and unfulfilled. The White Paper very properly emphasises that our first priority is NATO. With this I entirely agree. But the problem of flexible response, lack of reserves, I should prefer to leave to other noble Lords more competent than myself to deal with.
Like the noble Lord, Lord Bourne, nowhere in the White Paper do I find any conception of global strategy. Lip service is paid to this rather peculiar "general capability", based on the United Kingdom, which I cannot honestly myself believe credible. The fact is that after 400 years we have abandoned altogether maritime strategy and are concentrating what is left of our Armed Forces in Europe and home waters. The bulk of our Army and Air Force is deployed in this country and in Germany. There are good reasons for this with which I shall not disagree. But I do disagree with the policy of calling back the ships of the Royal Navy from the oceans of the world and concentrating them in European and home waters. We have to keep up the shield in Europe, and it is taking most of
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the Army and the Air Force to do that. But by virtue of that fact, almost the least likely place where an enemy will strike is central Europe. He is far more likely to strike in the Middle East, in South-East Asia, or even in Africa.
Nor are we doing a service to our allies by leaving the oceans of the world unmanned and unattended. The great majority of seafaring nations of the world are members of NATO: I am thinking, besides ourselves and the United States, of Norway, Denmark, Holland, France, Portugal and Greece. The defence of the trade routes is vital to us all. We should take the lead in seeing that they are properly protected. I would also ask the Government not gratuitously to antagonise those countries who could be of most help to us in the protection of our trade. I am thinking of South Africa, of Spain, of Portugal, and even Malta. In the interests of brevity, may I again implore the Government, first, to implement the Simonstown Agreement, both in the letter and the spirit; and, secondly, to consider maintaining a maritime presence in the Persian Gulf, the Indian Ocean and also in the Far East. We want to show Australia, New Zealand, Singapore and Malaya that we mean business if any of them should be threatened.
So far as the rest of the White Paper is concerned, I want to comment briefly on two aspects. The first has already been touched on by the noble Earl, Lord Dundee. By all means let us encourage, and continue to take part in, bilateral and multilateral conferences for disarmament. But do not let us reduce our Armed Forces in the expectation that these conferences will be successful. Such expectation has proved a very bad bet in the past.
I should like to say a good word for the new pay code. I think that most of it is very satisfactory. But I should like to ask the Government not to try to equate soldiers, sailors and airmen too much with civilians. They are very different people, and they behave in a different way. These are young men who have voluntarily placed themselves under discipline—itself now, in this permissive age, a dirty word. They are trained to a hard life; they have no trade union, no overtime; they are serving their country and not themselves. It is not

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only money that counts: they must command our respect and support, and the image must be kept bright and shining. In this way I believe that something might be done about the recruiting problem.
Next, I turn to maritime affairs and back to the vexed question of aircraft carriers. The Leader of the Opposition in the other place said that should the Tory Government win the next Election it is his intention to retain the aircraft carriers in commission—not because he considers them essential to his East of Suez policy but to obtain some advantage from the very large sums of money that have been expended on them. It is my opinion that whichever Party win the next Election they will have to keep the carriers in commission, or we shall find that the Fleet is completely defenceless against surface and air attack throughout the 1970s. The Fleet Air Arm provides about three-quarters of the Navy's weapon capability. If we are to build no more carriers of the present type, this capability must be re-provided before we get rid of the existing ones.
The situation to-day is far more urgent than it was this time last year. Besides the strike role, the aircraft carriers are responsible for the long-range reconnaissance and defence of the Fleet. With the best will in the world the R.A.F. cannot effectively provide this. They have not the aircraft, and their pilots are not experienced in sea warfare. They cannot be expected from distant shore bases to produce that split-second timing that is so vital in war at sea. In addition, we have no surface-to-surface missile—not even the medium-range one which the Russians are prepared to lend to their Egyptian allies.
I read in the Press only last week that the Sea Slug, Mark II, our medium-range, surface-to-air missile, has run into trouble. The vertical take-off aircraft for ships is still over the horizon. Helicopters, although admirable for anti-submarine work, and possibly for defence against M.T.B.s, are quite unsuitable for the other tasks that I have described. The Minister of Defence said in 1967 that in order to help carry out the role previously played by the aircraft carriers, the Fleet submarines will be used for long-range protection of the Fleet. By the time the carriers are due to be phased out, we
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shall have four Fleet submarines in commission, which means, at the very most, two and a half at sea. Moreover, the Mark 24 torpedo, the first torpedo produced by Britain since the war, has also run into difficulties. I understand that it requires extensive redesign and that production is now being suspended.
Finally, my Lords, we must expect considerable delays in major refits, particularly of nuclear submarines, in the next few years. The reorganisation of the Royal Yards is being undertaken with the object of obtaining greater productivity with a smaller labour force. In itself that is a good thing, and probably long overdue; but with industrial relations in their present chaotic state throughout the country, the successful outcome of this bold initiative will take time, and the Fleet is bound to suffer in the short term. For all these reasons, the continuation of the carriers in the Service becomes an absolute "must". Not only must they be there to provide defence for the Fleet, but they also, I think, assist in making our general capability world-wide slightly more credible. They are also needed in the NATO area.
During the war I spent a fairly uncomfortable year and a half in that very inhospitable sea area known as the Norwegian Sea, which is bounded to the West by Greenland and Iceland; to the East by the North coast of Norway, and to the North by Spitzbergen and the North Pole. When conducting naval operations in that area, and running the early Russian convoys, we all felt, even in those unsophisticated days, desperately naked and defenceless without the support of the carrier. I hear on very good authority that the American Navy feel desperately strongly on this point. But carriers are required not only in areas outside the NATO area; they are also required within the NATO area: in the Mediterranean, and also in the Norwegian Sea and in the Atlantic.
My Lords, both "Eagle" and "Ark Royal", and possibly even "Hermes", are perfectly capable of going on to the end of the 1970s, and the "Ark Royal", in fact, a little longer. I realise what a reversal of policy would mean. Training for the Fleet Air Arm is ceasing this year, and there might be a very awkward period when we should require the R.A.F.,

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or even American squadrons, to fly off the decks of the carriers in order to bridge the gap. But certainly I feel that the aircraft carriers are essential, and I should be most grateful to the Leader of the House if, when he replies to the debate, he would tell us how the Government now view the situation and whether there is still hope of a change of heart. I am very concerned about the Royal Navy. During the battle cruiser action at the Battle of Jutland Admiral Beatty, on the bridge of the "Lion", looked aft. He saw the "Queen Mary", the next ship in line astern, blow up. This was only half an hour after the "Indefatigable" had suffered the same fate. He turned to his Chief of Staff and said, "There seems to be something wrong with our bloody ships to-day". Then, rather characteristically, he altered the course of the battle cruiser squadron two points towards the enemy. My Lords, it was not only on that day that there was something wrong with those ships. I believe that it is up to us and our colleagues in another place to see that no British Admiral in the future ever has cause, as a result of the default of this or any other Government, to say the same sort of thing as Admiral Beatty said at Jutland.
5.14 p.m.
LORD MOYLE: My Lords, I am pleased to follow the noble Earl, Lord Glasgow, because he has represented the Royal Navy, and I am one of the few ex-members of the Royal Marines in your Lordships' House. I welcome his observations about the salary improvements in the three Services, but I was somewhat puzzled by his slight criticism, or complaint, about equating the Service salaries with the civilian standards in industry. Speaking as an ex-Royal Marine private, I should have been delighted if the powers that be had had the good sense to equate my salary, which was a shilling a day, with what was being paid to comparable unskilled labour in industry; but then, of course, we did not have a Labour Government.
THE EARL OF GLASGOW: My Lords, I absolutely agree with what the noble Lord says. What I had in mind was making the sailor pay for his own food.
LORD MOYLE: My Lords, what I wish to say is this, and it may please the noble Earl: I have not the slightest objection to our paying our Armed Forces in excess of industrial standards. That is where I stand with regard to the Services.
My Lords, the remarkable thing about these Defence Estimates is that they have been presented by the same Minister of Defence that we had in 1964, the right honourable Denis Healey. Without wishing to be too facetious, I doubt whether anything quite like this has happened in the annals of British political history, certainly since the Second World War. At any rate, I think that nothing has startled us more since the days when it was alleged that the Emperor of China baptised his troops with a hose-pipe. I say that for this reason: that here we have a Minister of Defence who has brought authority, dignity and efficiency to his high Office, and one who has won the confidence of the military chiefs. In my view, Mr. Healey is unquestionably one of the outstanding Ministers of Defence that we have had in this country for some time. It is remarkable that the Labour Party who, allegedly, are without any military sense, who are said to love an army only when it is inefficient, are the very Party who have produced two of the outstanding Ministers of Defence of post-war days: I refer to the right honourable Emanuel Shinwell and the present Minister.
Why do I say all this, my Lords? It is for this reason. What happened in the 13 years of the Tory Administration? We had nine Ministers of Defence, and the Office was reduced almost to the status of a consolation prize, to be handed out to tired warriors at the end of a long political day. It became a kind of consolation prize, like the chairmanship of the parks committee of a local council which is handed over to a disappointed alderman. That has been the position with regard to the Tory Governments of post-war years. I am glad to see that the noble Viscount, Lord Monckton of Brenchley, is present in the Chamber. I think he will understand exactly what I have in my mind with regard to the comparable experiences in relation to defence of the Labour Government since 1964 and of the previous Tory Administrations.

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I welcome the reduction in military expenditure that has taken place since 1964. Including the increased cost of the military salary, I am advised that the saving on the estimated costs of the Tory Party's own plans in 1964 is within the region of £3,000 million. This has been achieved, admittedly, by reducing our Armed Forces by one-fifth, but reducing our commitments by one-sixth. Therefore, to-day we have available more battalions for operation in the United Kingdom than we had before the cuts were imposed, as evidenced by the expeditious way in which the forces were transported to Ulster almost immediately when the crisis arose. I am also advised that this has been achieved without any reduction in our military capability; and, in any case, it is accepted by experts that there is not a single West European Power that can surpass our standard of military capability.
I should like to say a few words about the progress made by the Minister of Defence in the direction of unifying the functions of that Department. I well remember the late Lord Attlee dealing in his famous book with the need for a Ministry of Defence to be set up to take the place of the various Services, and how when he became Prime Minister one of the first things that he did was to set up a Ministry of Defence subordinating the three Services to the one central direction and control. I am quite certain that nothing would have pleased him more, if he had been living to-day, than to see the amazing progress in the field of economy and efficiency as expressed through the Ministry of Defence under that policy of unification.
I want now to refer to the position with regard to rates of pay and conditions of service in the Forces. I am glad that the increases have been welcomed. But I should like to draw attention to the need to consider other aspects of the Services and their conditions. For example, the principle of establishing the rate for the job in the three Services is a revolutionary principle; it has never been done before. Of course, it has brought about a certain amount of criticism as between the single and married men; but that will iron itself out in due course, and I think it is a step in the right direction.
I should like to put this proposal forward for the consideration of your Lordships.
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Our Servicemen are recruited for a period of years—some for 12 years, some for 22 years and so on. I want to see a more forward and more progressive approach to these men who have to stand the brunt of the day in relation to the defence of this country. Why give them a gratuity at the end of their period of service? Why not treat their service in the Armed Forces as superannuable service? When the day comes for them to return to civilian life, the money can be paid to the new employer, and they can enter into that employment knowing that their service in the Armed Forces has been superannuable; that they can carry on with those transferred superannuation rates, and at the end of the day can retire at the age of 65 on the same basis and the same terms as those who have been continuously employed in industry.
A further point is this. Why do we keep talking about barracks? As soon as we talk about accommodation, we immediately envisage barracks. What is wrong with hotels? To-day, the use of the troopship has greatly declined, and the aeroplane is the basis of transport. With men and women, married couples, happy to be transported from one place to another, why do we not consider building our own hotels to accommodate married men and women who are employed in the Services? It would be a grand opportunity for training personnel in the Services in the work of catering and the hotel business, so that when they return to civil life they will be available for work of that kind. I think that the day has gone when soldiers and sailors are provided with the kind of accommodation represented by the barracks of the 17th, 18th and 19th centuries.
In conclusion, I should like to make one further reference; that is, to commend the Minister of Defence on the wonderful record of industrial relations as between the trade unions and the Minister in respect of the civilian staff. Here we have a record of first-class industrial relations as between the trade unions and the Ministry of Defence. I hope that that excellent record will continue throughout the term of office of the right honourable Mr. Denis Healey, and continue even if we have the lamentable experience of a return of a Tory Government.
5.27 p.m.
LORD ASHBOURNE: My Lords, I hope that the noble Lord, Lord Moyle, will forgive me if I do not follow him in his arguments. I am disappointed in the White Paper. It gives me the impression that the Minister, perhaps naturally, is satisfied with the Government's defence programme and the reductions in defence expenditure. That is far from my own view. Like many other noble Lords, I was disappointed that in the gracious Speech last October defence was scarcely mentioned. There was just one reference, saying that:
"We will continue to play an active part in the North Atlantic Alliance".
In essence, this has been repeated in paragraph 1 of Chapter I of the White Paper that we are discussing this afternoon. This is of course consistent with the policy of the Government in withdrawing our Forces from East of Suez and concentrating them in Europe. I am still disappointed, however, for, as I have said before, I believe that this is a dangerous and mistaken policy.
I have been dismayed, too, to hear a Government spokesmen speak with some sense of pride and satisfaction at the withdrawal of our Forces and the general reduction in defence expenditure. I can understand the reason for this, but I think there is great danger that our people may deduce that the withdrawal and reduction are entirely to our advantage. I want, if I may, in a few words to point out that this is not so, and to refer to what is on the other side of the scales: in fact, to the price that we have to pay for this withdrawal. In the main, I shall limit my remarks to the Royal Navy and to the influence of present Government policy on conventional war at sea; for once action has escalated to nuclear war, conventional forces, and life as we know it to-day, will soon become irrelevant.
My Lords, the most dangerous aspects of these reductions and withdrawals from the naval point of view seem to me to be, in their simplest, the early phasing out of the carriers, or perhaps I should say the paying off and breaking up of the carriers, and the virtual disappearance of our vast trade East of Suez in time of war. Coupled with this is the closing of all our overseas naval bases apart from Gibraltar. Of course, if we are going to
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withdraw our Fleet from East of Suez we shall not require bases there, but in closing down bases we have to remember that it will take years to bring them back into use again, and until they are available Her Majesty's ships cannot operate in that area for prolonged periods. We shall, in effect, have written off our East of Suez trade in war time. Memories are short, and it is easy to forget that already since the last war we have closed, or are about to close, naval bases at Bermuda, Malta, Aden, the Persian Gulf, Trincomali, Singapore; and Hong Kong is only a shadow of its former self.
I do not want to weary your Lordships by repeating all the old arguments for retaining the carriers, but in scrapping them we are not only saving money; there is a price to pay, and as I see it the next time we are faced with an emergency or war our naval forces will start under a very severe handicap. One of the Fleet's most potent offensive weapon systems—the carriers—will be missing. Recently the well known United States naval writer, Norman Polmar, said this:
"Despite the advent of missile-firing submarines, and other so-called atomic age weapon systems, the aircraft carrier remains the backbone of United States sea power. Indeed current United States defence policy provides for the continued construction of aircraft carriers and for the operation of these ships into the 21st century."
At this point, it is worthy of note that so far as one can see the United States, France and Australia, to name only three countries, will continue to operate fixed wing aircraft from carriers, and it is clear that these countries, among others, fully understand and believe in their supreme importance.
As I understand it—and I shall be very glad if I can be told that I am wrong—very little has been done to provide ourselves with a substitute for carriers. There has been talk of small, simplified carriers replacing the large carriers as we have known them up to now. Last month a command cruiser, which is part carrier, was authorised, but this ship can hardly be ready before 1975 and probably later than that. At one time there was talk about R.A.F. bases in the Indian Ocean, but even if these bases had been provided they would, as I understand it, have been much too widely separated to be effective. Surely, my Lords, we must have learned what

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swift disaster can overcome the Fleet when it takes the risk and operates without proper air cover. The loss of the "Repulse" and "Prince of Wales" in the South China Sea was surely a bitter lesson.
What sort of a navy are we going to have if we have to restrict our operations to areas which are covered by R.A.F. aircraft operating from limited fixed bases? A navy, to be of any real use to this country, must be able to go anywhere where our trade is, which is anywhere in the world, and not just to areas where the Royal Air Force is in a position to lend a hand. It will be very interesting to hear of the lessons learned from the maritime exercises referred to in paragraph 67 of Chapter II of the White Paper; that is, exercises to test arrangements for the air defence of the Fleet when the carriers have been paid off. Perhaps the noble Lord who is to reply to the debate can tell us a little about this.
My Lords, in a debate in your Lordships' House on October 30 last year, I remember that the noble Lord, Lord Winterbottom, pointed out that when our carriers were phased out we would have six or seven nuclear-powered fleet submarines, and that these would be our main anti-surface ship and anti-submarine capability. He has substantially confirmed these figures in his speech this afternoon. Of course we have frigates and R.A.F. long-range strike aircraft, too, in certain areas, but what impression can our handful of fleet submarines have on Russia's 65 nuclear and 300-odd conventional submarines? And let us not forget that these Russian nuclear submarines are increasing at the rate of about one a month.
I would be the first to agree that our fleet submarines are splendid ships and a phenomenal advance on their conventional predecessors, but what weapons have they got, and how many? I know that we cannot be given any classified information, but I am afraid that I, for one—and clearly the noble Earl, Lord Glasgow, for another from his remarks—have never heard of anything more modern or exciting than an improved 21-inch torpedo. I hope very much that I am wrong and that I have missed out on something here. Perhaps the Minister can reassure us on that point.
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I have heard it said—I think on not very good authority—that Russia's submarine fleet is designed mainly for coast defence work. We ourselves thought on these lines at the beginning of the century, but we very soon learnt differently in 1917 and 1941; and in the last war we took great care to assist our allies, and in particular the Russian submarine service, to learn the lessons that we had already learnt the hard way. There is no doubt whatever that in the main Russia's great submarine fleet is designed for ocean warfare, and that includes, of course, warfare in the Indian Ocean, warfare against our oil supplies from the Persian Gulf, against our rubber and tin from Malaya, and against our immense trade with Australia and New Zealand. Bearing in mind this very real threat by Russian submarines, I hear disturbing rumours that the joint Royal Naval/ Royal Air Force Anti-Submarine School at Londonderry is closing down—the school which ever since the last war has developed and practised and kept up to date our anti-submarine tactics, the most vital of all the branches of maritime warfare with which this country is concerned. This is an economy which, if it is true, is beyond my comprehension.
My Lords, I have said all this before. I have said that I think it is utterly wrong and dangerous to dispose of our carriers and to withdraw from East of Suez; and, of course, as I reluctantly expected, this has made little or no impression on Her Majesty's Government. That being so, and if Her Majesty's Government are determined to leave our maritime forces in a depleted state while the Russians build up theirs, then we must look for some other way of reducing the grave threat to our overseas trade, and particularly that East of Suez. With that in view, I suggest that we must now, so far as possible, minimise our trade in and through the Indian Ocean where we can no longer protect it, and transfer it, again so far as possible, to alternative sources bordering the Atlantic where we and our allies will at least have some forces with which to guard it. For let us not forget, my Lords, in this time of peace, that this welcome state of affairs will not go on for ever. It never has before and, whether we like it or not, we shall doubtless be put to the test again one day, and when that day comes

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there will be no time allowed for making preparations, there will be no breathing space. The carriers will have gone and we shall have no naval forces East of Suez; and as I said in my opening remarks, in quoting from the gracious Speech of last October, we shall be left only with the ability "to play an active part in the North Atlantic Alliance ". And even here, in my view, our maritime forces are likely to fall far short of requirements.
My Lords, may I say one final word on the new pay code. I believe that it has been generally welcomed, and though it will probably help towards solving our recruiting difficulties, I think we should be careful not to be too optimistic. In recent times I have not heard much criticism of forces pay, and I think that it is the frequent reductions in the Fleet, uncertainty as to when these will end and, as the noble Earl, Lord Dundee, said, the great reduction in foreign service, that are the principal causes of lack of enthusiasm for joining the Royal Navy. And who, my Lords, can be surprised at this?
5.41 p.m.
LORD GORE-BOOTH: My Lords, it is a great pleasure to follow the noble Lord, Lord Ashbourne, whose great naval expertise and ability so frankly and clearly to express the warnings which he has given us we all recognise. He will, I hope, excuse me from following him in argument, since my naval expertise is sadly deficient. I also wish to offer a provisional apology to the noble Lord the Leader of the House. I shall do my best to be back to hear his reply to the debate, but I have undertaken a commitment which outweighs my capability of being in two places at once.
I should like to talk a little about the balance of our defence policy from this country to the Far East. Before I do so, perhaps I may be permitted to make one or two observations on things that have been said, because they indirectly relate to this theme.
In considering the position of warfare in the modern world, I find myself somewhat nearer to the concept explained by the noble Lord, Lord Bourne, than to the concept held by the noble Lord, Lord Gladwyn. The significant point, and the difficulty about talking about defence at
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this stage, is that because there is now a total deterrent there are parts of the world in which hostilities may be waged—and waged ferociously—precisely because the possessors of total deterrents cannot possibly use them.
We ourselves have a particularly complicated position in being what I may call a "small nuclear Power". In a sense, therefore, we are not involved in the struggle—the peaceful struggle, we hope—of the super-Powers, and we are not exactly on the same level as the Powers that have no deterrent. We must form our policy in such a way as to have a capability of non-nuclear warfare wherever it is needed, and make sure that this is efficiently distributed and disposed. I think the noble Lord, Lord Gladwyn, was looking for a definition of Soviet policy in so far as it affects us in this respect. But I do not think he found quite the right word. Soviet policy is to supplant; it is not to deny the West one particular facility or place at one particular time; the object is to supplant, in the sense of making sure that from now on that facility will never be available.
There is one other miscellaneous point which has been raised and on which I should like to express a view in one sentence. There is obviously much interest in the idea that your Lordships' House and another place should combine in a kind of American-styled Parliamentary or Congressional Committee on Defence affairs. The only comment I would make on what has been said is that if such a Committee's examination of these affairs is anything like that of the equivalent American Committee it will not be dispassionate: it will, however, be thorough.
May I now proceed to my general theme? I must start, clearly, from the sentence in the White Paper which speaks of Britain's military role having
"been transformed over the past five years by the historic decision to withdraw our forces from their bases East of Suez",
and so on. Like the noble Lord, Lord Bourne, I had rather the same reaction to the word "historic". I thought that the writer, or authoriser, had a slight doubt in his mind as to whether the policy was right and decided to settle for "historic". In many ways the policy has been right, but there are certain

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qualifications which I should like to develop. Perhaps I may say with modesty that I have a certain advantage in speaking from these Benches, since there is no need for me to commit myself to a particular policy about East of Suez, nor to some of the material used try the noble Lord, Lord Moyle. But I am with him in bringing a little more to the forefront the matter of costs, which we cannot afford to disregard.
The text from the Defence Estimates of this year, of which I have read a part, raises two questions of great interest and importance which have not really been thought through. I should like to deal with both of them. The first is: what is a base and what does world opinion think about bases? Secondly, what are we really to do East of Suez? I dislike the expression, "East of Suez" because I feel that our defence policy should be a unity. "East of Suez" has a certain temporary reality, because while 100 years ago it was possible to get through the Mediterranean to the Indian Ocean direct by water, to-day, owing to the advance of civilisation, it is not. None the less, the separation is in this day and age an artificial one, and we should consider our defence policy as a whole.
On the subject of bases, may I be allowed by noble and gallant Lords to describe—not define—a base as an installation with capital equipment and repair and maintenance facilities? I know that it is more than that, but let us call it that. I am not trying to be clever or paradoxical if I say that this concept is both in advance of its time and out of date. It is in advance of its time because in an organisation such as NATO, where there is mutual confidence, one can have bases in somebody else's country in a perfectly relaxed manner, every nation feeling that they have allowed this because they are thinking in an advanced way over international frontiers. On the other hand, in the eyes of many countries who have only lately won independence, or regained independence, bases of the nature that I have described appear obsolete and raise political tensions of a kind which in the present world—at any rate from the point of view of Western countries, countries with government by consent—are not tolerable and not worth contesting. We have a difficult situation
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with which to contend, and one in which our withdrawal from Aden was a political necessity, however much it may have been militarily regrettable. There are places in the world where one's position in a base under the old-fashioned definition is not tolerable and the base is obsolete. The same applies to Soviet bases in Czechoslovakia.
Let us apply some of this thinking to the decisions that have been taken in recent times. The decision to withdraw from the Middle East was not really a financial decision at all; it was an important political decision, and an economic emergency was used to make it and announce it. I say this because the Estimates for 1968 and 1969 both give a figure for the period 1968–69 of a local expenditure of £16 million. If we are running this country in any way efficiently, we could afford £16 million for the purposes for which that base has been there for a long time.
On the other hand, now that this decision has been taken a new situation has been created. An important political decision has been taken in a very sensitively political area, and the mere fact of taking it has meant an alteration of the political forces operating in that area. The people of the area have been making dispositions to ensure the safety of the area so far as they can from outside interference, and they have made reasonably good progress. It would be very difficult and very dangerous, however, for us to seek our way back again, to reverse that decision, unless there was strong pressure on us from the area to do so. That pressure does not seem to exist at the moment. I should have thought it was not very likely to arise unless there was some very great emergency.
Then, if I come to the Far East, the case is rather different. There a withdrawal was foreshadowed certainly in 1966. It was in fact decided in 1967 and not in 1968. The decisions of 1968 were to dramatise and accelerate the withdrawal. Here the situation is quite different, in that locally the withdrawal was not at all welcome. It is even possible that a return might be welcome. But here, unlike the Middle East, the economic element is one which we really have needed to take seriously, because at the time when the estimate was £16 million local expenditure in the Middle East, the estimate

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for South-East Asia and the Far East was £79 million. Whereas £16 million is not a great drag on our balance of payments, £79 million is something we have to take very seriously. The difficulty, further, is that if we were to try to carry on a base of Singapore proportions with something like the staff we needed there, the figure would still remain very high. The reason of course is that the payment for manpower per man is very high indeed. Great satisfaction has rightly been expressed at the improvement of conditions, but of course they make that particular equation more difficult still.
If I have said at the present point in the argument that it looks very difficult indeed to reverse decisions that have been made, am I then saying something for which, if I must be Shakespearean, I would give the answer, "A blank, my lord"? I think not. But clearly the Defence Estimates do not give us the answer; they give us a picture of our military and defensive power extending to the eastern Mediterranean, and then the picture in the Estimates is somewhat of a blank, but with two qualifications. One qualification, of which I need not read the text, is a qualification to which reference has already been made, of the general capability based on Europe, including the United Kingdom, to be used in our judgment of the circumstances. That is at least something, although its limitations have been extremely clearly explained by various noble Lords. There is also an interesting qualification in the present Defence Estimates. There is a sentence in paragraph 14 of Chapter I which states:
"We shall continue to train forces of all three Services in the Far East after 1971."
The Paper does not say exactly which Forces, or how, or where; perhaps it is wise not to do so.
However, this combination of comment takes my mind back to the period shortly before it became clear that we were going to withdraw from Singapore. At that time there was some question of whether facilities could and would be provided in Australia for British Forces operating in the Far East. At that time the Australians were understandably hesitant about being forthcoming, for the reason that they hoped, of course, that
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we should still stay in Singapore and that our suggestion that we might withdraw was not in fact serious. Now our friends from Australia know that it is serious, and it is possible—I do not want to press this point too hard, but it is possible—there might be a re-think.
If I may go back to what I said about the nature of bases, if we could get some increased facilities, with some capital equipment, with some staff and so on, at that end of the line, then perhaps we could fill in, commensurately with our resources, something which at the moment seems to be lacking—lacking because of this blank, of which I spoke, at the end of the line stretching from England to the South Pacific. There are many political reasons why this might be a development which we should all welcome.
I remember very well that when the present Foreign and Commonwealth Secretary visited Australia in 1966 he made the following remark in a speech in Canberra:
"Just as Australia and New Zealand came to the help of Great Britain in two World Wars, it is unthinkable that if Australia and New Zealand were the victims of aggression Great Britain would not similarly come to their assistance."
In fairness to the Foreign and Commonwealth Secretary, I must explain that that was not a commitment; it was not a formal document; it was simply a statement of a feeling which he had and which probably everybody in this House would share.
Therefore, I would end by expressing the hope that if, as I believe, we cannot reverse what we are proposing to do in the Persian Gulf and in Singapore, we may start, if we have not started already, to discuss with the Australians some way in which we can have something more than facilities in Australia, and something perhaps less than the traditional base. If we do not have something like that, then I think many of the warnings we have had from noble and gallant Lords with expert naval knowledge will be better founded than they ought to be. If I may conclude in so suggesting, I think that something of this kind corresponds to a prudent, universal and commonsensical approach to a British world defence policy. I would add that I have put this idea in the form of a suggestion rather than of a question to the Government, because I believe that

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this is the kind of subject on which, particularly at this time, it would not be sensible to press Ministers. None the less, my Lords, I hope that they will not take it amiss that I should have made the suggestion.
5.59 p.m.
LORD TEYNHAM: My Lords, I do not propose to follow the interesting arguments raised by the noble Lord who has just sat down. I am going to confine myself more or less to naval matters. In the past in your Lordships' House we used to debate the Navy Estimates on a different day, apart from Defence as a whole, but that custom seems to have gone by the board; so I feel I must confine myself to the Navy Estimates to-day. I am afraid I cannot congratulate the Under-Secretary of State for Defence for the Navy on the presentation of the Navy Estimates as set out in the Defence White Paper. It is still the old, old story: a further weakening of the Navy over the past year, and progressive weakening promised for future years. The Estimates for all three Services are being cut, and I would say the reason stems from an arbitrary figure of £2,000 million for Defence at 1964 prices—which of course is quite absurd at the present day.
The Estimates do not appear to relate to any policy but only to politics. I wonder how many of your Lordships realise that manpower since 1964 has been cut by some 50,000 men. Perhaps it is pertinent to mention that almost a similar number of civil servants have been added to the Establishment. When we turn to recruiting, the figures are very bad indeed, especially in relation to the run-down figures. The White Paper on Defence in 1967 said that recruitment had been running at a fairly steady rate of 7,400 per annum. Only three years later this figure has been reduced to 5,091. I think I am right in saying that this is a cut in recruiting of 33 per cent. in five years, and I suggest that these figures are most alarming for the future. If we turn to officer recruitment there is the same sad story. In 1963 there were, I think, 198 cadets at the Royal Naval College at Dartmouth. By 1967 this figure was reduced to 182; in 1968 it was 175; in 1969 it was 159, and in the present White Paper the figure is 112. Of course it takes very much longer to train an officer than a rating,
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and perhaps the Minister who is to reply for Her Majesty's Government will give your Lordships his ideas as to how this short-fall can be stopped.
My Lords, I do not wish to enter into the carrier controversy at any length, but I have a sort of feeling that we shall be told to-day that we no longer have the men to man them. Surely, if France, with naval personnel running at about 70,000 men, can operate two carriers, we can do so with 85,000 men. I am not one of those who are wedded to aircraft carriers as they are to-day. I have always thought that simple, flat-topped ships, far less sophisticated than the present carriers, could be used for both fixed-wing aircraft and the new VTOL aircraft at far less cost and less maintenance.
I now propose to turn for a few moments to the state of the Fleet. The Defence White Paper of 1964 stated that we had 181 operational ships; the figure this year is down to 143. Each year the Navy seems to get smaller and smaller. No wonder recruiting is on the decline, when young men who might wish to join the Navy for a career know about these figures. I see nothing in the White Paper which indicates that we have been provided with an antidote to the Russian short-range 20 miles and long-range 150 miles surface-to-surface missiles. I understand that we are still examining the position and that there is little chance of any antidote to these missiles being available for at least another five years. I understand that the Russians are able to launch their surface-to-surface missiles in salvoes of 12, and defence against them is a formidable matter. I suggest again that it would be safer not to phase out the carriers until some new form of defence has been provided against these missiles.
There is one ray of sunshine in the White Paper, and I would refer to the development and building of the new type 21 frigate—H.M.S. "Amazon". I had the honour to command the last H.M.S. "Amazon" in the Battle of the Atlantic and the Mediterannean convoys, so I shall take a special interest in this sophisticated vessel. I should like to sug-get that there should be a clear distinction between what I would call front-line warships, able to conduct full-blooded

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engagements with enemy forces, and vessels whose duties are limited to reconnaissance and short-distance patrols and action against pirates and smugglers. The United States Navy found out rather belatedly in Vietnam that lack of minor war vessels was a serious handicap. It was not until they became available that it was possible to begin the eviction of the Viet Cong from the Mekong Delta.
Apart from these small and very necessary craft, of which we have hardly any, I suggest that it is interesting to look at the design of frigates less sophisticated than the type 21 frigate. Why not build to the design of a 1,600 ton frigate which has been produced by a well-known and famous shipbuilding firm and fitted with diesel-gas turbines? Although having a speed of only 27 knots as against the 30 knots of the type 21 frigate, she is designed to carry an armament comparable to the larger vessel; but what is interesting to note is that her proposed complement is only 120 as against 260. She is, of course, a much less sophisticated vessel and is far cheaper to build.
My Lords, I should now like to touch for a moment on the disbandment of Coastal Command. I understand that it is now incorporated in what I believe is called the Strike Command of the 18th Maritime Group, but that the numbers of aircraft have been greatly reduced. In view of the ever-increasing importance of maritime reconnaissance with a large Russian fleet at sea, perhaps the noble Lord who is to reply for Her Majesty's Government could give us more information about this new grouping. My Lords, I maintain that the role of the Navy is the same now as it has always been: the protection of the ships of the Merchant Navy, which are our lifeline. It is no use blinking the fact that we have neither the resources nor the ships at the present time to combat nearly 400 Russian submarines, and we must largely rely on our technical skills to produce superior weapons of detection and attack. I do trust that the money allocated for research will not be reduced this year.
6.6 p.m.
LORD SOPER: My Lords, I shall endeavour to make a short speech, and that may be more agreeable to your Lordships because I think what I have to say, unlike the general content
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of the speeches which have preceded mine, will be strictly egregious. My problem in approaching this particular subject is that I am a pacifist. It is not only a problem but a claim, and I notice that in this particular document, composed of ten chapters, nine of those chapters are precisely consequential upon assumptions made in Chapter I; and it is upon those assumptions that I wish to speak.
To begin with, there is the assumption that the apparatus and practice contained within the articles and suggestions and programmes of this White Paper are compatible with a Christian civilisation and what ought to obtain within that civilisation. With that I cordially disagree, because I believe that this is strictly not so. I say that carefully; and although most of my ecclesiastical brethren have departed—if I feel a little like Shadrach, Meshach is still here, and Abed-nego has just gone off to Fulham Palace—I think I should be in agreement with them, and they would be in agreement with the general consensus of Christian opinion and Christian conviction to-day that our Christian civilisation is no longer capable of sustaining within its theological propositions a just war. There might have been in other generations reasons for which a just war was conceivable, but the very conditions which this White Paper envisages makes such a just war, by all those classical definitions, impossible.
A just war can be fought only under conditions which seek a minimum of violence; a just war can be fought only under conditions which are properly regulated by international agreement; a just war can be fought only if the calculable results are more or less certain and there is only a small area of possible error. In all these matters I do not find it possible to believe that these estimates, however genuinely and sympathetically they may be viewed, are compatible with the Christian faith, and I have to say so.
It does not make very much difference—indeed, it is no comfort—if the retort is made that these propositions in the White Paper are intended to prevent a war and not to engage in one. For if the deterrence of terror means anything at all, it must mean that in certain circumstances a Christian country—officially so-called—would carry out the propositions that it most desires to avoid and

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carry out the programmes, however detestable those programmes may be. The internal conviction of the deterrence of terror is once again incompatible with the teaching of the Sermon on the Mount. I say that with care, because it may contain within it seeds of irritation to people who sincerely hold the opposite view. I would, if I could, explain to myself and to your Lordships what it is that for them makes this decision to embark upon such a detestable programme inevitable. They would regard the proposition that we are to practise Christianity as an ideal which in the present state of society is inapplicable.
Last Saturday, the Minister of Defence, Mr. Healey, was engaged in a programme called "Speakeasy", the title of which is an insidious trap for the garrulous, and he was asked what was his view with regard to Cambodia. His reply was something like this—this is a translation, for I did not hear quite clearly the exact words: "In the past this country has been the world's policeman."—rather a grandiose concept, but let that pass—" I do not intend that we should now become the world's parson." I am sure that if we take a "holier than thou" altitude Mr. Healey is justified in that particular comment. But I am a parson, and if I am invited to take note of these defence propositions I must, so far as I can, be true to the faith I hold. I believe that what is morally right must in the end be politically right, and therefore I dare to say to your Lordships that, though it does not appear in Chapter I that there is any defect in the various arguments and anterior reasons there propounded, a closer inspection of them would I think lead to considerable dubiety as to whether they are verifiable, or whether they are viable.
The White Paper depends for its substance on the proposition that there is a deterrence which can be maintained and is likely to be effective. I find this increasingly difficult to sustain as an argument. The facts seem to me to be irrevocably against it. The one outstanding contribution made to this argument by the Cuban crisis was that although Khrushchev was deterred from initiating nuclear war, there is no evidence that Mr. Kennedy was—in fact, the evidence is that he was not. Furthermore, I still remain appalled at the evidence,
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which has not in my judgment been in any way minimised in its stark gobbledygook, that in any kind of large-scale operation of war in Europe we should in fact not be compelled to utilise in the first instance tactical nuclear weapons. And I find no comfort in the proposition that these tactical nuclear weapons would be, on the whole, more congenial than larger weapons of the same nature. Here is the answer, as I see it, to those who take their comfort in the assumption that a nuclear deterrent works. We have two classical instances that it does nothing of the sort.
The second proposition that I find in the White Paper and subject to extreme dubiety is that you can, with any reasonable prospect of turning out to be right, wear the cloak of prophecy and undertake to say what will happen in given circumstances if you deploy your forces in a certain way, and if you either have carriers or Polaris submarines, or your forces are in this particular part of the world or elsewhere in sufficient depth or strength or firepower. I do not pretend to have the mind of youth to-day (and, as I said, I shall not string a guitar across my shoulder in order to be "with it"); I do not understand them in some respects. But one thing which they are saying very clearly, loudly and unmistakably is that the evidence of what is happening in Vietnam is a refutation of the calculation that you can deploy armed forces to-day in any calculable attempt to produce military results. The greatest military Power the world has even known is now bogged down in a ceaseless, wicked, endless, terrible struggle; and that struggle, far from coming to a successful conclusion, has in fact escalated with the recent invasion of Cambodia. The one thing we can be certain about is that more and more people will be slaughtered; more and more people will be homeless.
The third concept that lies behind Chapter I of the White Paper is that our strength and safety depend very largely upon NATO. I find it impossible to believe that when 95 per cent. of the nuclear striking power is held in the hands of one member of an alliance he will not exercise the rights of an elder brother, holding at least most of the cash in his hands and holding certainly the majority

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of power. And when I think that NATO will largely be determined, or at least conditioned, by the convolutions and the practices of the present President of the United States, I am almost in despair: because here, it seems to me, is nothing more than naked political action bereft of any sense of ultimate purpose.
I would make one final comment, which is an assumption drawn from the first Chapter; and that is that we are able by the use of armed forces to allay problems and suspicions which otherwise might become acute. My Lords, I find the opposite to be true. I have just come from talking on Tower Hill. It may interest your Lordships to hear that there is a sense almost of disgust among people there, who contrast the attitude that we take—and I take it—of opposition to the South African cricket team's coming to this country, because of our abhorrence of apartheid and our connivance at Simonstown in the continued practice of what is, after all, a much closer collaboration than any cricket match can ever be. When I think of the Middle Eastern crisis, the pollution of that situation or the exaggeration of its enormities, how much of this is due to the fact that those who possess arms and find they have to sell them because they are obsolete before they are out of date, find willing markets and perpetuate a struggle which becomes all the more terrible as it goes on?
Your Lordships may think this is another petulant complaint of the pacifist. I have a proposition to put, and even if I do not anticipate an immediate conversion I do not apologise for introducing it. I do not believe that half-measures with regard to arms are effective. I too deplore our partial disarmament, in the sense that if you are going to do what is right, you should do it wholesale and for the right motives, otherwise you get no credit for it. If you are going to lose your soul, you may as well win the world in the process. If you are going to embark on a programme of disarmament, let it be seen clearly to be a part of a process that leads to total disarmament and not a piece of connivance or political strategy or political tactics. I would propose total unilateral disarmament, and I venture to say to your Lordships that there are not a few people in this country
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who believe, as I do, that such an adventure, taken, if you like, in the teeth of what seems to be the realism of our wicked world, would break into a vicious circle which becomes the tighter as the days go by.
VISCOUNT MONCKTON OF BRENCHLEY: My Lords, will the noble Lord allow me to intervene? I cannot help thinking back to Czechoslovakia, which did exactly that, and it has not done that country very much good.
LORD SOPER: My Lords, might I say that there is a world of difference between the situation in Czechoslovakia to-day, where resistance was non-violent, and the situation in Hungary to-day, where in 1956 the resistance was violent. What is more, it was because the Czechs refused to embark on violence that they were able to embark on programmes of wireless and television exploitation which made the whole world know much more clearly, and raised a greater hopefulness for the future than was raised even by the most splendid personal courage of those who gave their lives fighting tanks in Budapest.
LORD ST. OSWALD: My Lords, does the noble Lord consider that the present situation in Czechoslovakia is in any way enviable?
LORD SOPER: No, my Lords, and that is why I said that I thought it was comparatively better. I cherish the opportunity presented to a great country such as this of making the experiment of total disarmament at a time when increasingly the evidence points, as I see it, to escalation of the problems which hitherto have confronted and daunted us. And if it be that this is a wild and impractical suggestion, at least it is an adventure that we could take, in the confidence that, somehow, we had the morality of the New Testament and the fervent wishes of so many people behind us. We have taken innumerable risks for war. I humbly suggest that to take this tremendous risk for peace might indeed be for the salvation of the society in which we live.
6.20 p.m.
LORD NAPIER AND ETTRICK: My Lords, I propose to concentrate my remarks on the subject of manpower in

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the Services, and I shall be as brief as I can. As all your Lordships appreciate, manpower is the fundamental and major problem that faces us, for with insufficient men we are unable to operate either effectively or efficiently. Those men who are serving become overstretched because the work load is too great. They then become dissatisfied, and they leave for civilian life at the earliest opportunity. That of course merely aggravates an already serious situation. The Statement on Defence Estimates which we are considering this afternoon, itself tells us that the strength of the Armed Forces as at January 1, 1970, was 376,300, and that by 1974 it will be of the order of 350,000; in other words, a further reduction in the Regular Forces of some 26,300. As has already been pointed out by my noble friend Lord Dundee, the Statement admits that even if this year's recruiting levels rise to about 35,000 men, it will still be well short of our requirements—the noble Lord, Lord Winterbottom, mentioned a figure of about 250 in excess of that number.
I have recently returned from a week's visit to the British Army of the Rhine and I should like to deal with that theatre first. I have to say that I found that all our major units in Germany were, at best, at only 90 per cent. of their peacetime strength, and many were considerably worse off than that. Her Majesty's Government have always said that it is the presence of efficient and trained men on the ground that is the important factor from the point of view of deterrence; but since some of the units are not physically on the ground it surely makes that claim a trifle hollow. The Secretary of State for Defence admitted late last year—to be precise, it was on December 8 in another place—that the strength of B.A.O.R. was down to 48,100. Mr. Healey has also recently said that the present role of our 6 Brigade as a crisis reinforcement for Northern Army Group is to be taken over by a newly formed German brigade. Can the noble Lord the Leader of the House tell us when this newly formed German Brigade will become operational?
One cannot help but feel worried about the reinforcement situation. As my noble and gallant friend Lord Bourne has already mentioned, in a period of tension the peace-time strength of B.A.O.R. needs to be doubled by the arrival within seven
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days of reserves in the shape of units and individuals. Would those reserves ever arrive in time? And if they did, is it appreciated that they would leave precious little else behind them in this country? If I am right, then in my submission considerable doubts must be cast upon the potential effectiveness of many of our contingency plans.
I understand that there are serious worries on this score both in NATO headquarters and in SHAPE. And yet we are told, somewhere in the Defence Statement, that:
"Our reserves have been reorganised to provide more effective reinforcement for the Regular units which we have committed to NATO."
How is this so? Can the noble Lord, Lord Shackleton, explain it in due course? I myself believe exactly the opposite; namely, that our reserves have been deliberately run down. There is widespread scepticism about the policy——
LORD SHACKLETON: My Lords, if I may interrupt the noble Lord, which particular reserves does he mean have been run down, as compared with the date before the creation of TAVR II? He is suggesting that the creation of this new reserve has been accompanied by a worsening of the position with regard to the reserves which are readily available. Which reserves is he referring to?
LORD NAPIER AND ETTRICK: To TAVR III.
LORD SHACKLETON: But that was never a reserve for NATO operations.
LORD NAPIER AND ETTRICK: My Lords, I accept what the noble Lord the Leader of the House says on that. As I was saying, there is widespread scepticism about the policy of flexible response, because there is serious doubt whether a political decision to use nuclear weapons would ever be made in sufficient time. A request to use them cannot be initiated until the reserves have been committed, and once that situation arises a quick decision on their use would be vital. I query, therefore, whether we can really afford what are called "balanced force reductions", because, as everyone knows, in NATO we are already greatly outnumbered. Any further reductions, even if matched by Russia, would make our

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position even worse. And surely the ironic thing is that it is a Labour Government who have become more committed to a nuclear response at an early stage.
But coming back for a moment to the basic problem of recruiting, I am quite satisfied in my own mind now, having talked to a large number of Servicemen recently, that pay is no longer the overriding factor here. There are indeed many anomalies in the new military salary which will need to be ironed out quickly; and because, in the event, the Servicemen got only 50 per cent. of their award this year, the impact of the new scales was, I believe, largely lost. The Serviceman is still a bit suspicious, and needs time to see how the new pay scales are going to work out. I think it was recently stated: in another place that when a Serviceman finds himself worse off than he was before the introduction of the new military salary scales then action will be taken to redress the balance. Can the noble Lord confirm that this is true? If so, we welcome it.
No, my Lords, what matters to-day is where the Serviceman is likely to have the opportunity of serving; and, as we know, the overseas stations are fast disappearing. He also needs to see clearly what is the purpose of his engaging to serve the Colours. I believe that that is not always made clear to him. Furthermore, he must have a sense of security regarding his future; and it cannot be said that he has this at present. He must not be overstretched, otherwise he will become totally dissatisfied and leave the Service at the earliest opportunity.
I should like to illustrate what I mean by telling your Lordships of the planned deployment of one single battalion of infantry between July this year and February, 1971. The whole battalion is scheduled to proceed on an exercise for six weeks in East Africa, in July. A company of 100 men will go on an accompanied tour (that is, with their wives and families) to the Far East in November. Two companies go on an exercise in the Near East in November and December. A further two companies will proceed to the Caribbean on an unaccompanied nine-month tour in February. On top of all this, during September and October this particular battalion is the spearhead battalion for
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Northern Ireland. If that is not bordering on overstretch, then I do not know what is.
Northern Ireland is imposing an enormous strain on our manpower, as all noble Lords appreciate: so much so, that even Gunners and armoured regiments in Germany and elsewhere are being warned for duty in Ulster as infantrymen. Yet, despite this, Her Majesty's Government continue with their plans to reduce the infantry by a further six battalions. Why? Is it not realised that such a policy is liable to lead to a situation in which, even if only small, unexpected problems arise, in say Trinidad or British Honduras, our infantry will be totally unable to meet our treaty obligations or our national requirements? Will the Government undertake to reconsider this decision, even at this late stage?
The conditions that some of our troops had to endure during the early stages of the troubles in Northern Ireland were almost unbelievable, and I should like to read to your Lordships one paragraph from an article written by a company commander in the Grenadier Guards, and which was first published late last year in the British Army Review. It is dealing with the accommodation problems that the company had to face when they arrived in Belfast, and it reads:
"The principal administration problem facing us throughout our tour has been the lack of accommodation. For us there was none. In this deployment we slept in two filthy derelict houses which boasted one unfiushable lavatory."
He goes on later:
"In the first ten weeks of our tour we moved hither and thither; platoons of the company at Belfast and Londonderry. We slept in one bank, two shirt factories, a factory selling rubber accessories, a Presbyterian Church, an Orange Hall, a dairy, several private huts, one Methodist hall, five T.A. centres, an abandoned prison, numerous miscellaneous derelict houses, a county court house, two Royal Ulster Constabulary stations, an ex-bus station, a sheep shelter, innumerable three-ton vehicles, a childrens' créche, Her Majesty's ship 'Sea Eagle,' a naval maintenance yard, and an ex-seamen's hostel."
Will the noble Lord the Leader of the House assure us that these conditions no longer exist? I think he probably will, for if he cannot, how can one expect Servicemen to remain satisfied with their lot in conditions such as these?

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My Lords, I think that by and large the current recruiting advertising is good, but I wonder how good the overall control of the recruiting centres is. I have heard some not very good reports. It has been suggested to me, and I mention it as an aside, that if only certain members of the Inner Cabinet, such as the First Secretary of State, or the Secretary of State for the Social Services, would occasionally say something encouraging and appreciative about the Services, this in itself could have a good effect upon recruiting. Perhaps this suggestion might be passed on to the right quarter.
As has been said before, we accept that our primary defence commitment should be to Europe, but not to the exclusion of everything else. We must be concerned about the availability of our conventional forces. Surely it must be right at the present time to look beyond Europe; it is the protection of our trade routes that is so vital. The defence of the South Atlantic is just as important as that of the North Atlantic. What of the exposure of the NATO flanks? We all know that Western Europe's economy relies very largely on oil from the Middle East brought in tankers via the Indian Ocean and the Cape route. I have recently seen the Royal Navy to-day described as something little better than a coastal defence force. The naval recruiting advertisements imply that the Royal Navy have 200 or more warships permanently at sea to support our friends and interests. In fact, some 60 of these ships were not available last year because they were refitting, or were in reserve. And is it not true that some 44 of them are 360 ton wooden minesweepers?
As the number of our ships dwindles, those that remain have to spend more time at sea, and consequently family separation becomes more frequent. Report No. 116 of the Prices and Incomes Board, dated June, 1969, states that 69 per cent. of the Royal Navy and Royal Marines gave family separation as their reason for leaving the Service. I saw it reported in a recent edition of Blackwoods Magazine that a Junior Minister of the Crown stated in Singapore that the Royal Navy's most important task to-day is the Beira blockade—surely the most astonishing statement
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ever made by a Minister of the Crown before dinner.
My Lords, what of the Fleet Air Arm? Is it not a fact that the Government have created and are creating deliberate redundancies here? "Ark Royal" is good, I am assured, for a further twenty years after her major refit, but it is doubtful whether there will be enough men to man her in a few years' time. Why is no Fleet Air Arm Squadron being allowed to perform at the Farnborough Air Display this year? They want to be there themselves.
How right was the noble Lord, Lord Gore-Booth, when he said that it is Soviet policy to supplant the West in every area vital to us. The Russians continue to strengthen their positions throughout the oceans of the world, by making friends, influencing people and promptly filling the vacuum left by our withdrawals. They use, of course, as their agents their merchant shipping fleets aided by the hordes of Russians who enjoy diplomatic status in every country where Russian interests can be advanced. In Malta, Russian warships have been using the Grand Harbour. Requests will be pressed for repair and docking facilities. Should Mr. Mintoff win the forthcoming Maltese election it is surely not beyond the realms of possibility that we shall see a Russian base within the Commonwealth! In the meantime, Her Majesty's Government refuse to cooperate with two Powers—Greece and South Africa—whose geographical positions are of such vital strategic importance but whose anti-Communist zeal appears to offend.
My Lords, I could go on for hours, but I think that I have said enough. In my view, the failure to attract men to the Services stems directly from the overall defence policy. There is, I am afraid, still a lack of faith in the future that the Services offer. Taking part of the closing words, if I may, of the noble Lord the Leader of the House, as he wound up last year's Defence debate in your Lordships' House, we may still have "a quality in our Services that is second to none". I think we do, but where is the quantity? To achieve the latter, we must restore a sense of purpose. This, the future Conservative Administration will do.
6.36 p.m.
LORD GRIDLEY: My Lords, at this stage of a debate in your Lordships' House one endeavours to throw away much of what one intended to say, and to speak to your Lordships extempore. I should like to cover an area of which I have some knowledge, and that is South-East Asia, Malaysia and Singapore. I must make one comment in connection with that area and say something about the speech, to which I listened, of the noble Lord, Lord Soper. I would ask him, in his consideration of whether we should take action in any part of the world, if he thinks that it is morally right to leave people in subjugation suffering from a tyrannical oppression; and if he himself has ever been in a position to experience these sufferings. I can only tell him that I have been in a country under an occupying Power for four years; and I can say, with regard to the people of that country, that the fact that we made the exertions we did to relieve them from their sufferings and bring them back to a condition of life which they understood was, in my view, a moral right for which we fought in that part of the world. I say that with affection, having listened to what the noble Lord had to say.
Whether one's policy in regard to defence may be a success in any part of the world must, in my view, be dependent upon whether one is welcome in that area. May I, in passing, draw attention to one incident in my life which occurred in the Malayan Campaign, when we were retreating, after the Japanese ouslaught in the North of Malaya, through the centre down to the South? In five weeks of continual harassment and terrible suffering, one thing which blazed itself on my mind was the terrible suffering of the local population of that country, who for the first time in their lives had seen all the terrors of a modern war. Until then they had not understood what modern war meant. I felt then that if ever we went back to Malaya or South-East Asia it would surely be right to accustom those people to defend themselves and not to rely on us. But at that stage of our history we were quite unable to do that, because the people here in Britain were defending the shores of these islands and all their exertions had to be made back here in Europe.
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One would have thought that, after their sufferings, their attitude would be that they did not want us back there again. But, my Lords, we are still welcomed with open arms. They want us back, and they want to be associated with us. Lee Kuan Yew, the Prime Minister of Singapore, made a speech at the last Lord Mayor's Banquet in London in which he said that he preferred to deal with the British, that he understood them, and that he wanted our association to continue. Tunku Abdul Rahman, the Prime Minister of Malaysia, echoed those views.
To come to a specific proposal for South-East Asia, I think it is the Government's policy that they would reinforce that area with a capability strike force of 2,000 or 3,000 troops based in the United Kingdom. They would be flown out there in an emergency, and would help to maintain the integrity of that part of the world. But if I know anything about Malays and Chinese, it is that they are complete realists about what goes on in the world. To refer to the speech of the noble Lord, Lord Bourne, who was Director of Operations in Malaya when we were facing a Communist insurrection, what we then wanted most was reliable information. But you are not going to get any information at all if the local people feel that you are not on top and that in the end Communist terrorism is going to win. I say that because that kind of feeling is endemic in the area, and the country lends itself to it. With due respect to the Government, I do not believe that sending a force out there will be anything like so effective in assisting the people in a place where we are welcome as a permanent small force stationed in the territory would be. For those reasons I support my Party's proposals for the Far East—that we should have a small force composed of Commonwealth units to maintain stability, and that we should come to an agreement in consultation with Australia, Singapore, Malaysia and other interested people.
In conclusion, may I say that I was rather surprised that the noble Lord, Lord Soper, should condemn the President of the United States, with all the great difficulties facing him at the moment, for the action he has taken in

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Cambodia? I imagine that the President took those steps most reluctantly and, in view of the perils which face him, I am sure that it was done with the best of intentions in order to get a withdrawal from Vietnam as soon as possible.
6.45 p.m.
LORD CLIFFORD OF CHUDLEIGH: My Lords, I regret that each time we have had a major Defence debate since 1964 I have inflicted my opinions on your Lordships' House, and so have many others on the list to-day. The only exceptions in my case have been when I was on one of my periodic visits to Australia. If I combine that statement with the fact that when I first came to your Lordships' House I was a Territorial Army A.D.C. to the Queen, and am now Honorary Colonel of a TAVR III regiment of eight men—all that is left of 12 major and minor units—it may give me an excuse to make yet another short plea.
To my way of thinking, the duty of Government is primarily to protect the future of the country and the people it has been elected to govern. What use the most ideal Welfare State, the most perfect educational system, if we had been overrun by the Nazis in the last war, or if we are overrun by the Chinese in the next? What nonsense, because we disagree with the internal politics of another country, to jeopardise the future of our own. Our Government did not, and probably still do not, like the Spanish system, so we insulted a proud race by refusing to have naval manœuvres with them. The result was that they gave their orders to France and caused us a lot of expense in the confrontation over Gibraltar.
Our Government do not like the system in South Africa, so that when the Indian Ocean and the South Atlantic are swarming with Russian submarines—and we should have learned the lesson there by now—we refuse to arm the South Africans, although we had agreed to do so, and so jeopardise the Simonstown Agreement. So that, following the closure of the Suez Canal, they lay supplies vital to our continued existence open to attack by what is probably the most powerful submarine force deployed in that part of the world to-day.
In the last three wars in which we have been involved, Australians and New
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Zealanders have sent men all over the world to aid this country. Your Lordships may remember that in a debate on the insulting way we treat Australian and New Zealand visitors, I quoted the inscription on the war memorial of the little village of Cambridge in New Zealand:
"Tell England, ye that mark this monument, faithful to her we died, and rest content."
How honourable it is of us now to pull out of Singapore, the last ditch before Australia and New Zealand, especially when nobody wants us to go.
And do not let anyone "kid" your Lordships that the exercise now going on fools anyone, least of all the troops taking part. With bases thrown away and carriers abolished, we should not have a hope in hell of getting to that part of the world. Where would we get the overflying rights? What guarantees are there of that? With the Russians controlling the Middle East, and China probably controlling Central Africa, perhaps the noble Lord will tell us what guarantees he can get that we can fly our troops out. The noble Lord, Lord Chalfont, made a remarkable and excellent speech on the Common Market. He pointed out that by the year 2030 one in three of the world's population would be a Chinaman. What do we do about the implications of that situation? Again, we abolish our carriers. We do not even leave a platoon in Singapore to guard an airfield; and, into the bargain, we abuse the Americans for trying to stem the tide elsewhere. Yet we seem to be going to keep troops in Hong Kong. What for? To be an appetiser for shark's fin soup? I do not see the logic in removing ourselves from one place but not the other.
While on that part of the world, let us forget our obligations and any old-fashioned ideas of loyalty, honour and all the rest of it, to our friends and relations, and let us think for a moment just of self-interest. We have over 3,592 million dollars invested in Australia. Surely, that alone warrants a battalion, an airfield and an anchorage in Singapore. No—our friends and relations can go hang. It seems to me so short-sighted. I asked the noble Lord a Question about the unparalleled iron ore recently discovered in Australia. I tried to point out to him at the time the importance

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of the fact that we should get our share of it, and that it should not all go to our competitors. But the reply was completely lacking in any strategic appreciation of this terrific bonanza, and my Question was countered with a crack about fluctuations on the Stock Exchange—the fluctuations being, as it happens, in nickel and not in iron ore. But that is beside the point.
The Government have decided in their wisdom to become committed to Europe, and Europe only; and so, just to make certain that we have not a friendly Government remaining anywhere, we upset the Maltese, presumably with the object of making certain that NATO is outflanked. For centuries, the policy of this country has been to keep the Russians out of the Mediterranean and the Gulf, but I suppose that, because it was the pre-1964 policy, it must be wrong, and we now seem to be encouraging the Russians in.
On the same sort of point, I asked a question supplementary to the Question of the noble Lord, Lord Sorensen, the other day on Guyana. I asked whether there were any commitments of our troops should the threatened attack from Venezuela materialise. There was no definite answer to my question. I wonder about British Honduras and Guatemala. There are no adequate reserves anywhere of our Regular or other Forces which can cope with any extra burden laid upon them. Your Lordships have heard—and this has been referred to by other noble Lords—of the drain of Northern Ireland alone; how reserves which, so the Press says, were promised for NATO have had to be called upon. Look at our trouble in transporting our troops. There was a bit of trouble the other day in the two companies which were doing winter warfare training in Norway because at the same time we were having to withdraw from Libya.
To get back to our own little Island, one would think that even an inward-looking Government would pay a little more attention to our preservation. It does not seem to be so. Just at the moment when, according to articles in The Times earlier on this year, there is a possibility of a dirty nuclear set-to between Russian and China, what do we do? All those of your Lordships who, like
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myself, went through the Civil Defence Staff College (or the erstwhile Civil Defence Staff College) at Sunningdale knew that, for the application of the principles that had been worked out for protecting our population from nuclear fall-out, a home Army—the erstwhile heretofore Territorial Army—was an essential ingredient. But what do we do? We abolish the Territorial Army and then the Civil Defence. That leaves the rump of our defence forces with little or no reserves, which as I see it is all we have to-day.
Several noble Lords have recently been on a visit to Germany. I would be interested to hear from some of them if they received the same impression as a friend of mine whose son is commanding a battalion out there came back with; that is, that they are convinced that we must either have a reformed Territorial Army or National Service. Now if people are thinking in that way at those sort of levels, surely—and this has been mentioned before today—it is about time that, on a dispassionate basis, all-Party preferably, we worked this situation out.
LORD SHACKLETON: My Lords, may I interrupt the noble Lord? Again, I should like some precision from noble Lords who talk about reserves. What does the noble Lord mean by a reformed Territorial Army? Does he mean the sort of Territorial Army we had before, or a larger TAVR II?
LORD CLIFFORD OF CHUDLEIGH: My Lords, if the noble Lord the Leader of the House will let me get on, I shall come to my suggestions in a minute, which I hope will answer that point.
Recently, the prospective C.I.G.S. was reported in the Sunday Telegraph as saying that during his tour of duty he would not be troubled with the question of National Service coming up on his plate. As he is well known as having a lot to do with (shall we put it in this way?) the reform of the Territorial Army, it looks to me as if we are in rather a depressing position so far as any of our reserves are concerned—and I am now coming on to what I suggest. The only thing we can do, or should do, is first of all to turn the TAVR III cadres into full-strength units. That, I think, would help Regular recruiting, but, of course, not as much as it did before, when we had many

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more T.A. centres. It would improve morale, because these people have been going on for years, even before they were reduced to eight men, with no pay and very little encouragement. If we did that, then we would have a basis on which to work up and increase the TAVR II, if necessary, after that.
I think we must stop the run-down of the Fleet Air Arm. Reference has been made in the Press to what looks like a very spiteful decision about performing at Farnborough. I suggest that the Government should develop more quickly, as was suggested by the head boffin from Farnborough several years ago to the Fisher Society, a cheap carrier force based on a development of the Harrier. I suggest, also, that there might be quite a saving in abolishing the R.A.F., as suggested by the articles of Wing-Commander Allen, and creating an Army Air Arm and a Fleet Air Arm in its place. All long-range strategic bombing should be the responsibility nowadays of rockets. And for Heaven's sake keep just a couple of battalions in Singapore and Malaya or forever hang our heads in dishonourable, cowardly shame!
7.0 p.m.
THE EARL OF CORK AND ORRERY: My Lords, I confess to considerable temptation to do what I can to follow the speech that we have just heard from the noble Lord, Lord Clifford of Chudleigh, which I found much to the point and, in some places, moving, but I think I had better stick to what I had prepared to say, otherwise I shall be making two speeches. My line is different but not entirely dissociated from that of the noble Lord. The first thing that I have to say, and I say it sadly, is that in this White Paper I detect no true overall defence policy at all. It contains a certain amount of defence policy, of course; but it is embedded firmly in a scheme for saving money—an aim laudable in intention and necessary, but not one to be carried to such a length as to jeopardise that which it pretends to be its intention to secure, the safety of the nation.
It may sound to your Lordships that I suspect that this White Paper and Government policy are some kind of confidence trick. I do. I think it is a confidence trick. I impute no dishonesty to the Government; but confidence, none
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the less, is something I do not have in this policy. And this is how the trick is worked. Over a period (of years and through a series of White Papers you sell to the public the idea that the defence of Great Britain is indissolubly dependent on the defence of Western Europe by the united powers of NATO. There is no trick in that; it is true. The trick begins when you embark on the enterprise of selling to Parliament and the people the idea that if the NATO area is secure, then Great Britain is secure. That is not true. It might be true if the country concerned were Western Germany or Luxembourg; but not Great Britain.
Before attempting to convince your Lordships that I am right, may I show you where the trick begins? It begins in the first two sentences of the White Paper:
"Britain enters the Seventies with an overall military capability which no other West European power can surpass. Her Armed Forces are the most highly trained in the North Atlantic Alliance."
Those two statements are unquestionably true but they imply that Great Britain is a European Power and a member of NATO, and that when you have said that you have said all. But you have not said all. Great Britain is a nation surrounded by the sea and does not draw her sustenance in peace, and could never draw it in war however closely integrated we might become, from the Continent of Europe.
I offer a third quotation for consideration. Paragraph 69, page 14 of the White Paper, says:
"The broad direction of our defence policy for the new decade is set. It will be a European policy firmly based on NATO. It will not however be inward-looking. We shall still have certain obligations elsewhere including the protection of … "
Of what? What, elsewhere, have we an obligation to protect? There are various answers; but surely the first of them is our own overseas trade, the shipping routes that span the world and whose severance, since we live in the sea, means death. But there is no hint of that in the White Paper, no inkling in that passage that I began to read and which ends like this:
"… certain obligations elsewhere, including the protection of Hong Kong and other dependencies, and we shall retain the capability to operate outside the NATO area with

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allies or in support of the United Nations should the need arise."
Whatever that may mean.
So, my Lords, it comes to this: that "Britain enters the Seventies with an overall military capability which no other West European power can surpass" is true; but it is not precisely what we want to know. What we want to know is whether or not we have the right kind of military capacity to meet our needs. I believe that we have not and that where we lack it above all is at sea. That is where the confidence trick is worked by which the Government have made economies at a risk infinitely greater than any economies could justify. They have done it simply by saying nothing about it; and it seems that almost, not quite but almost, nobody in either House has noticed it.
My Lords, to look out from the United Kingdom you must look out to sea; and I find the view a sombre one indeed. For that reason, I propose to turn my back upon the land and upon the Army for which I was trained and in which I served, and invite your Lordships to look with me for a few minutes upon the Navy,
"whereon "—
in the words of the Elizabethan Articles of War—
"under the good Providence of God, the wealth, safety and strength of the Kingdom chiefly depend".
Just occasionally in these debates one hears a remark about "maritime strategy "; sometimes how, being a maritime nation, we ought to have a maritime strategy or that our strategy is not maritime enough. Very often that remark is a result of muddled thinking. The reason why I say that is this. If you are surrounded by water, your strategy is maritime anyway, whether you like it or not. If you choose you may decide to keep a standing army and have no Fleet, but your strategy does not thereby cease to be maritime; it merely becomes silly and you will probably starve. What you have done is to abolish its most vital component, the naval strategy. And that is precisely what this Government have done. As the Government of a maritime nation, depending for its safety on a maritime strategy, they have abandoned naval strategy altogether.
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As has been pointed out in this debate already, Soviet Russia is steadily expanding her influence, particularly in that quarter of the globe where it is most likely to affect us most; namely, the near East (which for some reason is now called the Middle East), the traditional strategic centre of the world, in fact, where the oil is, where the Russian sea route from the Black Sea comes down to if it does not yet actually pass through, the Suez Canal into the Red Sea and the Indian Ocean beyond. Under the guise of providing aid in the war against Israel, Russia is slowly establishing an ascendancy over Egypt that in the end may bring her mastery over the whole area—and its oil, as the noble Earl, Lord Dundee, pointed out at the beginning of the debate—and is doing all this without giving the American Sixth Fleet an excuse to intervene.
Given this fact, plus the fact that the Russians have a Fleet more powerful than ever the Germans had, it is plain that the strategic pattern of the whole world is changing. It is true that the U.S. Navy is more powerful still; but have we any agreement that in any emergency they would accept responsibility for safeguarding our sea communications? I think not. Some noble Lords may recall that my predecessor in your Lordships' House was an Admiral of the Fleet. In March, 1937, he said:
"It is for the safety of the Mercantile Marine in war that we go to the expense of maintaining a strong Navy."—[OFFICIAL REPORT, 8/3/37; col. 572.]
That thought was not original nor was it dependent on the need to safeguard the communications of the Empire that we then possessed.
May I ask your Lordships to listen to the words of George Savile, Marquess of Halifax, as long ago as 1694:
"The importance of our being strong at sea was ever very great, so in our present circumstances it is known to be much greater; because as formerly our force of shipping contributed greatly to our trade and safety, so now it is become indispensably necessary to our very being. To the question, 'What shall we do to be saved in this world?' There is no other answer than this. 'Look to your Moate.' The first article of an Englishman's creed must be that he believeth in the sea. Without that there needeth no General Council to pronounce him incapable of salvation here."
What Halifax said had been true for centuries; it has always been true; it is true now, I am certain.

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Lord Fisher maintained that "five strategic keys lock up the world ". They were Singapore, Alexandria, Gibraltar, Dover and the Cape of Good Hope;. I doubt whether, sixty-five years later, he would change that list at all; and I am quite certain that he would still include that golden key, the Cape of Good Hope. Round that Cape come three-fifths of the oil supplies for the Free World. It is the gateway into the Indian Ocean and the lands that lie beyond the Eastern and Southern Hemisphere. I am convinced that in war the keeping open of that gateway would be vital to our survival—even more vital than it was between 1939 and 1945. Keeping it open means having free access to the ports of South Africa. This is provided for us, not entirely but partly, by the terms of the so-called Simonstown Agreement, about which we have heard a great deal in the last twenty-four or forty-eight hours.
My Lords, I make no point whatever about the question whether or not we should be sending ships to South Africa at this moment, because that plays no part in the Agreement. As I understand it, we have no such obligation. The Agreement is in fact a group of agreements, arrived at by an exchange of letters between the two Governments, the chief object of which is to organise and co-ordinate between the two countries a means by which the sea routes round the Cape shall be safeguarded in time of war; to provide for a naval Commander-in-Chief for the Royal Navy in South Africa and various joint collaborative provisions. That particular Agreement is called the Agreement on Defence of the Sea Routes Round South Africa (Cmnd 9520). In the last paragraph, No. 17, it says:
"This Agreement will remain in force until such time as the two Governments decide otherwise by mutual agreement"
I should like to address a question to the noble Lord, Lord Shackleton, for him to answer, if he will, when he winds up the debate. It is: Has this Agreement in fact remained in force; is it in force now, or has it been modified or changed in any way, with or without the mutual agreement of the two Governments? It may or may not be worth mentioning that this has nothing whatever to do with the question whether or not we are hon
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ouring any agreement about ships to South Africa.
My Lords, apart from that, the brutal truth is that we, a maritime nation, depending for our very lifeblood on the sea, have no naval strategy that I can detect; only a collection of half-defined, ad hoc "commitments"—a fashionable word. So, not surprisingly perhaps, we have very few ships. I will not go into the matter of Fleet submarines which has been covered fairly thoroughly, but I would mention that we have some patrol submarines. According to the White Paper we have a force of 27 which will be in operation, or in service, during this year—27, my Lords! Four years ago the number in service was 36; so that in four years there has been a reduction of nine. The Russians have 400 submarines or thereabouts, many of them nuclear.
The question of aircraft carriers has been thoroughly covered, particularly by my noble friend and namesake Lord Glasgow, and I do not propose to refer to it any more. But of the so-called "major warships" I understand (this matter was referred to by my noble friend Lord Napier and Ettrick) that only about 70 are likely to be in action at any time. How does that come about? My noble friend Lord Dundee has referred to the speech by the Prime Minister at Plymouth in 1964, in which he said:
"The Royal Navy is not adequate for our needs in the 1960s. I believe that we shall need an expanded naval shipbuilding programme."
My noble friend referred to the fact that at that time there were 180 first-line ships, with 170 in reserve. He wondered what the figures are now. I can tell my noble friend what the figures are now. The answer—the almost incredible answer—is this. For the 181 first-line ships that we had in 1964, we now have 143—a reduction of 38 ships, or 21 per cent. In 1964, of ships in reserve, undergoing long refits and so on, there were 107. To-day there are 38, a reduction of more than 48 per cent. The total strength of the Fleet now, counting ships of all categories, operational and otherwise, is a fraction over one-half of that figure which the Prime Minister said was inadequate four years ago.
My Lords, the Royal Navy, which I believe is still, as it always has been, the most efficient fighting force in the world, has been reduced in numbers

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and in striking power to a point at which I do not believe it can carry out the task laid on it by this White Paper. And the White Paper does not even mention the greatest task of all, the protection of the ships of the Merchant Navy. This staggering dereliction on the part of the Government seems, as I suggested earlier, to have passed almost unremarked—with certain notable exceptions, such as my noble friends Lord Glasgow and Lord Ashbourne, and the noble Lord, Lord Bourne.
We all know what has happened to the Army, how it has been whittled away until behind the field formations there stands only the mobilisation reserve. Even the framework, the reinforcement and expansion, has been dismantled. That sort of thing has happened before. Often in its long history the Army has been reduced far below the danger level, as now. But previously when this was done it was done behind the sure shield of the Navy. Now, for the first time in this island nation's history, the Navy, too, has been run down. The sure shield is no longer there. That is what the Government have done, and I doubt whether there could be a more damning indictment of any Government.
My Lords, do not tell me that it does not matter; that in some mysterious way all will yet be well. It is a crime greater than many for which men have been impeached. Do not tell me, in the words of the White Paper that:
"virtually all our Navy is earmarked for assignment to NATO …"
and at the same time ask me to believe that our world-wide lifelines can be saved. I would rather listen to more weighty words. On October 21, 1918, the Commander-in-Chief, Grand Fleet, submitted to the War Cabinet his views upon the Naval terms of an Armistice—and I quote from those views:
"We have built up a great military organism, but the British nation still exists on sea power. Although a platitude, it is one which will bear constant repetition, that even though we gain many victories on land, one defeat at sea and the Allied cause is lost."
My Lords, that remains as true to-day as it was when Beatty wrote it and called it a platitude.
Is there nobody, on either Front Bench, in either House of Parliament, who will stand up and say as much? Is there
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nobody on this side who will rise above silly squabbles about whether one Party's defence policy is better or worse than the other's because it looks like costing less or more? We are talking now of the life and possible death of a nation—something rather more important than a financial scheme for rescuing an incompetent Government from an economic mess. Some Member of the Government may come to me and say, "What you have said implies the spending of great sums of money. How do you propose to find the money?" My reply would be: "It is not my busines to tell you how to find the money. It is your business, above all else, to ensure the safety of the people who have committed that high trust to you. When you have done that, then you will be free to consider how to extract from the long-suffering people the money to pay for Socialism's private dreams."
7.19 p.m.
VISCOUNT MONCKTON OF BRENCHLEY: My Lords, I am sorry that the noble Lord, Lord Moyle, is not in the Chamber. He made an attack on my late father, although I know that he meant it in the kindest way. One other interesting suggestion was that we turned barracks into hotels and marines into hotel managers. It is a little late to think about that, when we cannot even get dinner here to-night for those of us who are going to be late.
To-day, my Lords, I have listened with interest to some extraordinary speeches, some so old-fashioned as to be almost impossible to deliver in the 1970s. The idea that one Service can still do anything by itself is to me quite unbelievable; the idea that a maritime or blue-water policy ever did anything by itself is equally unbelievable. You have only to read Correlli Barnett on the Army to knock that over straight away. It has never been one Service but always a combined strategy that will save this country; and it is even more so now, with the third Service with us. Those who have recently served would, I think, be staggered and ashamed to have listened to some of the speeches to-day. We no longer think of ourselves as blue, pale blue or khaki. We look upon ourselves as part of one Service to the nation, and the proportion has to be judged in the balance. I wish that that book by Correlli Barnett were compulsory reading; it is well worth looking at.

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I should like to go straight from there to the Far East—only briefly, because so much has already been said about it—and to put a different view from some of the amateur military historians in another place, notably Mr. Enoch Powell, on what the Americans are doing in Cambodia. I, for one, believe that it is an expert, right military operation. They have decided to withdraw from Vietnam, and before you withdraw you secure your flanks. That is exactly what the Americans are doing in Cambodia, and with great success. They have uncovered an enormous number of arms and ammunition dumps; they have encouraged the South Vietnamese forces to do a lot by themselves, and to push on; and they are going to secure their flanks before they can properly withdraw at the time when they say they will withdraw. No criticism has ever been levelled on the North Vietnamese for coming down to occupy so much of Cambodia; there is only criticism of the Americans for going in and out to save their own forces later.
I will not go at all to Germany other than to say how much I enjoyed Lord Winterbottom's view on the use and functions of tactical nuclear weapons in a war in Europe. The argument has been going on between Mr. Healey and the noble Lord, Lord Wigg—and it is a pity that the noble Lord is not here to-day. The solution is, I should have thought, somewhere slightly between the two, in that the forces there cannot hold on for quite as long as Mr. Healey would like us to think, but not for quite so short a time as the noble Lord, Lord Wigg, would like us to think. What really will matter is whether we can maintain the mobility of the Allied Forces there, and obviously, in particular, the British part of the Allied Forces there. That means sea supplies, air support and land mobility—all three, not just the one. It means that the brigades which the Government have rightly reorganised out there into the new shape are all armoured brigades, and the men commanding them should be basically armoured soldiers who are forward thinking, quick reacting and used to what is going to be necessary in mobile warfare.
Let me make another quick switch, to Malta. This is where I feel more uncomfortable even than I have on the other spheres of this debate. I was not
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here for the debate on the financial implications and difficulties that have occurred there, but I read it with interest. I must admit that I could see a little bit of right and a little bit of wrong on both sides. But it appeared to be more mistaken on the Government's side than on poor Mr. Borg Olivier's side. It seemed to me that he was in a most difficult and awkward position. His country is important to us all—indeed, it is important to the Free World. The island is not, I suppose, more than an anchored aircraft carrier; but it is a large one. Its people are brave, and we do not want anyone else to have it or to have influence there. By the way, I heard it mentioned by some noble Lord that a Russian warship has been in the Grand Harbour. I can assure the noble Lord that no Russian warship has ever been in the Grand Harbour since the days of Grand Master Hoskiss; nor will there be.
Why should we keep our Agreement going? What will happen if we break it and the Maltese tell us to get out, and we do not make the Financial Agreement? In that event it is quite possible that we shall see Russian warships in the Grand Harbour. It is easy to keep a force in Malta and to retain it: air, sea and land forces there—easy and happy for them; a wonderful running up area for the sea, because you get good weather; the same for the air; and a wonderful resting place for the Army. It is a place that we should keep,, in duty to NATO. We should want to know what advice has been given by our own Ministry of Defence on what is our interest in Malta.
One other thing I should like to mention about that country is that the 1st Regiment, Royal Malta Artillery, is due to leave the British Service altogether in September or October of this year. The regiment has already left the Service in the British Army of the Rhine. It was founded in various shapes until it became the 1st Royal Malta Artillery shortly after the British were asked to come to Malta, when the French were still there. Its members served with distinction through war and in peace: more recently, as a gunner regiment, well trained and technically proficient in its own role. Then, suddenly, it was asked by us to become a transport regiment in

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Germany, to support the British Army of the Rhine. This it did with enormous success, throwing itself wholeheartedly into this new and totally different role.
The men were good at work, smart on parade; they were excellent motorcyclists, excellent swimmers, and runners up in the football final in the year while I was still there. I was doing an inspection of them and had had lunch with them on the very day they heard that they were to come out of the British Army after all that service. I have felt small before, and almost ashamed to be British; I felt it very much then. But they were so dignified, proud and quiet that it made one almost more ashamed, both in the sergeants' mess and, indeed, in the officers' mess. I think that we should pay them a tribute, because we owe them a real debt of gratitude for having served us so well in the British Army of the Rhine, especially those of us who served there. One could hope very much that we would go on serving together.
LORD BOURNE: My Lords, perhaps the noble Lord will give way for a moment. While he is making his remarks about the 1st Regiment, I think we ought to recollect that with their 26 pounders they shot the Italians out of the water just before the German and Italian invasion. I forget the actual date, but they were extremely efficient.
VISCOUNT MONCKTON OF BRENCHLEY: I thank the noble Lord; that just adds to what I have said.
Everybody has mentioned the new pay system. I welcome it wholeheartedly. It will be a great success. It has at last achieved the right view on the single man in the Services—and that is really what the Services want: the more wives we carry about the more difficult it is. This, I think, will give a lead. There are minor anomalies which can easily be sorted out and which I am sure will be. It will, I feel certain, increase recruiting. But it is not the only thing that will increase recruiting. Confidence also will do this. And confidence has been difficult to create, not only here, but everywhere else. The confidence which is now lacking in the United States will make their affairs more difficult; their crash in Wall Street, and our crash
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to come, is from a lack of confidence; and it is that which will also affect recruiting very much. I am going to say nothing more about Reserves other than to ask whether plans really exist to call up all the Reserves: that is, the TAVR II and the cadres. If so, how? And if it is not breaking security, where?
I should like to end on a quotation from Mr. Douglas-Home, the Defence Correspondent of The Times. He was dealing with the turnover in the Services now; that is to say, how many people are leaving the Services each year after their engagement is completed and going into civil life, and what good or harm it may do. He said:
"The Services must realise during the 1970s that they provide a remarkable facility through their training programmes, management expertise and technical efficiency".
They are providing these three things for men when they leave the Services, and we must make use of them and make it worth while for these men when they come in to serve. I have used the word "serve" because Mr. Douglas-Home goes on about the study recently done in the Ministry of Defence on the basic reason why young officers have joined any of the three Services. It was found unexpectedly that the highest proportion of them joined to serve their country: not for money; not to see the world; not to gain a trade; it was quite simply to serve their country. That wants saying. It is nothing to be ashamed of, and I think it is a suitable note on which to end.
7.30 p.m.
LORD AMPTHILL: My Lords, I have taken part in these Defence debates for a considerable number of years, in the time of both this Government and the last Government, and I have always pursued the advocacy of equipping our naval forces to take their part in maritime strategy. My noble friend Lord Monckton referred to the naval element that is necessary to pursue a proper maritime strategy. Normally, this the line I should have pursued tonight, but my noble friends, both naval and military, have covered the point so well that I can confine my remarks to a few things in the Defence White Paper with which I am not quite happy.
Last Sunday, at what were the Liverpool headquarters of the old Western Approaches Command during the war,

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there were ceremonies to celebrate the 25th anniversary of our victory in the Battle of the Atlantic when for the second time in this century we defeated a nearly successful attempt to cut off our sea supplies. Although we finally triumphed in both World Wars, it was a near run thing, and only at the cost of thousands of lives in the Royal Navy and the Merchant Navy, and great hardships for the civilian population and enormous losses of shipping. One wondered, as they celebrated at Liverpool last Sunday, what they thought of our position to-day, 25 years later, with nearly 400 Russian submarines poised to threaten our trade routes.
Still more do I wonder what impact the White Paper, Cmnd. 4290, of which we are asked to take note to-day, would have made on the distinguished and gallant men who took part in the actions and who made those victories possible. What, for instance, would Percy Noble, Max Horton, Peter Gretton or my old friend and contemporary "U-Boat" Walker think? The White Paper opens with the proud boast that Britain enters the 'seventies with an overall military capability which no other Western European Power can surpass; that her Armed Forces are the most highly-trained in the North Atlantic Alliance, and that they have already in service, or in immediate prospect, a range of equipment second to none. Even if this be true, or partly true, it is beside the point—we are not competing in a league game for the European Defence cup. This Defence Paper is supposed to show what progress the Government have made in producing defence forces properly equipped and in adequate numbers for the defence of this country in its world-wide interests.
I will not waste your Lordships' time by speculating on what those gallant men of past campaigns would say about this White Paper—though as many of them were known to many of us in both World Wars we can make a pretty shrewd guess. I think that they would agree with The Times defence correspondent who wrote on February 14:
"The picture presented is one of almost wanton neglect of any real provision for defence. If an emergency now overtook us, we should have little or no supplies of ammunition, of vehicles, of tanks, or guns, or medical supplies—or any other equipment."
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In fact, my Lords, this Defence White Paper is a false and thoroughly misleading prospectus, well padded with descriptions of reorganisation, streamlining, computerisation, all like the conjuror's patter designed to deceive the audience and to take their eyes off the real facts—which are that this Government have absolutely no appreciation of our real need for defence, particularly the need for maritime strategy on which alone our real safety depends, and is making no proper provision for this.
Despite all the reorganisation of what can in the main be fairly described as "admin. nuts and bolts", some of which I freely admit is of value, the real position, as can be read in the daily prints, is this: that refits of ships and submarines are falling behind; new building delayed or postponed indefinitely; recruiting deplorable; reserves in the main scrapped; home defence dismantled; Mark 24 torpedo and Sea Slug II in serious trouble. We cannot even supply B.A.O.R. with proper winter clothing. But, of course, we can boast that we are now the only Western European power without reserves.
Further, the White Paper boasts also about what is described as the "historic decision" to withdraw our forces from East of Suez and concentrate them in Europe. "Historic" is hardly the word I would use to describe this act of folly about which we have had comments from my noble friends behind me—folly by a nation with world-wide interests, and depending for its safety on a maritime strategy to protect its world-wide interests. Moreover, if it is necessary, for one reason or another, to redeploy one's forces, why boast about it and give all the information away to potential enemies and, furthermore, discourage one's friends and allies? For instance, I do not suppose that that remarkable man, the Prime Minister of Singapore, would subscribe to the word "historic" as a description of this foolish decision.
The decision to concentrate all our forces in Europe brings us right up against the credibility of our deterrent. If it is not really credible, and seen to be really credible, B.A.O.R. and the other NATO forces in Europe will have "had it", whether it be in the centre of Europe or on the Southern or Northern flanks. This deterrent, as everyone knows,

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depends on our four Polaris armed submarines, of which three are in service and one is over in America on her firing trials. In my view, five is the minimum we require for real safety. But an immediate point I wish to raise is that these wonderful ships will obviously be worked very hard in terms of continuous sea time. Apart from regular test and relief, they will need refit. In fact, "Resolution" is due to refit this July, and "Repulse" in April, 1971. But, due to the delays that have befallen "Dreadnought" in her refit, it seems possible that the refits of "Resolution" and "Repulse" may be delayed or, worse still—and this would be quite unacceptable—may have to be undertaken together.
My Lords, the other matter in this White Paper which causes me (and, as your Lordships will have gathered from the debate, not only me but the majority here to-night) grave concern is the decision to cease fixed-wing flying training in the Navy, coupled with the decision to withdraw the aircraft carriers from service within the comparatively near future. The White Paper does not tell us how the Fleet is to get air cover: with what sort of aircraft; whether it is to be from land bases, or where those land bases will be. Your Lordships will know that it needs at least a squadron of aircraft to keep just two aircraft over a fleet of ships in nearby waters. Helicopters, valuable though they are in many situations, are not suitable as replacements for real strike aircraft, or aircraft of the future.
There is all too little time, five or six years—perhaps seven at the most—to retrieve this situation and produce both suitable aircraft and ships to carry them, all of which is easily within our financial and technical capabilities if we set ourselves to it and accord the right priorities. This White Paper fails to give any indication that resolute thinking and planning on these matters is in hand. We shall deserve all the disasters that will undoubtedly befall us if we take the attitude that it cannot be done and that in any case we cannot afford it.
The Navy Records Society have recently published a history of the Royal Naval Air Service which is based on State papers now released to the public gaze under the 30-year rule. This volume
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was edited by that eminent naval historian Captain Stephen Roskill, R.N., well known for his objectivity and fair-mindedness. In his introduction he writes:
"The annals of the R.N.A.S. (or Fleet Air Arm) are in large measure a story of continuous controversy, and at the time of writing (1969) this state of affairs seems likely to continue."
That is unfortunately true, but it need not have been so if the Government had had the sense to accept the Johns Templar Report.
I imagine that there are security reasons, and even more political reasons, why that Report could not be published. If it were published it would show up the Government's policy, in particular as regards the Fleet Air Arm, as the dangerous, if not criminal, folly than it really is. However little satisfaction it may be to some of us to-night, the Report will be published in less than 30 years' time. I shall not be alive to read it, and many of your Lordships here to-night will not be here to read it, but I should like to place on record in Hansard, May 13, 1970, my firm belief that that Report will depict with frightful clarity the ineptitude and lack of foresight displayed by this Government in planning our defence for the 'seventies—in particular, for maritime air. This gives me no personal satisfaction, because I fear that when the crunch comes we shall expect our young men to "Fly Navy", lacking all that they need except courage, just as we did in 1939.
7.44 p.m.
LORD BURNHAM: My Lords, if there is one certainty, it is that we cannot defend ourselves against all threats. We must, therefore, look to the most likely threat. I get the impression from the White Paper that it has been written without very much assessment of the capabilities or the likely intentions of our enemies. It seems to be common ground that the NATO Forces in Europe cannot defend Europe without the use of nuclear weapons. If nuclear weapons are used, it will be for us to use them first. I put it to you that if the Russians are convinced that we will use them there will be no war. It is a virtual certainty that there will be no war in Europe so long as the Russians remain convinced that we will fire the nuclear weapon.

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There is a moral from this: that money spent on marginal reinforcement and re-equipment in Germany is wasted, in that it will have no effect on the overall military position, which depends entirely upon the nuclear weapon. However, comparable expenditure on forces to be used outside Europe could have a quite disproportionate effect on our capabilities overseas. I am not suggesting that we should withdraw forces, or deliberately weaken them in Europe, but I am asking the Government to look carefully at the possibility of improving our outside capability, rather than relatively throwing away money on machinery, although desirable machinery, by sending it to Europe, where it is not going to change the position.
The Russians are well aware of the situation, and I believe that they have no intention at present of waging war on any global basis; and they are not likely to change their minds about this until there has been a complete breakdown of NATO. But until such time comes as they cease to want to export Communism and expand their own national influence there will be continual pressure in distant parts of the world, at the same time as attempts to decompose (I suppose that is the word) democratic capitalist society. The latter is not a subject for this debate, nor is the means to counter it, but the former is, and I believe it gives rise to a far more likely requirement than any in Europe.
The second point I wish to make is connected with it, and is a subject which is not generally raised in polite society. Depending on which side of this House you sit, you believe that our forces are either inadequate or barely adequate for what they might have to do. In these circumstances the vital need is for accurate and timely intelligence of future trouble. I know that there are many persons to whom "intelligence" is a dirty word, particularly as we are a people who have no aggressive intentions and who believe that information about other countries ought not to be our business. I do not hold with that. The search for truth is an essential and honourable preoccupation. Governments get information by many means, and I have no intention of going into them now. But information requires to be processed and evaluated into the form
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of accurate statements of situations as they are and reliable prophecies of situations which are going to arise. Much of this is the business of the Ministry of Defence.
At the present time I am delighted in many ways to see that there is pressure to reduce the size of the Ministry of Defence. But when such pressure exists, the branches which are not obviously cost-effective tend to be the ones that suffer, and if nothing happens the intelligence branches are ripe for the "cut". I should like to ask the Government if they agree that at the moment, when our forces are at best only barely adequate, we should pay more, and not less, attention to getting the information which the Government need to formulate policy and, if the policy fails, on which our troops will need to act.
7.48 p.m.
LORD ST. OSWALD: My Lords, we hold our debate to-day sadly mindful of an echo from the last World War. General Wladyslaw Anders died yesterday in London. He was one of the great warrior commanders of Europe, and of the Free World. He was a man idolised by those he led in battle, and by the thousands that he led out of a first Soviet captivity in 1941. The valour and prowess of this man and his troops helped to preserve our freedom, while that of his own land was tragically lost. He remained to lead his people, patiently and uncomplainingly, in their exile among us. Some of us came to know him well in this unhappy but always dignified role. He is to be buried, most fittingly, at Monte Cassino, where he commanded the Poles in their heroic and historic assault, and where he deserves to lie, among his fallen comrades, wrapped in his fame on the site of a noble victory. There will be a ceremony in London next week, and I hope that Her Majesty's Government, and the Ministry of Defence in particular, will wish to be represented in a distinguished manner. I am sure that would be the wish of the noble Lord, Lord Shackleton. By a strange and even splendid accident of history, to-day is the anniversary of the first fierce day of fighting for Monte Cassino; the battle opened 26 years ago last night, the same date as the General's death.

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Such an event, with its reminder of sacrifice, should make us more than ever determined to prevent the need of similar sacrifice repeating itself. It is not enough to be determined in words. Prevention of future tragedy can only be achieved by resolute action and resolute decisions. If action demands some limited sacrifice to redeem us from overwhelming sacrifice, so long as we are wise and far-seeing we accept that cost; we foot the lesser bill. The price may be in terms of withholding some expenditure from our physical comforts or from the valued aspiring plans for the social improvement of a nation, as nearly every nation does to a greater or lesser degree. All such plans and all such personal comforts are protected by peace and demolished by war. The price, alternatively, or perhaps additionally, may be in terms of giving up some element of a nation's sovereignty to strengthen its alliances. To forfeit a little freedom in preserving freedom itself is a counsel of wisdom, for freedom is the first victim and all too often the permanent victim of war.
Defence to-day, for our and kindred peoples, is a matter not of waging war but of trying to avert war. The noble Lord, Lord Winterbottom, said exactly this in opening the debate to-day, and I am happy that our thoughts and beliefs should chime together. It is also a protection from enslavement, the sort of enslavement that other countries have suffered and are suffering now. Therefore, when we argue, sometimes vehemently, it is an argument between friends pursuing the same objective. If on occasion we taunt each other, it is not to wound but to alert the other to matters which we conceive to be neglected, to our common peril. We are nearing the end of a fairly long debate, but not unwarrantably long in view of the subject. Anxieties have been expressed as to the state and management of our defences. I share some of those anxieties and I must express them, as noble Lords would expect. Some anxieties I shall seek to allay.
A little more than a year ago we discussed in this annual debate the philosophy of flexible response which the North Atlantic Alliance had formally adopted in December, 1967. If that philosophy is no more than a bluff, it will be seen as a bluff and must lose
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all effect. The credibility of flexible or graduated response depends on its very flexibility; if it is not flexible, it is not credible. That I believed to be the disturbing case a year ago. I believe it is even more seriously so to-day. There is more cause for concern—concern based on facts which have not been concealed by the Government. Last year I quoted the Secretary of State for Defence in his frank statement of the facts, and I shall do so again. My quarrel is not that he, the Secretary of State, paints too rosy a picture of the military scene; it is that he fails to respond to the dangers he himself so starkly describes. I hope that the Government to-day, in the person of the noble Lord, Lord Shackleton, will be able to give some comfort, so long as the urge to comfort is not confused with complacency.
Three weeks ago my noble friend Lord Jellicoe and I spent some days in Brussels looking at certain aspects of Western defence. Our visits to the headquarters of NATO and SHAPE were arranged through the kindness of the noble Lord, Lord Winterbottom, for which we were both very grateful. My noble friend, as your Lordships have heard, would have opened this debate but he has reluctantly admitted himself to be ill. Made of such indestructible material, he is one who suffers the illusion that he never can be ill until the conviction is forced upon him, but he will return reinforced in vigour and stamina very shortly.
I think our impressions matched from what we saw and heard in Brussels, and those impressions matched very closely with those of our colleagues, such as my noble friend Lord Napier and Ettrick, who had visited B.A.O.R. in Germany a week or two before. The besetting fact is that NATO's conventional forces are alarmingly thin on the ground and in the air compared with those of the Warsaw Pact countries facing them. Last year the figures I quoted were from Mr. Healey's speech in Munich the previous February. This year he repeated many of them in the House of Commons, and we have had, among other evidence, a convincingly and disturbingly factual account in the Press from General Sir John Hackett. I do not intend to repeat the crude and telling statistics to-day; they have been referred to in the course of the debate. The Government have not

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taken refuge in any factual pretence as to the imbalance across the Iron Curtain. But the White Paper we are debating today is in all conscience a pretty flimsy protection against the pointed facts of military realism.
It was some years ago that the present Government began using the Defence White Paper as a Party political document and the element of fanfaronade contained in it in this Election year was something we had to expect. We enter the 'seventies, says the White Paper, with
"an overall military capability which no other Western European power can surpass".
Our forces have
"in service or in immediate prospect a range of equipment which is second to none."
We have
"increased our contribution to the defence of Europe, vital to our survival"—
a contribution which
"will reinforce the growing political and economic unity of Western Europe. … Britain's role has been transformed over the last five years by the historic decision to withdraw our land forces from their bases East of Suez and to concentrate them in Europe. … Our Army Reserves have been re-organised to provide a more effective reinforcement for the regular units committed to NATO. Substantial increases in Britain's contribution to NATO, following the invasion of Czechoslovakia, were announced in last year's Statement on Defence Estimates. … We are embarking on a programme of active and passive defence measures at our airfields in Germany to protect aircraft on the ground."
Those are some of the claims which I consider open to question, either as to substance or as to extent, and which I shall question in no spirit of rancour, but in a spirit of pure inquiry.
One claim I do not question, and which I found accepted throughout NATO and SHAPE, was that our troops are the most highly trained in the North Atlantic Alliance. This reflects of course the great advantage of having Regular forces in distinction to conscript forces. I take one by one the other claims I have quoted from the White Paper. First, the overall military capability which no other Western European Power can surpass. I wonder whether this is true if we include France. If it were true, as I should like to believe, there are certain forms in which we in my Party believe that Britain is under-contributing—weaknesses which mean that our own highly
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trained forces lack the degree of support they deserve.
My right honourable friend Mr. Geoffrey Rippon has named four basic needs as we see them: more front-line aircraft, better anti-tank defences, stronger reserves of men and materials and better mobility on land and sea. In saying this I should in fairness pay tribute to the fact that since our debate last year the decision has been made reversing that declared at the time that three of the Harrier Squadrons then envisaged as being stationed in Britain, though assigned to NATO, will now gradually be moved to German airfields. This is an excellent and appreciated step. I should like to ask, will they in fact be formed and on German airfields by the end of 1971, as I think has been anticipated?
All this is very much to the good. However, there is a disturbing rider. A week or two ago I was able to see a demonstration of the Harrier at Hurley, and one cannot but be impressed by it. It is of course subsonic, and therefore more vulnerable in terms of target acquisition to the enemy. The P 1154 would, as we said at the time, have been a good British buy. The concept of the V.S.T.O.L. aircraft under battle conditions has always included servicing and supply by helicopters. Without such supply in their hidden landing places they are no better off, after one sortie, than a normal combat aircraft "tied to a runway", to take the phrase used by the noble Lord, Lord Winterbottom, earlier to-day.
The Chinooks, which were cancelled, were intended to perform this essential task. None of the helicopters now in process of design and construction between Britain and France is sufficiently powerful to play this part: none mentioned by the noble Lord, Lord Winterbottom, in the opening passage of his speech, so far as I know. I think I am right, but I should be very glad to be corrected. If I am right, is there any intention of placing the order for Chinooks again? Making due allowance for this fine aircraft, the Harrier, and regretting our lack of success in selling it more widely than we have been able to do, the total figure of British front-line aircraft does not measure up to the contribution which Britain has traditionally made to her

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alliances, and certainly would not measure up to the needs of the fighting troops on the ground once a land battle had been opened.
Most serious of all, when will the R.A.F. possess again the long-range strike and reconnaissance aircraft—the staple element of its fighting effectiveness? With the cancellation of the TSR 2, the F 111 and the A.F.V.G. we wait upon the M.R.C.A. like waiting for Godot. I know that the noble Lord the Leader of the House, when TSR 2 is mentioned, conceals the wincing of his soul by simulated boredom or derision, but nobody seriously doubts that had that cancellation—that political ritual murder—not been carried out as an early act by his Government, we should be selling TSR 2s to America and many other countries to-day as fast as we could construct them. I will not—even if he is not listening—twist the knife in his conscience by quoting his reverent blandiloquent assurances about the F 111, not all that many moons ago. But what of the M.R.C.A.? I fear that among the many things he told us, the noble Lord, Lord Winterbottom, told us very little about that today.
That is all I shall say, out of all that can be said, on the question of aircraft. I turn to other forms of this "range of equipment second to none", which is in service or in immediate prospect. If I were a serving soldier I am pretty certain that I would choose to be in a Chieftain tank rather than any other military vehicle. When I served in Korea with Centurions they, in their time, were the finest tanks in service. The claim that the Chieftain is the best main battle tank in the world is no idle claim. I think the sales resistance of allied countries is largely misconceived. The fact is that other European allies prefer the Leopard. The Chieftain is slower and heavier—a disadvantage with compensating benefits in terms of protection. I am told, however, that the engine is suspect and has been giving trouble. Could the Government give some reassurance on this? The 120 mm. gun is, in the view of all, superb. But I have heard criticism of its ranging device, which is by coaxial machine gun—a relatively primitive method these days.
The doubt I heard professionally expressed is that the trajectory of the bullet
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drops in relation to the trajectory of the shell, at its full a very considerable range, and thereby is inclined to mislead the gunner. A highly skilled gunner can overcome this by "bracketing", and the more skilled he is the less time this consumes. But as the Government will know, this has been regarded as a fault by prospective purchasers. I understand that a very up-to-date system of ranging through a Laser beam is being introduced, and we should like to learn something about how soon (if this is true) it is likely to be incorporated.
As regards anti-tank defences, we are told to-day by the noble Lord, Lord Winterbottom, that Swingfire is about to be supplied to our infantry units, mounted on A.P.C.s. I should like to hear something of the scale, both in quantity and time, how many and when.
Since I am dealing, within this broad subject, principally with matters affecting the defence of Europe I shall not enlarge on what we see as other deficiencies under which our forces at present have to labour. The naval aspects have already been dealt with, first by my noble friend Lord Dundee and then by my noble and nautical friends on the Benches behind me: in particular, the uncertainty of the future of the carrier force, together with the lack of any surface-to-surface missile comparable to advanced Russian weapons, and the disturbing delay in the development of the new torpedo. I hope that the noble Lord, Lord Shackle-ton, will feel bound to answer the penetrating and cogent questions put by my noble friends Lord Ashbourne and Lord Glasgow, in speeches which could be made only from wide and observant experience. It stands to reason that a warship is as good as its torpedoes, and to be armed with torpedoes from a previous world war must be discouraging to the finest fighting seamen. As has recently been said, we intend to make up for the present failure of the Government in the hunter-killer submarine programme.
There is another class of weapon deployed on the Continent of Europe in which we certainly do not surpass, or even compare with, some of our partners. It has a direct bearing on this basic question of credibility-cum-flexibility, upon which the accepted concept of European defence either must depend

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or cannot depend. I am speaking of the tactical nuclear weapon; and I should like to say first that I have more respect than has sometimes been shown in both main Parties for Mr. Denis Healey's attempts to distinguish between strategic and tactical nuclear weapons. I agree that the distinction is difficult: It is also important so long as we are dependent upon an identifiable difference—identifiable to the enemy as well as to ourselves.
I am sure that Mr. Healey is right in tying it to targets as well as yield—perhaps even more to targets than to yield. This makes sense. I sympathise with the impossibility of describing it with precision in a Parliamentary Question, or even in a passage in a Parliamentary debate. I accept that it can be spelt out more comprehensively in agreement between allies, which have to be kept secure. But the credibility rests upon the existence, nature and deployment of the weapons themselves. Britain's only weapon of this type is Honest John—the earliest and most primitive; the least impressive. It has an outer accurate range of 30 kilometers and therefore, to be of any use, has to be located at precisely the right point behind the front; and fronts would be very fluid indeed once an attack began. There would be no certainty of being able to move it laterally behind the line because the line might well not exist in some important sections.
There are two more effective and modern weapons—Serjeant and Pershing, both of which I believe the Germans possess. Their ranges are, respectively. 45 to 140 kilometers and 160 to 600 kilometers. These are weapons which convincingly implement the concept of flexible response and thereby its objective of precluding attack.
My Lords, I return to the White Paper and its assurance that,
"We have increased our contribution to the defence of Europe".
and its reference to the transformation of our role by that historic decision of the Treasury, allowing us to withdraw our manned forces from the Far East and to concentrate them in Europe. The curious discrepancy here is that studying the comparative figures in the two White Papers—the current one and that of
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1968, when the historic decision was made—I find under the numerical distribution table, which is at page 19 in the current document and at page 13 in the earlier one, that our forces in Europe numbered 63,700 two years ago and 60,200 when the present White Paper was published. According to my mathematics, Europe does not seem to be obtaining very much advantage from this concentration coming from the Far East. In fact, it lost a total of 3,500 British troops, which is a queer way of reinforcing or concentrating. There is a separate figure for the Mediterranean and the Near East, respectively 18,500 and 18,400, a neat reduction of 100, despite the credit which is taken for reinforcing the Mediterranean. I am certainly not opposed to reinforcing, but we would be helped by a little explanation as to what the reinforcing is for in the Mediterranean. Taking Mr. Healey's assurance seriously, as I am sure we must, that the whole Russian fleet in the Mediterranean could be blown out of the water in the first five minutes, presumably we could now do it in 4 minutes 50 seconds.
To return to the mainland of Central Europe, the basic manpower problem is disturbing, as my noble friend Lord Napier and Ettrick explained in some detail; and the European nations as a whole, I am sorry to say, make a poor showing compared to the Americans, who are taking on new responsibilities as fast as we are shedding them in other parts of the world. With the exception of one American Division which operates on a rotation system, the United States units are in almost every case manned up to 100 per cent., whereas my noble friend and I on our visit were told that it would be hard to find a European unit with more than 70 per cent. I am admittedly not clear as to whether that figure was meant to refer to war time or peace time establishment, but significantly it was related to American 100 per cent. manning, so that, unless American units maintain war-time establishments in Europe, it must mean that European units, including our own, may be 30 per cent. down on peace-time establishment. I hope that this is not so, but I have given notice of this question to the noble Lord who will wind up the debate. Whatever the figure, the fact that we are down on

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establishment and down in all units, or virtually all units, does not help the credibility of flexible response.
There is, of course, another distracting factor undermining the British effort. Three weeks ago when my noble friend and I were at SHAPE, one British battalion, The Royal Scots, had been removed to Northern Ireland, another was expected to go shortly, and it was foreseen that during the coming summer B.A.O.R. would be depleted by as much as four battalions for duties in Northern Ireland. Is there substance in this forecast? We also learned that whereas American formations were strong in supporting arms, artillery, engineers, signals and transport, European formations, including our own, were in almost all cases dangerously weak.
As to the reference to Reserves, I am truly surprised that the term used in the White Paper does not stick in the gullets of present Ministers. The truth is that we have no Reserves after the deliberately destructive measures of previous years. The whole TAVR is already committed; every man is detailed to make good the present shortages in B.A.O.R. if they have time to get there before the battle commences. The noble Lord, Lord Bourne, made this plain in his speech. Once casualties occur in a fully established unit, there will be nobody to take their place and therefore it is misleading to speak of Reserves. Reserves there will be in the true sense of the word when a Conservative Government are able to build up again TAVR and give an opportunity to the magnificent volunteer spirit which the present Government have disdained and frustrated.
I did not either follow or accept the challenge of the noble Lord the Leader of the House to my noble friend Lord Napier on reductions of Territorial forces. The wholesale reductions, dissolutions and amalgamations of Territorial units are well within our recollection. I am in fact the honorary Colonel of a Territorial unit in a very different situation from the noble Lord, Lord Clifford of Chudleigh. He said that he had in his Regiment eight men. Mine is in fact the largest manned-up unit in the British Army, either Territorial or Regular. It has, I believe, at this date over 1,000 men in it, but it is an amalgamation of
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four existing regiments, four regiments which to-day could be well manned-up themselves; so this is no advance and no benefit to the Army or to the nation.
I have a further detailed, though significant, query on the passage in the White Paper regarding airfield protection. I put, I recall, direct questions on this matter a year ago. Out of all the studied and careful questions I put, it was only one that the noble Lord, Lord Shackleton, deigned to answer, and he did so in a somewhat supercilious manner, foreign to his usual serious nature, and requiring a later Parliamentary Question which was answered by Lord Winterbottom. I was told then that this matter was being given "active consideration". That was a year ago. In this White Paper we see that, "We are embarking on a programme …". Could we be told the period of embarkation leave before some of these measures promised a year ago begin to take physical shape? Until then our aircraft remain in danger of suffering the same fate as befell the Egyptian Air Force in the first hours of the six-day war.
The Government have taken credit for the return of Six Brigade to the Continent of Europe in the coming autumn, and I certainly do not want to seem unwelcoming. The Brigade should never have been taken away in the first place, and I do not think the Government deserve to have that forgotten. It does something to compensate for the regrettable withdrawal of the Canadian Armoured Brigade, but it is not an addition as such to the strength of NATO land forces. The formation of the new German brigade is being accelerated, but even so we shall lack an armoured brigade that we had before, and that is a further weakening of an alliance which was already worryingly weak before that happened.
I do not think Mr. Healey would contradict the view of one of my right honourable friends that it is no good making great play of having changed the strategy from "trip wire" to "flexible response" if the end result in either case is an inability to put up a successful conventional defence for more than a day or two. I do not think he would demur at the description of a narrow margin between safety and suicide. He minted a very similar phrase himself. But what

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has he been doing to widen that dangerous gap? There are many, admirably many, cases where one can quote the Secretary of State as a robust realist. One can quote his words and one can quote his unflinching figures. It is his actions which fail to reflect or take account of that realistic assessment. He flourishes in oratory, but he fails in performance. Why, in face of the dangers he sees so clearly, are we running down our forces so drastically?
I have avoided speaking of the East of Suez policy because that would widen an already fairly expansive speech. Once, as we know, the British frontiers were at the Himalayas, and not very long ago. The Himalayas have not shifted, but no political tracking device, however sophisticated, can hope to keep up with Mr. Harold Wilson across the map of Westminster, let alone the world.
Restricting myself simply to the problems facing us in Europe, I cannot see how a man as ready to face facts and describe facts as Mr. Denis Healey can so casually, smilingly derogate his own duty conferred upon him by his high office. I agree with him in so many things. I agree that it is foolish and damaging to make the assumption, so prevalent now, that American withdrawals are inevitable. I believe that they are not, but that we could make them so by this unwise assumption. I am sure—and I do not believe that I shall differ much from the noble Lord, Lord Shackleton, in this—that what any President of the United States will look for, what all world-minded Americans, champions of NATO, for instance, are looking for and longing for, is a genuine determination on the part of the Europeans to take a more active and effective part in our own defence.
Mr. Denis Healey has himself said, among his many more robust observations:
"If there were a major invasion by the Red Army, Western Europe would either have to surrender without a fight or use nuclear weapons."—[OFFICIAL REPORT, Commons, 4/3/70, col. 429.]
He has also said:
"A clear demonstration of Europe's determination to take its defence seriously is its best argument against the critics of America's present contribution to the Alliance."—[Col. 432.]
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This echoes in fact the searching query of a politician from another European nation as to why, in American eyes, 250 million prosperous West Europeans should have to depend so heavily and critically on 200 million Americans for their defence. The noble Lord, Lord Winterbottom, also paraphrased this remark but found it fallacious, and he based the distinction on the United States' near monopoly of nuclear weapons. But I would say that an increase in purely conventional capability among the European nations would give great encouragement to our friends in the United States.
Mr. Healey poses a number of forthright questions. But how does he answer them? "Readjustment" is the "in" word now. It means Europeans taking, indeed seeking, a greater burden in the defence of Europe. Not unreasonable. But where is the concrete evidence of our intention, our determination? Does this White Paper help the Americans to regard us, the British element of Europe, as being more deserving, more determined, than we seemed before? Does it give a lead to our European allies? The noble Lord, Lord Winterbottom, in opening, condemned complacency—and plunged, it seemed to me, into complacency. He said that we must make a "nice judgment" of what troops are required; and he then thought that we "had it about: right". I am afraid that I think that is a most optimistic judgment. My noble friend Lord Monckton mentioned the book by Mr. Corelli Barnet Britain and Her Army. I agree with everything he said about it. Three of those chapter headings struck me as significant. They were "Stagnation in an Age of Change.", "Illusion and Neglect", and "The Cost of Unreadiness". It seems to me that as a description of their own epoch the present Government can take their pick from among those chapters.
It is sad that this White Paper should not do what we would like it to do. I do not believe that it can possibly give comfort or confidence to the noble Lord, Lord Shackleton, who will begin winding up this debate in a matter of seconds from now. He has my sympathy. Five and a half years ago, when we first began debating from our present relative locations, I called him, aptly enough, "A bird in a gilded cage". To-day, nearing

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the end of that period of incarceration, I see him, as sympathetically as ever, as a bird in a rusty cage. I shall be as happy as anyone when the door of that cage is opened and he can fly out again to flutter his wings in the open and refreshing air.
8.24 p.m.
LORD SHACKLETON: My Lords, I must admit that the noble Lord at times reduces me nearly to tears by the sympathy that he feels for me. In some ways, I wish I shared his optimism that I should be released from this "gilded cage". I suspect that it may well be re-gilded with a rather larger majority. But before I go into the more contentious part of my speech I should like, first of all to say that I too am very sorry that the noble Earl, Lord Jellicoe, is not here. He always contributes extremely well and ably to our debates, and I hope that he will get better soon. We certainly miss him.
I should also like to say straightaway to the noble Lord, Lord St. Oswald, who expressed the hope that the Ministry of Defence would take part in the ceremonies following the death of General Anders, that I echo the tribute to someone whose name meant a great deal to us during the War. He was part of the symbol that we had friends. One noble Lord at one point said that in 1940 we were alone, without allies. I am sure that he did not mean it in that way. We must always remember those from other countries who were with us, particularly the Poles and the Free French; and there were others. I am delighted to assure the noble Lord that there will be senior representation next week from the Ministry of Defence. We know that there was some muddle on the last occasion, but I think that the noble Lord knows that there was no disrespect intended to General Bor-Komorowski. My noble friend the Parliamentary Under-Secretary of State for Defence, R.A.F., who knew General Anders, may himself be able to go, but at any rate there will be representation. It is right, I think, that we should recognise the passing of this great man.
I am also grateful to noble Lords for the way in which they heeded the request to keep their speeches short. I am bound to say that when one is speaking from
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the Front Bench it is always difficult to be as successful as the Back Benchers. The noble Earl, Lord Dundee, always manages to be short, and I will do my best to speed up. It means, of course, that once again many questions will be unanswered. I sometimes wonder whether we ought to have a sort of "Any Answers?" debate afterwards, and whether there is not some way of doing it. We will certainly write to all noble Lords on particular points and supply answers. Of course, that is not the same thing as giving answers in the House, but I am afraid that I have about three hours' worth of answers here, and I think that with that threat noble Lords would gladly forgo some of them.
I would say to the noble Lord, Lord Bourne, that having listened to the debate I am even more inclined than I was before to think that there is some merit in the idea of a Defence Committee. At least some noble Lords who seem to me to be living remarkably in the past might be brought up to date. I have a habit during a debate of trying to estimate how long each person is going to speak. On the whole, the sums have come out pretty well; and those who get top marks, I am bound to say, are two noble Lords who have been most recently in the Army. The noble Viscount, Lord Monckton, and the noble Lord, Lord Burnham, made speeches of a totally different kind. I think that there is a case—I believe that the noble Lord, Lord Bourne, would probably acknowledge that he, too, might benefit—for a bit of up-to-date instruction. Among some noble Lords there has been almost an absolute determination, which I find it difficult to believe comes from other than a determined prejudice, not to look at the facts; and I will give some of the facts. I hope that, as a result, there will be a little better understanding and a bit more justice for the Government's defence policy.
I was particularly interested in the speech of the noble Lord, Lord Burnham—I thought at one moment that it was going to smack a bit of the 1957 Defence White Paper, which of course was the most monstrous paper of all. I agree with what he said, and I have always been well aware that whenever there are economies there is always a tendency to

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cut out certain activities which somehow appear to be less cost-effective. As someone who has served in Intelligence, I can only say that I listened with sympathy to the noble Lord's remarks on this question.
I should like to direct my remarks particularly to both the strategy and the strength of the Army. Before I do so, I would ask the noble Lord, Lord Clifford of Chudleigh, whether his remarks that the Royal Air Force might be divided between the Army and the Navy were meant as a serious suggestion, or whether he thought this was the ultimate result of this wicked Government's actions. I rather thought he meant it seriously.
LORD CLIFFORD OF CHUDLEIGH: My Lords, I mentioned the article by Wing Commander Allen which put forward this proposal.
LORD SHACKLETON: My Lords, I must say that I think it a great pity that there are not a few more Air Marshals and rather fewer Naval Admirals in this House. It is rather a defect that we are unbalanced in this matter. If people complain about what this Government and past Governments have done to the Navy, I am bound to say that suggestions of that kind with regard to the Royal Air Force are deeply resented, and I am sure noble Lords will understand that.
I should like to start by referring to Northern Ireland, because the noble Lord, Lord Rathcavan, asked me some questions the other day which I was not able to answer on the spur of the moment, and they do enable me to lead straight in to the strength of British Forces and our strategy. Despite the differences between us, we all recognise that policies followed by successive British Governments in Europe and the world have given us peace, in the accepted sense, for 25 years. I do not expect my noble friend Lord Soper to agree, but, much as I admire his eloquence and his sincerity, I am bound to say that, like most noble Lords, I find myself in total disagreement with him on this subject.
We have had to face a number of situations in the world, and some of them have been predictable and some have not. On Northern Ireland it may well be that we all showed a great lack of foresight
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and prescience; and I think we did. But we had to face this situation in Northern Ireland. I will not go through the chapter of events, which is well-known to many noble Lords, but I think it was the noble Lord, Lord Napier and Ettrick, who referred to living conditions in Northern Ireland. I am happy to give him the assurance that conditions are enormously improved. I know that my right honourable friend the Secretary of State for Defence was desperately anxious on this subject, and that great energy was shown, although conditions are not yet perfect. There is no doubt that our troops in Northern Ireland, doing a beastly job, have lived fully up to the standards expected of them.
It is clear that although the British Army has had to face abuse, danger, and being shot and sniped at in places like Aden, it is particularly unpleasant to face abuse in your own language, and they have shown a great degree of discipline. But this bears directly on the numbers available, and I want noble Lords to accept that, first of all, we must not, in Northern Ireland or anywhere else, ask one battalion to do the work of two. We must be able, from the resources at our disposal, to make available units in large enough numbers to meet the task we have given them. I would submit, in all seriousness, that we have been able to do so, and that the reorganisation of our defence policy has contributed to this. Despite the reduction in the overall size of our forces, there are now 26 battalions available in the United Kingdom—and this excludes the British Army of the Rhine units that are in the United Kingdom at the moment. It also—and I would deal with this point which I think was raised by the noble Lord, Lord Bourne—excludes the two battalions involved in Bersatu Padu.
Noble Lords have asked what size of force could be sent at the present time to an emergency overseas. This is a very wide question, and obviously I can give an answer only in general terms. It would depend on the requirement, on the urgency, on the part played by our allies—and I strongly emphasise this point about allies—in whatever area the situation had arisen, and its priority. It would be wrong to think of our capability in this respect as confined to 3 Division, to

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which the noble Lord referred, since although that Division is intended primarily to be a source of units for emergency operations overseas, it is not the only one. I ask noble Lords to recognise these facts.
I would underline, therefore, that the general availability of battalions in the United Kingdom at the present time is such—and I ask noble Lords to accept my assurance—that Her Majesty's Government will discharge all commitments into which they have entered, taking account of all the factors at the particular time. Clearly, and this has always been the case, if you have too many emergencies arising in too many parts of the world you get stretched. But I submit to noble Lords who have talked about "stretch" that the stretch to-day is lower, and there is less stretch, than there was before. The fact that the emergency in Northern Ireland has not caused us to revise the size of our contribution to the Bersatu Padu exercise is proof of our ability to exercise our general capability. Our economic situation required reductions in the size of the Army, and we know that there was a great argument as to which was the more important nationally to our security—and I acknowledge that the Liberals were ahead of us in this respect. I was very much an East of Suez man, but I believe that the improvement in our economy is equally, if not more, important to our influence for peace in the world.
Our review of our commitments has given us more men, not fewer. In most of 1964 there were only 22 battalions available in the United Kingdom; at one point it was down to 19⅓, and it would have been very difficult at that time—and I admit British forces were engaged in Malaysia—to cope with the situation in Northern Ireland. We are now better placed, and I ask noble Lords to accept this. This has not been at the expense of the British Army of the Rhine; the overall strength is now over 3,000 higher than it was in October, 1964. Noble Lords who come and complain that it has been run down are simply failing to recognise the facts. They may wish to criticise all Governments, but tributes have been paid to the equipment and quality of our forces. In fact, they are better manned than they were in 1964.
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I do not know what the precise shortfall of the establishment was, but I certainly remember that in the years before 1964 we were continually raising the extent to which units, particularly in Germany, were under establishment.
LORD BOURNE: My Lords, will the noble Lord forgive my intervening? I am a bit puzzled. I asked whether a brigade group from the Strategic Reserve could be sent overseas at a moment's notice, and the answer of the noble Lord, Lord Shackleton, was, Yes, it certainly could. On the other hand, I hear that the rotation of units to Northern Ireland, if matters do not get worse, includes Gunners and Armoured Corps units from Germany. I simply do not square the two transactions together.
LORD SHACKLETON: My Lords, I agree. This is where the noble Lord's Committee would be helpful to him. I do not want to spend too long on this question, but there are powerful reasons why there should be a great deal of rotation. The conditions are not very good. There are a large number of units who would normally be at home or in Germany with their families but who are separated, and it is really necessary to provide a good deal of rotation. Perhaps I could give more information to the noble Lord, but I assure him that the rotation is for reasons of management and not because of the size of the forces. I will check again, and if I think I have not given the noble Lord a fair answer I will certainly get in touch with him.
LORD BOURNE: My Lords, I am very satisfied with that answer.
LORD SHACKLETON: My Lords, I could go on at great length about the British Army of the Rhine, but I do not want to do so. There are two battalions at present in Northern Ireland on temporary detachment from the British Army of the Rhine, and although we shall try to keep such deployments to a minimum they are necessary for the reasons I gave. There is another aspect which gives us some cause for pride, and that is the way in which the Army and the people of the Province have responded to the challenge set by the creation of the Ulster Defence Regiment. The Regiment became operational on April 1, and on April 30

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the Ulster Special Constabulary was stood down. This force has been created from scratch in three and a half months. Noble Lords will remember the debates. I have no doubt that in the Northern Irish situation there is a need for a force to support the Regular Army in what might be called the traditional Territorial Army role of defending and protecting the Border and the State against armed attack and sabotage.
The encouraging fact—and noble Lords had doubts about this—is that recruitment has come from all sections of the community, unlike the old Ulster Special Constabulary. So far a total of over 6,000 have applied to join the Regiment, of whom 1,281 axe Roman Catholics, nearly 3,000 are ex-Ulster Special Constabulary, and 1,500 are ex-Servicemen. So far 3,800 have been accepted for enlistment, and of those 2,500 are now on the enlisted strength of the Regiment. That is very encouraging, and there are times when I feel that we need a bit of encouragement with regard to the situation in Northern Ireland. One hears of things which make one anxious, but there is a good side and a strong side; and of course the Regiment is now part of Her Majesty's military forces.
I should have liked to deal at length with some of the arguments, particularly those posed by the noble Lord, Lord Gladwyn. I would only say that I am not really convinced that an increase in NATO's conventional forces would raise the nuclear threshold—I suspect that the noble Lord, Lord Burnham, might agree with me—because a deterrent has to be credible. It is a very delicate area of judgment and I am disinclined to get into the theology of nuclear weapons. There is a great deal of theology, such as whether it is trip-wire, flexible response. Obviously, if you raise the nuclear threshold, then up to a point you postpone the threat of use. It is our policy to maintain substantial conventional forces, so as to ensure that there would be time for an aggressor to think very hard. But given the scale of Warsaw Pact conventional forces—and I acknowledge what noble Lords have said; We have lived with this issue now for many years—there is a limit to the amount of time we can buy in this way. That is why it must remain NATO policy to resort to the use of tactical nuclear weapons
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on a limited scale if we were faced with an attack which could not be contained without it. I acknowledge that to many noble Lords this sounds very horrible, but the whole object is to avoid fighting a war. That is the fundamental concept behind NATO's strategy.
In this connection, I would say to the noble Lord, Lord Gladwyn—and I think that the noble Lord, Lord St. Oswald, will share my view on this point—that I do not accept his assumption that inevitably there will be large-scale United States troop withdrawals from Europe and that the Europeans lack the will to fill the resultant gap. We could wish, perhaps, that they all had more will, but, none the less——
LORD GLADWYN: My Lords, I did not say that withdrawals are inevitable. But I thought we must consider that they were at least probable.
LORD SHACKLETON: My Lords, there again my noble friend Lord Winterbottom, in an extremely interesting speech, dealt with the rather simple argument of the difference between 300 million Europeans and 200 million Americans, and pointed to the advantages of a unified national force. But the U.S. Administration has assured us that there will be no question of troop withdrawals, at any rate before the middle of 1971, and President Nixon made it very clear in his statement to Congress, that involvement in Europe is a major element in United States global strategy.
I think we can see heartening signs of a growing recognition among the nations of Western Europe of the need for a redistribution of the burden, and that is very much to the credit of my right honourable friend the Secretary of State for Defence. I do not—although it is very tempting—talk about the many Defence Secretaries under Conservative Governments. But if there is a field where high intellectual and expert knowledge and strength of character are necessary, it is in that of the Defence Secretary, and I believe that the present Secretary of State has developed a great deal of the new strategy and has played a crucial part among European Defence Ministers.
I would say to the noble Lord, Lord Napier and Ettrick, that it is a misconception to think that NATO's current strategy involves the earlier use of nuclear

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weapons than the old trip-wire strategy did. The old trip-wire strategy envisaged a massive nuclear response to any encroachment on NATO territory, and we now rely on maintaining conventional forces of sufficient strength to identify and contain an attack. So there is no question of even the initial selective use of nuclear weapons until and unless conventional defence fails.
I was asked when the newly-formed German brigade would become operational. This is part of several moves, including the return of 6 Brigade. I cannot give precise dates, and I do not know whether it is secret, but I can assure the noble Lord that it will be in the fairly near future.
Let me turn briefly to the reserves. The noble Earl, Lord Dundee, expressed surprise that the TAVR strength of 47,000 was as high as it is, and I do not think some noble Lords really believe these figures. But is is nice to have a welcome on this subject coming across the Floor, and I assure the noble Earl that the figures are correct. The strength figure in Scotland was 5,974 in March, 1969, and in the same month this year it was 6,175. I think these figures are of interest. But, my Lords, I must stress to noble Lords who take a gloomy view on the question of reserves that we have in fact much more serviceable reserves to-day to meet what appear to be the most important and probable contingencies; and I think noble Lords have paid tribute to the better equipment and the greater readiness of TAVR II. I know there is still a great deal of feeling—and it is understandable—about the disappearance of TAVR III, the old Territorial Army, but I really do not know what noble Lords who talk about a reformed Territorial Army are asking for. We really must have regard to the amount of money we have available. It may be that the Conservatives, with their reduction of taxes, will find lots of money from somewhere and will be able to afford it; but we have to make a realistic choice, and I believe that the Government have taken the right decisions. What we have needed, and have got, is a reorganisation of the reserves. Further, of course, the TAVR II are not the only reserves. There are the Regular Army reserves; and, of course, it should
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be possible to double the strength of the British Army of the Rhine within a reasonable period. Also, certain units are ready and earmarked. I have some answers to the noble Viscount, Lord Monckton, on arrangements for reporting for duty, but I think, if he will forgive me, I will not give them now. But I should just like to take one point, and that is to echo his tribute to the Royal Malta Artillery. They have given us very long and valued service, and I think we really should recognise it.
My Lords, may I say to the noble Lord, Lord Napier, that I think again he was slightly misinformed when he said that only 50 per cent. of the pay increases justified by job evaluation have been given. I am not sure whether he did say that, but, if so, I would say to him that the rates proposed in the Third Report of the N.B.P.I., which the Government have accepted, are already very largely implemented. The sole exception is the very large, not to say almost enormous, increase to bring single men up to the married rates. I should be most surprised if the noble Lord can produce any example where a single Serviceman has not had either a substantial or at least some increase on his previous rate of pay. Special measures were taken by my right honourable friends for those few—I think there were some Army apprentices; no, I think they were Naval artificers, or it may have been R.A.F. apprentices—who got married at the earliest possible moment, at under 17½. Even they got looked after. I assure the noble Lord that the recommendation was that nobody should be worse off, and many are greatly better off.
My noble friend Lord Moyle, in a most interesting speech, said that he did not mind having to pay for his food; but, again, I would say to noble Lords who objected, that the sailor at sea does not have to pay for his board, and, on the whole, these proposals have been welcomed. Let me say that I think the concept of the new National Superannuation proposals, which have their influence throughout the public sector, where we are actively engaged in considering the position, should, I think, meet the ideals and the purposes of the noble Lord, Lord Moyle.
I am afraid that I am not going to be able to say anything very encouraging to

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those extremely depressed representatives of the Royal Navy. They rather reminded me of Up Pompeii!, in which somebody says, "Oh, well! Oh, well!" all the time. I remember, shortly after I came into this House, that it was the distinguished father of the noble Earl, Lord Cork and Orrery, who, almost before I was here, moved a Motion of censure against the Conservative Government in relation to the size of the Royal Navy. I mean no disrespect, but I got the slight impression that they wanted some more windjammers, or something of that kind. He was joined by my dear noble friend Lord Alexander of Hillsborough, who felt equally strongly and had always, one felt, the quarterdeck under him. I abstained on that occasion, and for many years I have felt—and I think some other noble Lords felt the same—that we needed a different strategy.
I entirely concede to the noble Lord, as to naval strategy, that the Navy has a vastly important role to play, but because some of us, including staff officers, take a different view of how that should operate, it does not mean that we are wrong or that we are insincere about it. I fully acknowledge the importance of the anti-submarine protection role. I remember once during the war being ordered to go to Western Approaches—I was only a Squadron Leader at the time—to beard Sir Max Horton and ask him not to send out signals in clear because people were sighting snorkel plumes (some noble Lords will remember these) and because we thought perhaps the Germans did not know that they were as visible. I remember that this was one of the few occasions when I showed extreme cowardice, and said that I was no match for Admiral Sir Max Horton—and those noble Lords who knew him would probably agree I was wise.
My Lords, the strategic situation really has changed in the world. I have not time to develop it; nor have I time to do other than pay a great tribute to the high efficiency of the carriers and the vital role they are going to play during the next year or two in covering our withdrawals. On the future, I cannot express an opinion, but I must say that numbers are important and that—noble Lords have indicated this as a problem in relation to nuclear submarines—there is a number below which it becomes unrealistic to have certain weapons. Quite frankly, I
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should have thought that for young naval officers 360-ton wooden minesweepers were ideal. Indeed, my noble friend Lord Winlerbottom, whose son is in the Navy, hopes that there will soon be a Lieutenant Winterbottom commanding one of them.
My Lords, again I think I can add very little to what has been said about South Africa. We believe that we have fulfilled our obligations, both in regard to the supply of ships and in regard to spares and ammunition. There is a fundamental difference of opinion between us on this question, and I think that nothing I say will satisfy noble Lords. I acknowledge their sincerity: I happen to disagree with them.
THE EARL OF GLASGOW: My Lords, could the noble Lord answer the question about the problem of the defence of the Fleet, without the carriers, over the next six years? I feel that that is desperately important. The Fleet is going to be unprotected for the whole of the 'seventies if the carriers go now. I do not think one can pass over that problem just like that.
LORD SHACKLETON: My Lords, it would take me some while. Of course, it is not unknown—and there have been many such occasions in the past—for the Fleet to be without what I believe is called organic protection of its own. I can only say that this is a matter on which practices are going on, and the Royal Air Force will play their part in it. But there have been times when the Fleet has been without a carrier. At the height of the Indonesian confrontation, when the Navy was there in considerable strength, the only carrier that was available was non-operational. It is a problem and I should certainly be happy to debate it further. I can only say that there is great determination to try to meet this problem, and I would not underestimate its seriousness.
I have no time, alas! to discuss the Far East. I see that the noble Lord, Lord Gladwyn, has gone. I would only say that I really do not understand what is the Tory policy on this. I wish they could go into Government for just a week in order to learn some of the facts; but that would be too risky—they might stay on to the end. I suspect that it is a bit of public relations window dressing. I believe that we shall be able to make

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a contribution, but an honest contribution. The presence of troops means that you are going to get involved, and it may give a false sense of security. We have made clear what are our commitments and our limitations. I believe that this country has still an important part to play in the world. I believe that our commitments, those of sentiment and morality, particularly to Australia and New Zealand, are unbroken. But I think we have an obligation above all to play our part properly in Europe, and to strengthen ourselves economically and also as a bastion of the Free World.
On Question, Motion agreed to.

ROAD TRAFFIC (DISQUALIFICATION) BILL
9.2 p.m.
Read 3a, and passed.

IMMIGRATION: BRITISH ASIANS IN EAST AFRICA AND ADEN
9.3 p.m.
LORD BROCKWAY LORD BROCKWAY rose to ask Her Majesty's Government whether, in view of new information now available, they will reconsider their policy towards British Asians in East Africa and Aden desirous of coming to this country, who hold British passports, have no permits to stay in their places of residence and no means of maintaining themselves. The noble Lord said: My Lords, I beg leave to ask the Unstarred Question which is on the Order Paper in my name. I apologise for the late hour at which this debate begins; I apologise both to Members of this House and to the staff who serve us so well. I can only say that I made every effort to enable the debate to take place at an early hour and that when the day was arranged there was not the expectation that the discussion on defence would precede it.
Many noble Lords will remember the debate which took place in this House in February, 1968, on the Commonwealth Immigrants Bill which severely restricted the coming to this country of British citizens with British passports. That debate was remarkable because of the disquiet shown in all parts of the House. I was specially impressed by the concern
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of ex-colonial administrators, most of them on the Conservative Benches, who felt that this issue was one of our national honour. At the end of the debate, the Bill was carried by only 24 votes, in a Division of 194.
It is not my purpose this evening to challenge that Act. I will make reference to its principles, to which I am as strongly opposed as ever, but my purpose tonight is to appeal for humane consideration for the victims of the consequences of that legislation. I am encouraged by what the Home Secretary said on this matter when the Bill was being discussed. I will quote him in detail later. All I say now is that he assured us that the application of the Act would not be rigid and that circumstances might arise where flexibility would be shown. I shall seek to-night to show that circumstances have arisen which do demand that flexibility.
My Lords, British responsibility for the Asians in East Africa and Aden is very great. We encouraged the Asians to go to East Africa, largely to build the railway from the coast through Kenya and into Uganda. Aden at that time was part of the British Empire in India. This country has a large responsibility for the presence of Asians in East Africa and in Aden. Secondly, our responsibility lies in the fact that when these territories obtained their independence the Asians had the choice of becoming either nationals of those territories or citizens of this country. The majority, I think, decided, rightly, to become citizens of those countries. But a number decided to remain British citizens; and we gave the clearest assurances at that time that if they remained British citizens they would have the rights of British citizenship.
The present difficulty has arisen from the fact that with heavy unemployment in Kenya, in Uganda, in Tanzania and in Aden, Governments have there pursued the policy of saying that priority for work and priority for licences to conduct businesses shall go to the citizens of those countries. I deplore this. But let us face the fact that it happens in every nation State. It is a principle which we apply in our own country, and we have no right to protest when this principle is applied in the case of the new Territories in East Africa. The motivation, so far as the

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Governments are concerned, is not racialism. I want to be quite truthful, and I would say that in the countries of East Africa there is some racial feeling, largely because the Asian population has in the past dominated the retail trade, insurance and other businesses. But so far as the Governments are concerned, in introducing this restriction they have not been racialist in intention.
My Lords, my Question refers to the new information that is now available. That information has been given to us in this very remarkable report which has been produced by Mrs. Mary Dines, a joint secretary of the Council for the Welfare of Commonwealth Immigrants. That Council is a responsible body. It represents not only the immigrant communities in this country but also many British organisations concerned, including the British Council of Churches. Mrs. Mary Dines is a reliable person. She has a deep compassion about suffering; she has a sensitivity about human rights; she has an eagerness to end injustice. But added to these qualities is a practicality, an objectivity, an almost scientific approach to any investigation in which she is engaged.
No one could have read her report without being deeply impressed by its thoroughness. That she should have produced it in less than three weeks, with the help only of a number of volunteers, seems quite extraordinary to one who has been engaged in similar projects. I have in my hand a copy of what has not been distributed with the report, a detailed analysis of those whom she interviewed. It is divided into columns: the British High Commission reference; the name; the address; the numbers in the family; the assets in Uganda; the monthly liabilities; fares—whether they have still to be found or have been saved; the money in the United Kingdom; the date by which they must leave. No one in the Government, or in any organisation concerned on this issue, can afford to overlook the information which is contained——
THEMINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD SHEPHERD): My Lords, perhaps my noble friend can help me. If not to-night, perhaps at some time, he would let me have a look at this document. But can he tell the House how many heads of families, or what individuals,
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did this lady interview in those three weeks?
LORD BROCKWAY: My Lords, I am always grateful to my noble friend for his interruptions, because he always leads me on to exactly the next point that I was going to make. I was about to say to him that as there is only one detailed copy of this document—there is the report, in addition, but only one detailed analysts.—I am perfectly sure that Mrs. Dines would be very prepared for my noble friend to see this document. The Foreign and Commnowealth Office already has had a copy of the report.
LORD SHEPHERD: My Lords, may I ask whether my noble friend can help me? How many heads of family did this lady see? Has he any idea?
LORD BROCKWAY: My Loris, if I may say so, my noble friend interrupts rather unnecessarily, because I have told him that that is exactly the point to which I was coming. I will now give him the figures. In less than three weeks, 1,189 individuals were interviewed. Those individuals represented 3,693 persons, with their dependants. My noble friend looks a little astonished; I myself am a little astonished, too. Mrs. Dines worked from dawn till midnight, day after day and night after night, and the record is all there.
LORD GIFFORD: My Lords, perhaps I may interrupt my noble friend, because I am sure he does not want to be inaccurate. From my reading of the report, the number of cases of families interviewed, is 1,041, and the number of people involved 3,693.
LORD BROCKWAY: My noble friend says that that is the record. The figure of the dependants is the same, and I hope that I am accurate on the other figure. As a result of these interviews it was found that 561 persons are absolutely destitute, and that those 561 persons represent, with their dependants, 1,939. This analysis also shows that by the end of the year 486 will be absolutely destitute. Their savings will all have gone. This means that, of the 1,189 of these British citizens, 1,047 will be without any means of livelihood by the end of the year. September is likely to be the crisis.
I will not delay by giving the personal instances, deeply moving as they are

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which are included in this report. I will content myself by reading the summary which Mrs. Dines has provided. She says:
"it is not possible to describe the atmosphere of hopelessness and the insecurity that prevails among the British Asian community: the visible signs of their miserable existence; the one room shared by as many as eight people; the borrowing of a few shillings to buy flour; the children poorly clad and out of school."
I pause to remark that fees are required at the children's school, and these are not available. Mrs. Dines continues:
"The psychological effects are, if anything, worse. Men who have worked hard and honestly all their lives are driven to living off friends or relatives whose own situation deteriorates or are forced to live off charitable organisations. They are utterly humiliated by their circumstances and by their inability to provide for their families They are sick with worry and clutch at any straw of hope."
My Lords, these are British citizens, with British passports. Two years of destitution have brought a new problem. Only a fraction of these people now have any money left for their fares, even if this country were ready to admit them. Some may depend on relatives or friends; half of them say that they must go to some charity.
I am not relying, and I do not think others who speak will rely, only on this report from Mrs. Dines. We have had our own letters. I intend to refer to only two of them. One, dated April 28, is from a father of seven children, a British citizen living in Uganda. I have the letter here, and I quote from it. He says:
"I am now much worried as I will be residing illegally in Uganda after April 30, and I do not know what to do. I cannot go every time to my friends and beg them for rations, as I am feeling ashamed, because they have helped me since November, 1969. I cannot think what will happen for my passage. I have already spent 2,500 shillings out of my savings for my fares. As the time will pass away I will be left without a penny."
I would refer to one other letter received from a man in Aden who has served for three years and five months in the R.A.F. He received on his discharge the certificate of commendation from his commanding officer. He is a British subject; he holds a British passport. He has served for three and a half years with the British Command. Yet we do not allow him to come here. I recognise that these are the victims of the "priority
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for work" policy being pursued in these countries, but they are also the victims of our decision, and we have a responsibility for them.
My Lords, I wish to end, as I always try to do, with positive proposals, and may I say to my noble friend that I hope he will not say to-night either "Yes" or "No" to the proposals which are made. I am only asking that he will agree to pass on the proposals to the Ministers who are responsible, so that they may consider of them. My first point is this. The present administration needs to be humanised. It is not the fault of the officials and the High Commissions in these countries: they are the instrument of the policy of this Government. But applicants in these territories with nothing to live on have sometimes to wait six months before they can even get an interview.
There is always great confusion about responsibility. The High Commission informs the applicants that it is "waiting to hear from the issuing authorities". When the applicants, in despair, write to the Home Office the Home Office replies, "It is a matter for the High Commission". Now there is a further complication. They are now being referred to the Migration and Visa Department of the Commonwealth and Foreign Office. Who is responsible? Victims wait for months and are desperate in this confusion. My first proposal, then, is that the administration should be humanised, co-ordinated and speeded up in dealing with these applications.
My second positive proposal is this. The Home Secretary, during the discussions of the Bill, used these words:
"It is my intention that the number of vouchers fixed is related to what I believe should be a normal flow. This is not a rigid figure. It will be flexible in relation to the circumstances to which I am now coming. I was asked what we would do about a man who was thrown out of work and ejected from the country. We shall have to take him in."
So far, these persons have not been ejected, but they are being thrown out of work. They are in a worse position than if they had been ejected. One of the almost unbelievable features of the situation in these territories is that the plight of these people is so terrible that they would have welcomed deportation.

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I know that our Home Secretary is a humane man. He has been a great personal friend of mine for many years. I ask him to extend to the people who are in this desperate condition the flexibility which he has indicated.
The third positive proposal which I make is this. The Home Secretary, in the statement which I have read, said the number of vouchers is fixed in relation to the normal flow. Under the 1968 Act, 10,000 immigrants annually were to be admitted on employment and special vouchers. I do not possess the figures of these particular categories, but it is known that a large number have not been taken up. Last year the total number of Commonwealth immigrants was down by almost one-third. The East African allocation is 1,500 annually among the 10,000. I am asking the Home Secretary to raise that figure to meet the needs of these people, who are British citizens and hold British passports, and if the figure of 10,000 has not been reached, at least to add to the figure of 1,500 so as to attain it.
Fourthly we have to face a further responsibility. These people are impoverished because they are British citizens. If they had agreed to become nationals of the territories in which they resided, they would not have been refused work, and they would not have been refused licences to continue businesses. They are in this destitution simply because they are British; and we must face that responsibility. If an earthquake occurred somewhere, and British citizens were involved, we should all go immediately to their aid. The position of these people is as desperate as that of many victims of an earthquake. I suggest that it is now our moral obligation to help these people meet their immediate needs, and it may be, possibly by a method of loan, to help with the cost of their passages, when finally they are allowed to come here.
My fifth positive proposal is that further effort should be made to reach a tripartite agreement between, first, the countries concerned: Kenya, Uganda, Tanzania and South Yemen; secondly, India and Pakistan, and, thirdly, ourselves. India has said that she will agree to accept permanently those who surrender their passports and to accept temporarily those who wish to retain British
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citizenship if we will subsequently agree to accept them. This is obviously a matter for negotiation. My proposal is that we should send an envoy who is trusted in East Africa, India and Pakistan to negotiate a settlement of this tragic problem.
I have only two further points to make. The first is to meet the argument, which I know will be put forward, of the difficulty of accepting more immigrants. I would say only that in this case the difficulties would not be as great as they often are. These people are accustomed to the British way of life. They speak English. They are small shopkeepers, tailors, shoemakers, who would gladly go, not to London or Birmingham where there are big immigrant populations, but to small towns. There are craftsmen, bookkeepers, taxi drivers among them, who could easily fit into our methods of industrial and social life. The tragedy is that if they had come here two years ago they would have become easily adjusted; they would have had their savings, It is by our failure that they are destitute.
My Lords, I want to conclude by saying this as sincerely as I can. A deeper issue is involved than our convenience. In essence it is one of our national honour, our pledged word. These people have been admitted to British citizenship. They were assured, when they accepted British citizenship, that they would have all its rights. They hold a British passport, which reads:
"Her Britannic Majesty's Principal Secretary of State for Foreign Affairs requests and requires in the name of Her Majesty all those whom it may concern to allow the bearer to pass free without let or hindrance and to afford the bearer such assistance and protection as may be necessary."
Britain is the only country in the whole world which does not allow free entry for its own citizens. We cannot justify that. I am asking at least that the destitute victims of our policy should be admitted here.
9.33 p.m.
THE LORD BISHOP OF ROCHESTER: My Lords, at this late hour I shall try to obey the injunction about shorter speeches of which we were reminded earlier to-day, but had the most reverend Primate the Archbishop of Canterbury

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been able to be here he would, I know, have wanted to express, not only the concern of the Church of England in this matter but also that of all the Churches associated in the British Council of Churches, of which he is the active President. That body has recently received a report of its Standing Committee on Migration arising from a visit paid to East Africa earlier this year by one of its members who is the convenor of the Methodist Committee for Community Relations. Because of the grave concern which this report aroused about the plight of British citizens in East Africa, the Council has recently asked the Home Secretary to receive a deputation to discuss this matter with him as one of great urgency, not only to the Churches in these Islands but also to the Churches in Uganda and Kenya. I heard only yesterday that the Home Secretary has just agreed to receive such a deputation.
The noble Lord, Lord Brockway, in his comprehensive survey of this very difficult problem, referred to another report on the situation of British Asians in Uganda, published recently by the Joint Council for the Welfare of Immigrants, which is as yet the most representative voluntary body on work in this field. This report has been described to me by those who have seen the situation at first hand as extremely moving and fair on the humanitarian and moral aspect of the whole issue. As the noble Lord has already pointed out, it leaves us in absolutely no doubt that the position of these people holding British passports is progressively declining, and to me one of the worst features of this is that if and when they do eventually come to this country their economic condition will be such that they will be dependent on friends and relatives, and inevitably will gravitate to the large cities, such as London and Birmingham, instead of to smaller towns where their particular skills could more quickly be absorbed and where they would be in an environment more in accord with their own tradition.
In the face of the progressive destitution of those who are without any doubt British subjects I hope the Government will, as a matter of urgency, be able to accord them the highest possible priority on the Commonwealth list, on the grounds that they have a claim upon us, by virtue
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of their citizenship and their economic plight, that perhaps other applicants for entry vouchers do not have at the present time. I hope the Government will also consider whether they cannot give a pledge that the quota to be allowed admission from Uganda will be increased over, say, the next two years, so as to give the maximum encouragement to the Uganda authorities to give a fair deal to those who remain in that country meanwhile. Perhaps the Minister who is to reply to-night will be able to tell us whether the Government feel able to pursue renewed consultations with other Commonwealth countries with a view to encouraging British Asians in East Africa to emigrate elsewhere than to Britain.
My Lords, whatever is or is not done to speed up the rate of entry of these unfortunate people, there will remain a problem of widespread destitution which is rapidly getting beyond the resources of the voluntary bodies who are endeavouring to grapple with it. I would ask the Minister whether the Government will consider, at the earliest possible moment, inaugurating a Commonwealth fund for the relief of destitution, and doing it with a handsome contribution. I am confident that if the United Kingdom would give a generous lead in launching such a fund there are people of many different nationalities who might later contribute to it.
I was not a Member of your Lordships' House when the Commonwealth Immigrants Bill was debated, but, as the noble Lord, Lord Brockway, has already reminded us, it was a matter which brought a sharp division of opinion. It was a Bill which seemed to many to sacrifice principles and long-term considerations for apparent short-term gains. The comment made by the most reverend Primate on that occasion was that ethical grounds always have practical consequences. My Lords, it is the practical consequences of that Act with which we are dealing to-night. I hope the Government will be ready to reconsider their policy towards this group of those who are Her Majesty's subjects.
9.40 p.m.
THE EARL OF LYTTON: My Lords, I follow with pleasure the noble Lord, Lord Brockway, who has contributed in emotional terms all and more than I had

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planned to say. Also, I appreciate the opportunity of following the right reverend Prelate the Bishop of Rochester. I should like to run very briefly through what two Governments have done, with a view to setting this matter in its correct proportions. I want to be fair, because it is not only the Labour Government, but also the Conservative Government who have jointly been responsible for this move to restrict immigration. Eight years ago, I understand, one quarter of the inhabitants of the earth had an absolute right to come to these Islands and dwell here for ever and ever, and it was the passing of the 1962 Act which brought that risk, if it was a risk, under control. I often think it might have been a greater risk than we ever imagined. For example, Southern India is often unhappy under the Government of Delhi, and had Southern India decided to come in a body to this country it would have had the right to do so.
Before the 1962 Act there was the curious anomaly that this one quarter of the earth's population enjoyed full citizenship of two sovereign States, with two passports, each of them, as it were, on the gold standard at par. Each of them had the right to come here and dwell for ever, and the right to dwell and prosper in his own land. All we did under the 1962 Act was to remove one of those rights, the one least important to the individual concerned, his right to come here, leaving intact his right to dwell in his own country as its full citizen. Therefore, so far as I can see, no injustice whatever was done to anyone by the 1962 Act; it was perfectly fair, it was reasonably prudent and there was nothing wrong in it anywhere.
I suppose those who opposed it—and I believe those who opposed it included those on the present Government Front Benches—did so out of a kind of sentiment, just as we retain on our pound note to-day a promise to pay one pound on demand. What is that one pound? It is a bit of whimsy, a relic of the past, and so long as it does not matter, why bother? And I suppose that was the feeling of those who did not like that 1962 Act. It was disposing of a pleasant sentiment of Commonwealth unity unnecessarily. Events have shown that it was wise and prudent.
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The 1963 Kenya Independence Act brought us up against one of those very difficult problems of decolonisation, because the Kenya independent Government—the Africans that is—refused to grant automatic Kenya citizenship to every inhabitant of Kenya. We pressed them to do so, at least so I understand from the speech of the noble Lord, Lord Brooke of Cumnor, during the course of that all-night sitting. We pressed them hard and they refused. And in order not to create a class of stateless persons, which is contrary to our own principles and latterly would be a contravention of an international agreement, we agreed to recognise non-Kenya citizens who were inhabitants of Kenya as full British citizens—this is what I understand—with the right, unrestricted as before, which they had before the 1962 Act, to come into this country and to dwell here at will without any control.
As I understand it, this applied to the two categories of inhabitants of Kenya whom the Kenya Government—black, indigenous, African—would not accept automatically as citizens of Kenya: those were the whites, mainly of our own stock, and the browns mainly from the Indian Continent. How right the noble Lord, Lord Brockway, is to say that we encouraged them to go there! Without them the Uganda railway could not have been built, and Kenya would never have come to the prosperity, to the primacy that it holds among our colonial territories. They were indispensable at the time. They have had 70 years of doing good work. I think I may say that they were despised by both of the other communities; but they were disliked by the Africans and (I am quite certain wrongly) despised by the white community of Kenya.
The white community of Kenya have had the most extraordinary prejudices quite apart from their prejudices against the Indians. No Jew could be a member of the Muthaiga Country Club until after independence. At one time no official could be a member of the country club. The bureaucrats were not admitted. It was in the reign of Governor-General Northey that officials became members of the club. They had had their passionate prejudices, one of which was contempt for the Indians.
It is understandable that the Indians are a closed community of their own.

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They object to employing others; but everybody, from a child of five to the grandmother, works in the Dukha, and they have their own little societies, religious, welfare, everything. There is nothing wrong about it, but it creates prejudice. They are separate, little homogeneous communities of their own. I am afraid that I disagree with the noble Lord Lord Brockway, on this point: it is not because they are holders of British passports, British citizens, that they are being hounded. It is because they are Indians, Asians, and because the Indians are disliked. I have seen it for half a century. I am sure that that is the correct interpretation of what is happening.
Of course, the Governments out there are as hypocritical as any other Governments, and they try to pretend that it is because they are not citizens. But the Indians saw the red light. Why are they not citizens? It is because they were being down-graded and preyed upon in the days just before independence and after. They saw what was coming to them; that there was no future. That is why many of them would not become—
LORD SHEPHERD: My Lords, if I may intervene, I think the noble Earl is really stretching this point. Of course there are many Indians who accepted their rights under the Constitution to become Kenya citizens. Many of them have done so, and they are in no difficulties whatsoever with the Administration or the people of Kenya.
THE EARL OF LYTTON: My Lords, I thank the noble Lord, Lord Shepherd, for his correction that they are not in any difficulty. That is equally true of a good many of the white settlers. It is open to anybody to predict that when the time is ripe further Africanisation will be foisted upon them. I do not know. All I am sure about is that a great many of the Indian communities are greatly disliked. I recall that the noble and learned Lord who sits on the Woolsack assured this House during that long, all night debate, that he had been out there and was absolutely convinced that it was not the ordinary African alone, but that the highly educated African shared this dislike of the Indians. However, we are expressing our views, and I have the strong feeling,
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and have had it for forty years anyway, that the Africans dislike the Indian community, and that that is at the root of what is happening.
By the 1968 Act the United Kingdom removed the right of work and residence in the United Kingdom for a number of people (I think the total was estimated during that debate at about 2 million), but we dealt very much and very specifically, with those from Kenya. Kenya was the focal point of that debate. The reason why we did it was an unfortunate one: it was because at that very moment the Africans were in the process of removing from the Asians their right to work and dwell in Kenya. That is the point where the clash comes. We started forming a queue just as the African Administrations were turning on the heat, and we turned what the Asians thought, rightly or wrongly, was their refuge in trouble, into a stopped earth where they could find no refuge. That is the objectionable part of what we did.
I want to repeat what was said during that debate, and most of my remarks are taken from the speech of the noble and learned Lord now sitting on the Woolsack, not to criticise impertinently what he said but because it was a telling speech, and he told us the things that weighed in my mind as valid. Among the first things he said was:
"we are not saying … 'You cannot come here'. What we are saying is, You cannot all arrive to-morrow'."—[OFFICIAL REPORT, 29/2/68, c. 931.]
Secondly, numbers have been bandied about, and the number of vouchers for the whole of the Commonwealth, as I understood it, mentioned by the noble and learned Lord on that occasion was 8,500 a year. He added, to reassure us, that it was proposed to have a new category of vouchers simply for Asians in Kenya. The number was to be 1,500 a year, which he estimated, when multiplied by the suitable number for the size of the family, would mean 6,000 or 7.000 people a year. Fourthly, his figures of the communities who have this right of British citizenship being taken away from them showed that the number in Kenya was 167,000. At the rate of 7,000 a year, that would mean that the queue was 24 years long.
The noble Lord, Lord Shepherd, has said, quite rightly—and I know it—that

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many Indians are content and have taken Kenyan citizenship. The noble and learned Lord said (col. 932):
"it will depend greatly on how it is worked. The Government of Kenya is a civilised Government."
I should like to ask how this system has worked. A little more than two years have passed (it was in February, 1969, that we passed the Act, and it is now May, 1970, two years later), and I should like to know how it has worked. Is the quota still 1,500 heads of families a year? Do they come? Is Kenya all right? Has the "civilised Government" of Kenya worked happily with us, and we happily with them, since that happened—because that was the imponderable of which the noble and learned Lord spoke? I do not profess to know the answer. All I know is that the trouble has extended to Uganda. Of that the noble Lord, Lord Brockway, has spoken so fully that I merely say that there is some slight discrepancy in my figures—I have a slightly different set from his, or have read them differently—but I have nothing to add. But it is a distressing state of affairs, which I have felt was bound to come.
Is there a quota, or is it taken out of the Kenya quota? What is happening in Uganda? We have had no debate on this matter since the great debate when we had a new Act, which the noble and learned Lord, like many others, said he did not like. But we had to protect our own citizens and we had to protect race relations in this country. What has happened? Has a grip been taken of the Uganda problem in the same way as we took a grip of the Kenya problem, and has the grip on the Kenya problem proved successful? I profess ignorance. I have come up to-day because we have not debated this matter in detail. We have had many anxious questions on this matter from the admirably persistent noble Lord, Lord O'Hagan, but we have not really had a debate and have not been able to get out of the Government what is happening.
My impression, from summing up the totals which the noble Lord, Lord Brockway, mentioned, is that the number of totally destitute persons in Uganda now is around 9,000 or 10,000. That is tending to be cumulative and is rapidly
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increasing, because the resources of those religious communities of Indians who are helping each other are being exhausted. It is true that they are British citizens and are citizens of no other State, and if we are not responsible, who is? Nevertheless, I feel it is not entirely because they are British citizens that they are suffering in this way. It is an incompatibility of communities, such as one finds again and again all over the world, so often with the Jews but also with the Indians when they go elsewhere, and we have to cope with it as best we can.
A question has been asked as to whether the quota for the Commonwealth is fully taken up, and whether, if it is not, it could be used to absorb Asians. I do not know the answer to these questions, but I have come up to support the noble Lord, Lord Brockway, at least in this. I have for a large part of my life been interested in all the communities of Kenya. I have tried to do battle for Somalis who have had a raw deal and for Indians who are now in trouble, and I hope that Her Majesty's Government will give us some honest account of what they are trying to do in conditions which I recognise are the postscripts of these extremely difficult decolonisation processes.
9.59 p.m.
LORD GIFFORD: My Lords, I wish to speak briefly, but I hope forcefully, in support of my noble friend's Question. Some reference has been made to the debates that we had in this House in 1968. I am not one given to lauding debates in this House, but I must say that the debate we had on the Commonwealth Immigrants Act two years ago was one of the most impressive experiences I have had in this House. There can be no doubt that if this House had then been reformed on any rational basis, as was proposed a year later, the Commonwealth Immigrants Bill would have been rightly thrown out by this House.
I am sure that there were some members of the Government Front Bench who, at breakfast time on that morning when the debates were over and the Act was passed, said to themselves, with a sigh of relief when the dirty work was done, "Thank goodness, that's over! Something can be worked out now. It will all blow over. All the people who have spoken against this Act will find

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in due course that their fears were not really founded. Things will work themselves out." For two years we heard little of the situation of Asians in East Africa. But now, two years later, we are faced with the realities and the consequences of the passing of that Act in that week in February, 1968.
Reference has been made to the report of the Joint Council for the Welfare of Immigrants and to the support of the representatives of the British Council of Churches. I should like to refer also to the reports which have appeared in the Press week after week over this year. The Press has done a magnificent job in spotlighting in case after case, inquiry after inquiry, the destitution which is coming increasingly upon the Asians of East Africa. I must say that every time I read such a report I feel a sense of outrage and of anger that such a situation could come about by the deliberate act of a Government of this country, and a Government which I support.
There are of course many injustices in this world: many injustices about which we in this House, and particularly on this side of the House, protest. There are many injustices which are the direct concern and responsibility of foreign Governments and which are not, mercifully, our direct concern. There are many injustices which are the heritage of our past, which we, in our policies, try over a long period to rectify. There are injustices which come about by the incompetence or the bloody-mindedness of individuals, bureaucrats and the like, and which we can take up and rectify. But I know of no other situation where injustice of this kind, and on such a scale, has been created, not for any of those reasons but by the deliberate and conscious act of policy of a Government. Without that act of policy, enshrined as it was in the Commonwealth Immigrants Act, this situation, which we have heard so movingly described, would not be with us. I understand now more of the bitterness which young people in the United States feel at the policies of their Government when I read of the direct consequences of the direct policies of our Government. And the justification given for this policy—given then and given still—cannot be upheld.
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When my noble friend Lord O'Hagan asked a Question in this House on March 24 last, my noble friend Lord Shepherd replied, at column 1333:
"This control is essential in the interests of the large numbers of Commonwealth immigrants already here, to whom we have as great an obligation as we have to those United Kingdom passport holders who have not yet been able to come here".
My Lords, I would ask my noble friend who and what representatives of Commonwealth immigrants over here were consulted in order to ascertain whether they considered this law and this policy to be in their interests. The noble Lord knows well that every body concerned with race relations and with integration, every representative body of the immigrant and coloured communities in this country, are united in condemning this Act as a shoddy piece of work.
LORD SHEPHERD: My Lords, may I ask my noble friend: would those authorities for whom he speaks accept an uncontrolled flow of immigrants into this country to the tune of 2 million or 175,000? Because that is what the noble Lord is saying when he condemns this Act in those specific terms.
LORD GIFFORD: My Lords, if we are coming back to the 2 million figure, it is necessary to expose it. My noble and learned friend on the Woolsack dragged this spectre in front of us during the original debates. My noble friend on the Front Bench knows well that the vast majority of that 2 million were persons of dual citizenship. The number of persons of single citizenship is much smaller. They are mainly residents in East Africa.
LORD SHEPHERD: My Lords, could we take in, uncontrolled, at this moment of time, 175,000 people?
LORD GIFFORD: My Lords, my noble friend again haunts us with the spectre of planeloads and boatloads all turning up in the course of a week. That was happening during the week when the Commonwealth Immigrants Act was being debated, because it was clear that there was a danger, which matured, of the Government giving in to the pressures brought against them by the Right Wing of the Conservative Party.

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But apart from that, if a firm declaration of principle and policy had been issued—and even if now a declaration of principle and policy is issued—this sudden invasion, which is quite unfairly and wrongly dragged into these debates, would not be realistic at all.
My Lords, I have drawn attention to that—and I must say that I am not sorry to have done so, for, as my noble friend knows, I feel deeply and strongly about this question. My noble friend Lord Brockway has put forward proposals which go some way towards a solution. It may be that now we have reached such a state that it is necessary to compromise in order to get us back on to the right road; but in the long run the only solution is for the inhabitants, the citizens, of East Africa who wish to come to this country to be free to do so. While I welcome any move that the Government may make towards ameliorating the situation that they have created, they cannot escape the fact that it is their creation and, in the long run, as my noble friend has said, their responsibility.
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I do not expect that this Act is going to be soon repealed, although I hope that at least something of a positive nature will be done. But I hope that over the coming years—perhaps not now but over the coming years—when the pressures of the Election are over, when my noble friends are returned, as I know they will be, for a further term, they will reflect upon that Act, upon what preceded it and what followed it. I hope that they will progressively work towards removing the hardships and miseries that it has produced and, looking forward into the future, that they may care to investigate how such a situation can be prevented in future—because what that Act and its consequences to-day have shown are that minorities of citizens, particularly if they are beyond the seas, are intensively vulnerable to pressures; particularly when both Parties feel those pressures sweeping over them and give way to them. This situation could not have arisen in any of the countries to whom we endowed Constitutions. I hope that it will never again happen here and that meanwhile steps will be taken to stop the rot which set in two years ago.
10.9 p.m.
LORD O'HAGAN: My Lords, I shall be very brief, and I should like to emphasise that I am speaking as a Cross-Bencher and that my remarks on Party political lines or about Party politics are from this "No-man's land," as it were.
A few weeks ago the noble Lord, Lord Garnsworthy, said in this House, speaking of the Labour Party:
"I belong to a Party which I believe is the possessor of a strong sense of compassion !".
We shall all be anxious to hear how that sense of compassion is going to filter through from this Labour Government to the situation mentioned in the Question of the noble Lord, Lord Brockway. But there is more than compassion at stake. Even a few years ago the noble Lord, Lord Butler of Saffron Waiden, was talking about the rights attached to the statement Civis Brittanicus sum. It is painful to me that in the evening of Empire this Government should be the only Government in the world that does not allow free entry of its own citizens.
Why are these Asians where they are? Because in the days of the Raj their ancestors were encouraged, or at least allowed, to move between one part of the British Empire and another. To the descendants of these people we gave a safeguard, a last resort—a British passport. Many of the Uganda Asians and others accepted that pledge, and are now in "No-Man's-land": declared non-citizens of the country in which they have always lived and almost prohibited from entry into the United Kingdom. The present policy of Her Majesty's Government is not compassionate. It is not honourable, in that it does not honour fully the promises inside the British passport. But there is another issue. Her Majesty's Government have taken a firm stand against racial discrimination in Rhodesia, South Africa and also in this country. No doubt we shall see members of the Labour Party protesting peacefully if the Springbok cricket tour takes place. I submit to the noble Lord, Lord Shepherd, that there is something more than incongruous in Her Majesty's Government's taking a high moral view on these issues. A Labour Government will not stop the Springboks coming here, but a Labour
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Government do stop coloured British citizens from coming here; or, at least, they make the obstacle course of entry so tortuous that many never get to the end.
My Lords, I want to be fair. The age of unspoken tolerance towards coloured people in this country is past. Her Majesty's Government, and indeed the Conservative Party, have been severely handicapped in behaving reasonably since the prophet of outspoken intolerance began to thunder out his apocalyptic message. In the context of race relations in this country Mr. Powell has caused the publicly unutterable to be publicly uttered; the privately unthinkable to be discussed in every pub; and as the tide of tolerance went out, the Government were left high and dry and the British Asians were swept out to sea. I think it would be optimistic to expect the Government, with an Election in the offing, to honour those original promises to these people. But if they are going to knock Powell they must knock Powellism; and all of it. What does Mr. Powell represent? He does not represent compassion, for he appears to have the tender social conscience of a Marie Antoinette. Nor does he stand for a practical answer to honouring past promises. The eccentricity of his intellectual fireworks prevents that. But he does represent gut politics—"felt in the heart and along the veins ", as Malcolm Arnold put it; and if the Labour Party is to be a party of compassion, or honour, or reason, it must stamp on Powell and Powellism.
I appeal to the noble Lord, Lord Shepherd, to "do a Crossman" and to tell us what is really going to happen to these Asians. Has Powellism won, or will they be assured of a speedy entry to this country? Or will their fate be betrayed? The present policy is storing up a reservoir of bitterness in the hearts of these suffering Asians. Were they to be admitted soon, all the hatred earned by the rejection by their so-called mother country could be avoided, and their skills used. I would make a personal appeal to the noble Lord, Lord Shepherd. He has "ticked me off" before for the manner in which I have raised this subject in your Lordships' House, and no doubt will do so again. But I hope that, when he does

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so, he will not think I am being impertinent or personal if I remind him of something that he said to be just outside this Chamber.
The noble Lord told me that his sons were born in Singapore. Does he feel that on moral grounds his children have more justification for being here than a destitute Asian who is a British citizen? I hope the noble Lord will not think that I am attacking him in a personal way: I am simply trying to illustrate the moral fundamentals behind the juggling that has gone on, with the production of frightening numbers to overwhelm one's sense of compassion for individuals. Because if we stand back from Powellist tactics and the 1¼ million Yellow Peril quoted by the Government in the debate on the 1968 Commonwealth Immigrants Bill, and remember that these people are individuals, it is not enough for the Government to exaggerate the commitment that we already have towards racial harmony in this country; it is not enough for them to produce bogy plane-loads of Asians. I can assure the noble Lord, Lord Shepherd, that they are now too "broke" to afford to try to get on planes, and in any case most airlines will not take people with British passports in Africa unless they have an assured destination.
So I appeal to the noble Lord to give a humane answer to the problems of these British Asians, and to keep a restraining hand on his imagination when he is quoting figures about the numbers who can come in, and when he is quoting the amount of trouble that the Government have already taken towards keeping race relations in this country in a good state.
10.17 p.m.
THE LORD CHANCELLOR (LORD GARDINER): My Lords, my noble friend Lord Brockway has raised to-day a Question very proper to be considered. Some noble Lords have sought to reargue the question which we debated on the Commonwealth Immigrants Act, whether this ought to be the only country in the world to which, because they have United Kingdom passports, millions of people who have never been here, whose parents have never been here, and who have no real connection with this country, are entitled to arrive in any numbers they like, at any time they like. I do not propose to re-argue this issue again. But the question whether there
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should be controls, and whether the controls are being operated properly and with compassion, is of course a very proper subject for discussion. I am not for one moment criticising my noble friend for putting down the Question; indeed, I do not propose to say anything on behalf of the Government. But I should like, as Lord Chancellor, to say just two or three sentences to my noble friend, as sometimes I am entitled to do.
My Lords, we in this House have a privilege which the other House does not share, of having much more time, and so every Wednesday we have a Motion for discussion which the other House cannot afford the time to do. As my noble friend Lord Brockway knows, by the agreement of the Whole House there is an arrangement as to how the subjects for discussion on Motion are to be chosen. Roughly, out of every 30, 9 are accorded to those who sit on the Conservative Benches, 6 to the Government, 4 to Liberals and 4 to Cross-Benchers. In addition, any noble Lord who wants information can any day ask a Question; and there are also Un-starred Questions. The original object of an Unstarred Question was what it said: it was to be a request for information. But it has now ceased to be that, and it has become another Motion for discussion. It does not take six people an hour and a quarter to ask one Question. So really this has just become another ordinary Motion, whether you add "for Papers" or whether you do not, but without the agreement of the House as to who is to put them down.
I have looked at the figures, and I find that there has been a great increase every year for each of the last three years in the number of Unstarred Questions. It does not seem to me that this need affect the House, or cause anybody any difficulty, in October, November, December, January, February, March or April. But, as my noble friend knows, when we come to May, June and July the pressure of time on this House is enormous. The Unstarred Questions are still going on. We had one yesterday; we have had one today; we have one tomorrow. We are coming back after the Whitsun Recess on June 9, and there is an Unstarred Question down for June 9, and another for June 10. It adds one and a half hours to the work of both Front Benches, to the time when any Minister can start to look

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in his Despatch Boxes; and it makes difficulties for the attendants in getting home.
I would also draw my noble friend's attention to one other fact. Although the subject of tonight's Question is, I am sure, a very proper one to raise, now that we are already sitting five days a week I do not know how this House will be able to manage in June and July if this practice continues. Because it is not a question of the Government's getting their Bills through: the Opposition have just as much right to say, "We want to have sufficient time to examine those Bills properly"; and there are Private Members who have introduced Bills. They, too, must have an opportunity of getting their Bills through.
In all friendliness, I point out to my noble friend Lord Brockway that a very large proportion of all the Unstarred Questions are asked by two noble Lords, one on that side of the House, one on this side of the House. So, although I think that this is a very proper Question to have raised tonight, while this matter is under consideration at the moment by the proper authorities of the House I would venture respectfully to suggest that we are going to get into very great difficulties in getting through legislation in June and July unless at this time of the year a good deal more restraint is shown by Members in the number of Unstarred Questions they put down. There is nothing to stop 12 Members every day from putting down an Unstarred Question, and I foresee that when we come back very great difficulties will arise.
10.23 p.m.
LORD SHEPHERD: My Lords, I will not follow my noble friend the Lord Chancellor on his remarks about Unstarred Questions except, if I may, to add this: I agree with him that it is a subject that clearly merits discussion. My experience of Unstarred Questions is that on the whole they are debated in an empty House late at night and very rarely reported in the Press, and I suppose in the end the only satisfaction lies with the noble Lord who has asked the Question and the officials who have had to produce the answers. I think it is something which clearly the House itself will need to look at in due course.
My Lords, the debate to which noble Lords have referred, the debate on the
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Commonwealth Immigrants Bill of 1968, was a debate of considerable emotion and strong feelings. I well remember that debate. I had the task of winding it up. I made it clear then, and I am prepared to repeat it again, that that was one of the duties which I did not like undertaking: but I was convinced that it was right to undertake it, not because I was a Minister but because I believed that the Government were right in bringing that legislation forward in order that we could buy time to deal with grave social problems that exist in this country. Those problems were not social problems created by immigrants, because the social problems were already there, but they were being aggravated seriously by an uncontrolled influx of immigrants, not only uncontrolled so far as the Commonwealth itself was concerned but uncontrolled from East Africa.
We are in this situation to-day because a grave mistake was made by the Conservative Government—and I do not put this in any political sense—when the legislation providing for the independnece of Kenya, Tanganyika and Uganda was passed. We made a very grave mistake in making it possible for citizens who clearly should have been citizens of the country in which they intended to reside to become citizens of this country. We should never have given them the choice of being able to say that they intended to reside in that country but would keep their options open and possess citizenships of a country which in many cases few of them had ever visited.
I have heard a great deal tonight about passports, and the duty of this country to those persons, and I accept that we have a responsibility. We should not forget that well over a half of those who have applied under our special voucher system to come to this country for residence were born in India. They have no connection, other than the possession of that passport, with this country. However, the Act was passed by Parliament and we had this responsibility. We have said that we do not deny the right of those individuals to come to this country and take up residence. We have said we need to have time and we need a form of control in order that we can deal with the social and economic problems.

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I ask my noble friends who feel so passionately about this subject—and I feel this equally—if we have responsibility to whom do we hold to-day a greater responsibility? Is it those who hold a British passport but have no direct connection with this country, or to the children, the grand children, the children yet to be born, of Commonwealth immigrants of this country who, on their date of birth, will be British through and through? They will have no other country to which to call. This will be their only home; they will have nowhere else to go. I suggest that we have a great duty to ensure that they can live in peace and harmony with those who, shall we say, come from this country: I am speaking of terms of English, Anglo Saxon stock. This is a great dilemma, and I cannot but feel that our main responsibility is to those who cannot come here by free choice. This is a responsibility that goes on through generations and perhaps for centuries.
I recognise the problems in East Africa. I will certainly undertake to consider the points that were put to me by my noble friend, Lord Brockway, and the right reverend Prelate. I will certainly ask that those points be examined and will draw the attention of my right honourable friend the Home Secretary to them. I would not wish to say anything more than that, except that we are deeply conscious of the problem.
Of course, there is one way out. We could consider a change in the whole method of Commonwealth immigration into this country in order to deal with this immediate problem in East Africa. But here again one has to consider whether this is the time, or should one do it? Clearly, this is something to which all of us will have to give our thoughts: general principles and whether it is practicable. As I have said, I will consider and consult with my right honourable friend on the points made.
My Lords, in conclusion I would only say to the noble Lord, Lord O'Hagan, that I do not think I have "told him off". I criticised him because he used the word "Stateless", because I believe it is wrong for these people——
LORD O'HAGAN: My Lords, as the noble Lord has mentioned me specifically,
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may I ask him to expand on the nature of the free choice of people who are destitute in one of the countries referred to in the original Question of the noble Lord, Lord Brockway, and about their coming here? What is the nature of free choice which these people have on coming here if they cannot live where they are already?
LORD SHEPHERD: My Lords, we made it clear that these people have a right. We do not deny them their right under their citizenship. We have said that we need time to absorb them. We have a system of quotas which takes into account their particular position and their relations with the authorities. These are dealt with by our High Commissions overseas. These people are not Stateless.
We hope that the authorities in Kenya and Uganda will see that it is not only a question of humanity but, in the end, also good business sense that these people should not be hounded out of their countries. One should pay some tribute to the authorities in Kenya and Uganda because, while clearly they have a policy, they have been (shall we say?) relatively soft in the manner in which they have carried out their policy; and I believe that this will continue.
My Lords, I will look at the points that were raised by my noble friend Lord Brockway and the right reverend Prelate, and I will certainly communicate with them when we have the Department's considered views. But I close with these last few words. We are in a grave dilemma. We have—not just because of Mr. Powell—a race problem in this country. We have had, right throughout our history, periods when, if it was not the Welsh, it was the Irish; before them it was the Scots, the Poles, and the Huguenots—the lot. We are a rather conservative people: we do not like strangers. We are changing, just as I believe we shall change in the field of our friends from the Commonwealth. There is at this present moment among many of our people genuine fear about what is happening. This is why I believe it is necessary to buy time to be able to bring others into the nation and be one nation and not, as we can find throughout the world to-day, a divided nation—and I fear that, from what one can see,

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the division is becoming deeper and more savage. My Lords, I would not wish to see that in this country.

WEST RIDING COUNTY COUNCIL BILL
Reported, with Amendments.
WALLASEY CORPORATION BILL
Reported without amendment.
GOSPORT CORPORATION BILL
Reported, with Amendments.

NORTHUMBERLAND COUNTY COUNCIL BILL
The Queen's consent signified, and Bill reported, with Amendments.
House adjourned at twenty-six minutes before eleven o'clock.