Sitting of 23 July 1973

Preamble
The House met at half-past
Two o'clock

PRAYERS
[Mr. SPEAKER in the Chair]
ORAL ANSWERS TO QUESTIONS
  WALES

    Dee Estuary
    Sir John Tilneyasked the Secretary of State for Wales whether he has now studied the report of the Water Resources Board; and whether he has come to a decision on going ahead with the multipurpose Dee reclamation schemes.
    The Secretary of State for Wales (Mr. Peter Thomas): My right hon. and learned Friend the Secretary of State for the Environment and I have recently received the Water Resources Board's report. We shall complete our evaluation of the Dee project in the light of this report as quickly as we can.
    Sir John Tilney: Does my right hon. and learned Friend remember that as long ago as 19th July 1971, when asked about this potentially valuable scheme for the comparatively poor North-West, he assured me that the Government would not drag their feet in this matter? How long is a "drag"?
    Mr. Thomas: I can only repeat that in this matter the Government do not intend to drag their feet. It is an extremely important matter and there will be no avoidable delay in reaching a decision.
    Mr. Barry Jones: Does the Secretary of State understand that there is a growing power of opinion that feels it possible that this scheme may cause irreparable damage to existing communities in North Wales? Can he guarantee that, if sanctioned, this scheme will bring about
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    more employment and that the project will not be used to hasten the end of steel-making at shotton?
    Mr. Thomas: What the hon. Gentleman has said only shows that this is a matter which requires the most careful consideration before a decision is taken.
    Sir A. Meyer: Is my right hon. and learned Friend aware that whereas, say, six months ago the mere announcement of a decision to go ahead with the scheme might have sufficed to staunch the wounds inflicted by the decision to close down Shotton, any announcement to go ahead with the policy must be accompanied by a firm guarantee for future jobs?
    Mr. Thomas: The scheme is a multipurpose scheme, and it would be quite unrealistic to assume that even an immediate decision to proceed with the scheme could result in additional employment in the near future.
    Mr. Cledwyn Hughes: In view of the implications of this scheme for the whole of North Wales, can the right hon. and learned Gentleman say whether the decision, when it comes, will be final, or will it be in the form of a Green Paper which will give opportunity for full discussion before the final decision is taken?
    Mr. Thomas: I cannot give the right hon. Gentleman an emphatic answer. This is a very important multi-purpose scheme which will require a great deal of consideration. The Government will try to reach a decision as soon as possible, but whether by way of White Paper or Green Paper has yet to be decided.

    Straying Animals
    Mr. McBrideasked the Secretary of State for Wales to what extent he has further considered the problems created in South Wales by straying animals.
    The Minister of State, Welsh Office (Mr. David Gibson-Watt): The report of the interdepartmental working party is being published today and copies are being placed in the Library together with the report of a cost-benefit study by the Department of Economics, University College, Cardiff, which was commissioned by the working party. My right hon. and learned Friends have accepted the working party's recommendation that an official of the Welsh Office should be

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    appointed to initiate and co-ordinate remedial action with the interests concerned.
    Mr. McBride: I protest most emphatically against the gross discourtesy extended to Welsh Members in that the report has been put on the board only in the last few minutes.
    Mr. George Thomas: It was in the Western Mail on Friday.
    Mr. McBride: Is the Minister aware that serious accidents have occurred in Swansea in the last fortnight in which four animals were killed, and that we are worried about the problem of animals straying which might result in human fatality? Is he aware that urgent action is required for motor car owners, especially in the hours of darkness? Will he consider introducing a brand mark system in order that owners of all animals may be known? The time for discussion has passed, and I and some of my colleagues say that action is now required.
    Mr. Gibson-Watt: The hon. Gentleman raises a lot of questions. First of all, I am not responsible for Press reports. Secondly, when the hon. Gentleman has read the report of the working party—the first report on this subject ever made under any Government—into this most important question, and when he has also read the cost-benefit analysis prepared by University College, Cardiff, he will get a good idea of how the working party has worked and the conclusions to which it has come. The sad business to which the hon. Gentleman has referred is a separate matter, but if he writes to me I will certainly look at it.
    Mr. Abse: While we are grateful to the Western Mail for having given advance information about the report. may I ask whether the Minister agrees that it is abundantly clear from the recommendations made that those of us on this side who for years have pressed for such a report have been amply justified?
    Further, would not the Minister agree that it is abundantly clear that this report will be as of naught unless and until the Government proceed to a new commons registration measure since in many constituencies so many sheep, goats and other animals have been registered that it appears, certainly in my constituency,
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    that there are more animals than electors? Until such time as we have rationalised schemes under the last Act, the report will be as of naught. When will legislation be produced?
    Mr. Gibson-Watt: I could not pass an opinion as to how many goats there are in the hon. Gentleman's constituency. He and his hon. Friends and many outside organisations who have made representations to the Government on this important question should read the reports. They will find something in them which is extremely helpful to local authorities.
    Several Hon. Members—
    Mr. Speaker: Question No. 3.
    Mr. George Thomas: On a point of order, Mr. Speaker. As you have cut supplementary questions on this subject, I beg to give notice that at the first opportunity I shall raise on the Adjournment both the subject and the leak.
    Mr. Gibson-Watt: Further to that point of order. I agree with some of the points the hon. Member made about commons registration, but—
    Mr. Speaker: Order. I have no desire to "cut" questions, but we have been seven minutes on two Questions. We must get on.

    Llantrisant (New Town)
    Mr. Kinnockasked the Secretary of State for Wales if he will now make a statement about proposals to establish a new town at Llantrisant.
    Mr. Rowlandsasked the Secretary of State for Wales whether he will make a statement on the proposed Llantrisant town before the House rises for the recess.
    Mr. Peter Thomas: Because of the importance of the issues involved and the need to give the most careful consideration to the very long report on the public inquiry, I shall not be in a position to announce my decision on the proposal before the House rises for the recess.
    Mr. Kinnock: Would the Secretary of State accept that his answer will be disappointing to the people of Wales? He has had long enough to chew over his inspector's report and his delay has

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    become interpreted as deliberate prevarication. Would he take on board yet again the emphatic feeling of people in the South Wales valleys and hon. Members that the whole project should be cancelled and all the monetary savings redirected to the extended and continued renovation of social and industrial amenities in the valleys?
    Mr. Thomas: The report was received in the Welsh Office on 7th June. It is a lengthy document running to well over 300 pages and it is undergoing careful study. The hon. Gentleman will agree that it would be irresponsible and unfair to the many people involved to arrive at a conclusion without the most deliberate consideration of all the factors.
    Mr. Rowlands: Is the Secretary of State trying to make an announcement about such a controversial decision in the quiet of the Summer Recess? If he wants to be fair to all concerned, let him be fair to the overwhelming majority of local authorities in South Wales which are bitterly opposed to the new town proposal. Would it not be better to spend time considering the constructive proposal to establish a Heads of the Valleys Development Corporation, a proposal prepared by the Heads of the Valleys Standing Conference in consultation with the Welsh Office?
    Mr. Thomas: A great deal of evidence has been received by the inquiry and particularly by the local authorities that the hon. Member mentions. I am sure he would agree that it is important that the closest consideration should be given to all these matters.
    Mr. Probert: In reaching his conclusion, will the right hon. and learned Gentleman pay particular attention to debates and Questions put to him and others on the subject over the past year or so?
    Mr. Thomas: I shall pay particular attention to all these matters.

    Bagillt Village (Redevelopment)
    Mr. Barry Jonesasked the Secretary of State for Wales when he proposes to sanction the Flint Borough Council redevelopment plan for Bagillt Village; and if he will make a statement.
    Mr. Gibson-Watt: The Welsh Office awaits further information from Flint
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    Borough Council before determining a preliminary yardstick application for 46 houses in the first phase of the Bagillt redevelopment. I understand that the council is reapplying for planning permission. The council has been given approval in principle for environmental improvements on an area in West Bagillt comprising 225 houses.
    Mr. Jones: I thank the Minister for that reply. Would he not agree, however, that Bagillt has "Bum denied decent amenities for far too long? Would he please ensure that every possible assistance and encouragement is given to the Flint Borough Council to improve the existing situation? Has not Bagillt suffered a massive rates and rental increase? Would he not agree that consequently Bagillt deserves only the best?
    Mr. Gibson-Watt: This matter is not being held up by the Welsh Office in any way if there are any points additional to those raised in the hon. Member's letter to my right hon. and learned Friend, we will certainly look into them.

    Blaenavon Hospital
    Mr. Abseasked the Secretary of State for Wales what representations he has received protesting against the proposals to close the Blaenavon Hospital.
    Mr. Gibson-Watt: My right hon. and learned Friend has received none. The Welsh Hospital Board is now obtaining the views of the public before submitting proposals to the Welsh Office.
    Mr. Abse: The Minister can be assured that he will receive many representations from the whole of the township of Blaenavon. Will he bear in mind that it is a township which has a disproportionate number of old people and a disproportionate number of old houses lacking facilities, and that if the local hospital were taken away elderly people who need short-stay support when they are ill would be in great difficulty, since they are the sort of people who would never obtain priority for being admitted to the hospital at Abergavenny? There is deep concern in the area that no precipitate steps should be taken to close the hospital, which was the prototype for the whole of the National Health Service.
    Mr. Gibson-Watt: I understand the hon. Gentleman's feelings about this problem and I am sure that the Welsh Hospital Board will look at the problem as sympathetically as possible.
    Mr. Kinnock: Does not the Minister as a sensible man agree that it would be ridiculous to close Blaenavon Hospital and other hospitals in north Monmouthshire before suitable alternative hospital accomodation is provided? Until suitable position can be made available, should he not implement the recommendation put to his Government and the Labour Government to site the district hospital in West Monmouthshire?
    Mr. Gibson-Watt: I cannot add to what I have said to the hon. Member for Pontypool (Mr. Abse). I certainly understand his problem. I am sympathetic and I am sure that the Welsh Hospital Board is too.

    Pedestrian Footbridge (Glynneath)
    Mr. Colemanasked the Secretary of State for Wales what provision is being made in the construction of the new trunk road being constructed at Glynneath for pedestrians to cross the road in the vicinity of the Lamb and Flag Hotel; and if he will make a statement.
    Mr. Peter Thomas: I expect most pedestrians to continue to use the pedestrian crossing over the existing trunk road. Persons who need to cross the new road will be able to use a footway leading to a point away from the junction of the two roads.
    Mr. Coleman: I am grateful for that reply. Does the right hon. and learned Gentleman recall the representations made to him about the existing pedestrian crossing? Is he aware that the same conditions will obtain with the new road and that the conditions will be intensified? Is he aware that since the construction of this pedestrian crossing a child welfare clinic has been constructed, which means that there will be considerable traffic across the road by parents taking children to the clinic?
    Mr. Thomas: I recall the correspondence about the crossing. That was about a year ago. I will keep the matter under review but, as we assess the position now, the existing crossing should be enough.

    Welsh Water Authority (Chairman)
    Mr. Roy Hughesasked the Secretary of State for Wales what is the salary of the Chairman of the new Welsh Water Authority.
    Mr. Peter Thomas: £6,000 per annum.
    Mr. Hughes: Is the Secretary of State convinced that the noble Lord can obtain the necessary leave of absence from his duties in the European Parliament? Does not this appointment reveal the paucity of Conservative talent in Wales? Is it not a case not only of jobs for the boys but of jobs for old-age pensioners?
    Mr. Peter Thomas: Since the announcement, there has been widespread approval of the appointment of Lord Brecon. Anyone who is fair would agree that his administrative skill and his ranging knowledge of Welsh affairs make him an admirable choice for this exacting position.
    Mr. George Thomas: Is the Secretary of State aware that no one doubts his ability at finding highly-paid jobs for Conservative politicians in Wales? Is he further aware that it is a brazen piece of political nepotism to put a former Conservative Minister in this appointment and that it will receive derision and contempt throughout Wales?
    Mr. Peter Thomas: There is no question of this being a political appointment, any more than there was any question of a former Labour Minister becoming Chairman of British Railways being a political appointment. One appoints to a job of this character the best person to fit the exacting duties.
    Mr. Gower: Does not that last question come oddly from a member of the former Government which appointed two Labour politicians in succession as head of the hospital board?
    Mr. George Thomas: Unpaid.
    Mr. Peter Thomas: It is clear that these questions are politically motivated and are not directed to the appointment at all. Everyone in Wales accepts that Lord Brecon will be admirable in the position as Chairman of the Welsh National Water Development Authority.

    Water Supply (Caernarvonshire)
    Mr. Goronwy Robertsasked the Secretary of State for Wales if he is aware of the repeated failure of the water supply in parts of Caernarvonshire, particularly the parish of Llanwnda; and if he will institute an immediate inquiry into the causes and the measures needed to ensure the supply.
    Mr. Gibson-Watt: Engineers from the Welsh Office have been in constant touch with the Eryri Water Board to monitor the position in this area and give advice as necessary.
    Mr. Roberts: Is the hon. Gentleman aware that these frequent shortages are having a most serious effect on homes, farms and workplaces in this district, and that especially at the height of the tourist season, which is the present situation, there may be acute danger to health? Will the hon. Gentleman confirm that the appropriate authority has a twofold statutory duty, namely to prepare the long-term plan which is proceeding and to ensure the day-to-day supply of this vital necessity for everybody within its territory? As the Secretary of State and his hon. Friend have a ministerial responsibility for this, will he not himself institute a special inquiry into the situation in this district? I can assure him that the position is rapidly becoming intolerable.
    Mr. Gibson-Watt: I accept what the right hon. Gentleman says, that this is a very severe problem in the parish of Llanwnda. I am sure that what he has said will be read and registered by the water board itself. I cannot say that I am yet convinced that there is a need for an inquiry. However, I would remind the right hon. Gentleman that there is a plumbo solvency problem in this water supply, and that officers of the water authority are advising the water board on this matter.

    Housing Developments (Code of Practice)
    Sir A. Meyerasked the Secretary of State for Wales whether he will consult with local authorities and with the building industry with a view to drawing up a code of good practice in housing developments which will eliminate unreasonable
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    delays in the removal of builders' rubble, the completion of access roads and the provision of effective surface drainage.
    Mr. Gibson-Watt: My right hon. and learned Friend has written to my hon. Friend about a particular case. I am making inquiries whether this is a widespread problem. Local authorities already have sufficient powers to deal with nuisances.
    Sir A. Meyer: Is my hon. Friend aware that many local authorities, certainly in my part of the country, consider that they do not have adequate powers to deal with the problems arising out of this situation? Is he further aware of the growing practice, first, of what one might call semi-bogus bankruptcies on the part of builders in order to evade their obligations to finish off an estate, and, secondly, of leaving one plot undeveloped on a site in order to enable builders to evade their obligations to finish off the roadway and complete tidying-up operations?
    Mr. Gibson-Watt: As I said to my hon. Friend, if this proves to be a widespread problem we will certainly look at it very closely.
    Mr. Ellis: Will the hon. Gentleman also consult the National Coal Board about the disastrous situation in the village of Rhosllanerchrugog in my constituency, about which 1 have written to him, where a large area in the middle of the village stands derelict with little likelihood of being built on because of the rules of the board relating to mining subsidence and mine workings at least 200 years old?
    Mr. Gibson-Watt: That is another question, but I shall be happy to look into the point which the hon. Gentleman has raised.
    Mr. John: May I assure the Minister that the problem raised by the hon. Member for Flint, West (Sir A. Meyer) is widespread and that many occupants of new houses have had the amenities of those houses severely damaged for many months while they have waited for the builders to honour their obligations and to honour the conditions of planning permission?
    Mr. Gibson-Watt: As I say, I am making inquiries into whether this is a widespread problem. If it proves to be,

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    we shall not be backward in looking into this question.

    Improvement Grants (Central Heating)
    Mr. Probertasked the Secretary of State for Wales if he will authorise improvement grants towards the cost of installing central heating in houses occupied by the elderly.
    Mr. Gibson-Watt: Improvement grants are already given for installing full central heating in old people's dwellings owned by local authorities, housing associations, charitable trusts and similar bodies. In other dwellings, grant towards the cost of space heating up to Parker Morris standard can be given when this forms part of a scheme for the comprehensive improvement of a dwelling.
    Mr. Probert: While accepting that local authorities and housing associations have Government assistance to provide this heating in accommodation for elderly people, does not the Minister think it unjust that elderly people who occupy and own their own houses and are not in a position to provide the finances necessary to install central heating, even where the houses comply with the 12 necessary factors to attract improvement grants, are unable to do so because of the present situation? Will the hon. Gentleman look into this matter and remedy what I consider to be a wholly unjust situation?
    Mr. Gibson-Watt: This is a complicated and difficult matter because whereas it is possible to ensure that council houses, where the installation of full central heating has been grant-aided, continue to be occupied by elderly people, this cannot be done where the house is privately owned. This, therefore, presents a formidable difficulty to the Government.
    Mr. Elystan Morgan: Can the hon. Gentleman say what machinery, if any, exists in the Welsh Office to bring home to local authorities their duties and their statutory obligations towards elderly people? Can he say whether the Welsh Office has taken any initiative in this matter? Does he appreciate that the problem is far more acute in Wales than it is in the rest of the United Kingdom because we have a far higher proportion on average of elderly people in Wales?
    Mr. Gibson-Watt: There are, indeed, a large number of circulars and communications which the Welsh Office sends and has sent to local authorities. If it is possible, I will get the list and let the hon. Gentleman have it.

    Royal Ordnance Factory Site, Pembrey
    Mr. Denzil Daviesasked the Secretary of State for Wales whether he will now approve the compulsory purchase order made by a consortium of local authorities in respect of the old Royal ordnance factory site at Pembrey.
    Mr. Peter Thomas: No. I understand that the acquisition of this land is at present the subject of negotiations between the consortium and objectors. If no agreement is reached it may be necessary for a public local inquiry to be held before I can give a decision on the order.
    Mr. Davies: Does not the Secretary of State realise that there is considerable resentment in my constituency at the failure of the Welsh Office to approve this compulsory purchase order? Further, does he not realise that the local authorities' ambitious plans to develop a countryside park have now been put in jeopardy by the intervention of a private property company whose sole concern is to make as much profit in as short a time as possible with no concern for the needs of the local community?
    Mr. Thomas: I do not know why there should be any resentment at the failure of the Welsh Office to approve the order. The hon. Gentleman may be aware that there was an inquiry set for 27th March 1973, that the inquiry appointed for that date was cancelled at the request of all parties concerned and that the local authorities and the objectors are still in negotiation. It would be improper for me to intervene at this stage in a matter on which I may in due course have to make a formal decision.

    Hospital Services (Anglesey)
    Mr. Cledwyn Hughesasked the Secretary of State for Wales what plans there are for improving the hospital services in Anglesey.
    Mr. Gibson-Watt: The Welsh Hospital Board has no plans for major improvements to the hospital services in Anglesey, but people on the island will benefit from the services of the new district general hospital at Bangor.
    Mr. Hughes: While welcoming any information which is available of the progress which has been made in acquiring the land which is necessary for the building of the new hospital in Bangor, may I express the hope that there will be a start at an early date? Is the hon. Gentleman aware that the small hospitals at Anglesey with their devoted staffs arc operating in old and unsuitable buildings? Can he say what plans he has to replace these buildings with one modern central building?
    Mr. Gibson-Watt: There are no immediate plans for what the right hon. Gentleman asks, but there is no doubt that sooner or later decisions will have to be taken by the Welsh Hospital Board or its successors on what the right hon. Gentleman is inquiring about.

    Hospital Waiting Lists
    Mr. Gowerasked the Secretary of State for Wales what progress has been made during the past 12 months in shortening waiting lists of patients in Wales needing hospital treatment; and if he will make a statement.
    Mr. Gibson-Watt: Between 31st March 1972 and 31st March 1973-the latest date for which figures are available-the number of people waiting for hospital treatment in Wales increased by 18 per cent. for in-patients and decreased by 9 per cent. for out-patients. I would refer my hon. Friend to the statement made by my right hon. Friend the Secretary of State for Social Services on 9th July regarding the action we are taking to reduce waiting times for in-patient treatment.
    Mr. Gower: Does not that underline the fact that the Welsh Hospital Board may have been rather hasty in closing some of the smaller hospitals, particularly as the smaller hospitals have shown themselves able to obtain the part-time services of nurses who are not prepared to work at long distances from their homes?
    Mr. Gibson-Watt: I take my hon. Friend's point about part-time nursing. That is certainly a point. On the other hand, I could not agree with him that the Welsh Hospital Board was wrong in closing these hospitals down. These decisions were taken only after considerable thought. Although they may have been unpopular in my hon. Friend's constituency, I fear that they had to be.
    Mr. Roy Hughes: Does not the Minister feel that his right hon. and learned Friend has been seriously remiss in not making a public statement and authorising a full inquiry into the death of Mrs. Alice Higgs of Newport, following the failure to obtain a cardiac operation at the University Hospital, Cardiff? Is there any truth in the Press report that the Secretary of State visited the hospital last Friday and that this serious matter was not discussed? Is not the Secretary of State aware that he has full responsibility for health matters in Wales, or has he not been told?
    Mr. Gibson-Watt: What the hon. Gentleman says is unreasonable. My right hon. and learned Friend is aware of the circumstances and he has received a preliminary report, which he is examining with a view to considering what further action should be taken.

    Employment (Wrexham)
    Mr. Ellisasked the Secretary of State for Wales what remit he has given to the task force in respect of employment prospects in the Wrexham constituency.
    Mr. Peter Thomas: I am asking the members of the Shotton Task Force to produce a separate report on the situation in the Wrexham area, taking into account the effects of the proposed rundown in employment at Shotton and the proposed closure of Gresford Colliery.
    Mr. Ellis: Will the right hon. and learned Gentleman draw to the attention of the task force the necessity to see whether it can succeed where apparently everything else has failed and the fact that it is the overwhelming opinion among industrialists, trade unionists, and local authorities in Wrexham that a connection between the Wrexham area and the motorway link is of the utmost necessity and that, in particular, improvements

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    to the A534 Wrexham-Nantwich road should be accorded the utmost priority?
    Mr. Thomas: Yes, I agree with the hon. Gentleman. Communications would obviously be a matter which would be very closely considered.
    Mr. Cledwyn Hughes: What work is the task force doing in relation to the rest of North Wales? If it is to pay attention to the problems of Wrexham, surely it should have a little time to pay attention to the problems of North-West Wales, where unemployment is far higher than it is anywhere else in North Wales.
    Mr. Thomas: With respect to the right hon. Gentleman there is a difference, because the task force has already considered the Wrexham situation in the light of the proposed rundown at Shot-ton, because one in eight of the Shotton labour force live in the Wrexham area and it was in the light of the proposed closure of Gresford Colliery that I thought that it would be right to have a separate report on Wrexham so as not to hold up the final Shotton report, which is nearly ready.

    Rivers (Cleaning)
    Mr. Johnasked the Secretary of State for Wales what further action he proposes to accelerate the cleaning of Welsh rivers.
    Mr. Peter Thomas: £88 million will be spent on improvements to sewerage and sewage disposal in Wales over the next five years. The creation of the Welsh National Water Development Authority together with the control measures to be proposed in the Environment Protection Bill will reinforce the improvement in rivers already achieved.
    Mr. John: Does not the Secretary of State realise that the latest figures of industrial and sewage effluent for Glamorgan, for example, show an improvement of only 1 per cent. in the last two years? Does he not agree that a very marked improvement will be necessary before river conditions in South Wales, particularly in Glamorgan, which are among the worst in the country, become tolerable?
    Mr. Thomas: As the hon. Gentleman knows, there has been a significant im-
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    provement in the quality of Welsh rivers generally over recent years. I agree that it is very important that attention should be paid to the rivers in Glamorgan. The hon. Gentleman will realise that the Environment Protection Bill will contain provision to give greater control over trade effluent discharges.
    Mr. Elystan Morgan: Is it not ironic that at one and the same time the Welsh Office is reducing the amount to be spent on sewerage schemes in the next two or three years in Wales by £21-million, this information having been given to a Committee of this House?
    Mr. Thomas: The £88 million which will be spent on improvements in sewerage and sewage disposal in Wales in the next five years, as hon. Members know, is an enormous advance on anything that has been spent in recent years.
    Mr. McBride: Has this expenditure of £88 million been, or will it be, in any way affected by recent cuts in public expenditure?
    Mr. Thomas: The £88 million is the assessment that I make in the knowledge that there had to be a moderation of public expenditure in 1973–74.

    Area Health Boards
    Mr. Elystan Morganasked the Secretary of State for Wales how soon he expects to be able to announce the names of his appointments to the area health boards in Wales.
    Mr. Gibson-Watt: Within the next few weeks.
    Mr. Morgan: Despite the fact that the Government have rejected democratic election to these area boards, will the Minister give an undertaking that the persons appointed will be representative of the areas as a whole and of the main interests therein? Further, will he confirm that these bodies shall not be the prerogative of innocent placemen or wrinkled old retainers, whose real qualification is that they have given loyal service to the Tory Party over the years?
    Mr. Gibson-Watt: That supplementary question comes badly from the Opposition When my right hon. and learned Friend and I took over the Welsh Office,

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    there was one Conservative upon the Welsh Hospital Board. I should like to give the House the assurance that our choosing of these people to run health in Wales will result in a balanced and able crew.
    Mr. George Thomas: Will the Minister of State confirm that the former Conservative Member for Swansea, West, Mr. Hugh Rees, is already lined up for the chairmanship in West Glamorgan?
    Mr. Gibson-Watt: I could not confirm that.
    Mr. Kinnock: In making these appointments, will the Minister take care to see that he gets people who will give voice to the feeling that it is stupid and occasionally tragic to shut down hospitals or specialist hospital units before suitable alternatives have been provided, so that we avoid cases such as the tragic affair mentioned by my hon. Friend the Member for Newport (Mr. Roy Hughes) and bring relief to people such as those in my constituency who have had to go to extraordinary expense to receive treatment as far afield as London and Liverpool?
    Mr. Gibson-Watt: One of the reasons why the Government decided to have area health authorities, and not a regional board, and to have community health councils was to do just the thing that the hon. Gentleman wishes.

  TRADE AND INDUSTRY

    Petrol Supplies
    Sir G. Nabarroasked the Secretary of State for Trade and Industry whether he will make a statement on forthcoming petrol supplies having regard to the prognosis of a fuel crisis in Western Europe and North America, including a shortage of petrol supplies during the years 1974–75 and thereafter.
    The Minister for Industry (Mr. Tom Boardman): No, Sir. There is no general shortage of petrol in the United Kingdom at present and none is expected. However, the supply situation is kept under close review by the Government.
    Sir G. Nabarro: The reports reaching me and others say that many thousands of retail establishments are likely to run short of petrol and associated fuels at a
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    very early date. Does my hon. Friend recall, for example, that only yesterday a banner headline in the Sunday Telegraph announced that 8,000 establishments would run out of petrol shortly? Is all this to be lightly discarded by no ministerial answer at all?
    Mr. Boardman: Yes, I am aware of the reports, which I have seen. They are not borne out by the facts as so far reported to me, although I am keeping close watch on the matter.
    It is correct, as I understand it, that some major companies, while not restricting their supplies, are charging for oil on a wholesale basis instead of giving rebates and special discounts. A number of independent companies previously bought spot oil wherever it was available, but due to the fluctuations in price this is not so easily obtained.
    Mr. McGuire: Does the hon. Gentleman agree that the best way for this country to avoid a serious energy shortage in the next decade and beyond is to develop to the full our indigenous coal industry? Does he agree that the bedrock for the coal industry is the generation of power by coal, and that what we want is an expanding power station programme for coal? When can the Minister make an announcement on Drax and West Burton?
    Mr. Boardman: We have been concentrating massive help on the coal industry and recognise its value as well as the value of the North Sea and our nuclear programme. These are all important elements in our energy policy.
    Mr. Skeet: Does my hon. Friend agree that talk of a fuel crisis in the United Kingdom is being thoroughly overdone? When does he think that the Forties and other fields will come into operation? How many will be available by 1977?
    Mr. Boardman: I agree with my hon. Friend that there is too much talk about crisis. Far too much of it relates to the different situation in the United States of America. It would be wrong to be complacent, and it is for that reason that we are giving the support which we are. With regard to the Forties and other fields, I direct my hon. Friend to the report to Parliament published about six weeks ago giving an indication of when the oil will start to flow.
    Mr. Eadie: Apart from the information we receive that, if inflation continues at its present rate, petrol could easily become El a gallon in three or four years' time, is the hon. Gentleman aware of reports that independent retailers of petrol are likely to find difficulty and are talking about going out of business? Will the first signs of this happening be that there will be fewer petrol stations retailing petrol in the United Kingdom?
    Mr. Boardman: We know of two companies that have given a warning to some of their non-contractual customers that they may not be able to supply them much longer. The Government are looking into the situation and are keeping abreast of what is happening and will wish to know from the oil companies what their plans are in this matter.

    Price Commission (Chairman)
    Mrs. Renee Shortasked the Secretary of State for Trade and Industry if he will dismiss the Chairman of the Price Commission.
    Mr. Tom Boardman: No, Sir.
    Mrs. Short: Why not?
    Mr. Boardman: Because the chairman and his colleagues play a leading role in the fight against inflation, and I am satisfied with the way in which they are doing it. I remind the hon. Lady that only one-third of the applications dealt with up until the end of June were approved in full. The remainder were cut back, rejected or withdrawn.
    Dame Irene Ward: Will my hon. Friend tell the hon. Lady that the country would be much better off if we could get rid of her?
    Mr. Arthur Lewis: I expected that the Minister would not agree to the suggestion contained in the Question. Is he aware that the TUC, shoppers. shopkeepers and the overwhelming majority of the public would like to see the name of the Price Commission changed to the Commission for Increasing Prices? Will he adopt that suggestion?
    Mr. Boardman: Shoppers and the great majority of the public wish to see our policy succeed and wish to see Labour Members supporting it to ensure its success.
    Mr. Benn: If the hon. Gentleman will not dismiss the Chairman of the Price Commission, will he ask him to look at a point raised by my hon. Friend the Member for Renfrew, West (Mr. Buchan) in a letter this morning to the Minister of Agriculture, Fisheries and Food drawing attention to the FAO bulletin showing that in the past three years the price of beef imported from the Argentine into this country has risen only 10 per cent. whereas the retail price has risen by 45 per cent.? Does not this point to the need for an early inquiry by the Price Commission into what is happening and has been happening to beef prices and profits associated with them?
    Mr. Boardman: The right hon. Gentleman would not expect me to comment on a letter which he says was delivered today to my right hon. Friend.

    Prices
    Mr. Biffenasked the Secretary of State for Trade and Industry if he will publish a discussion document indicating the Government's views on prices before talks about phase 3 are concluded with the CBI and TUC.
    Mr. Tom Boardman: The Government will continue to bear in mind the need for informed discussion of counterinflationary policy.
    Mr. Biffen: That does not answer my Question. Does my hon. Friend recall that phase 2 of the policy was announced at Lancaster House? Many of us think that the House of Commons is a more important and more significant forum in which the next phase of this vitally important policy should be announced. Will he convey that opinion to my right hon. Friends? Will he reflect that, if the next stage of the price policy is to elaborate on increases in the wholesale price of bacon in order to see that they are being fully reflected in the retail prices in the shops, as announced by my right hon. Friend the Prime Minister on Wednesday, it is difficult to escape the logic of the letter addressed to the Prime Minister by the hon. Member for Renfrew, West (Mr. Buchan)? I hope he will feel that this question gives him the opportunity for second thoughts and a chance to answer on that point.
    Mr. Boardman: I am sure that if my hon. Friend catches your eye later today, Mr. Speaker, he will raise that point. [HON. MEMBERS: "Answer the question."] There is to be a debate later today on this very point, and that will give the House an opportunity to discuss the issue which my hon. Friend has raised.

    Weights and Measures Inspection
    Mr. David Watkinsasked the Secretary of State for Trade and Industry what representations he is making to secure the adoption throughout the Common Market of the British system of weights and measures inspection for the protection of consumers.
    Mr. Tom Boardman: We have made abundantly clear in discussions with our partners in the Community and with members and officials of the Commission our preference for the adoption of the system employed in the United Kingdom.
    Mr. Watkins: Does the Minister agree that, in the light of his reply, any replacement in the system of weights and measures inspection which gives the consumer protection at the point of purchase by a system of average contents inspection carried out at the point of manufacture would be a serious reduction in consumer protection? Can he give an assurance that he will seek to ensure that such a system will not be imposed on the country?
    Mr. Boardman: We believe that there are obvious advantages in our system but there are clear advantages in a system being adopted which is common to the Community. We shall press that our system should be the one to be adopted.
    Mr. Powell: Would my hon. Friend welcome a resolution of the House in support of what he has just said?
    Mr. Boardman: We are resolved on our priorities, believing that ours is the best solution. We are also well aware that there are considerable advantages in having a common system for the Community. There would be advantages to consumers in this country as well as to those in the Community as a whole.
    Mr. Alan Williams: What impact or value would a resolution of the House
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    have if the Common Market countries decided to go ahead with their system?
    Mr. Boardman: A resolution of the House has a great impact on the Ministers concerned.

    Aircraft Noise (Heathrow)
    Mr. Hugh Jenkinsasked the Secretary of State for Trade and Industry if he is aware that Heathrow noise limitations are being exceeded by aircraft when landing; and if he will now introduce regular measurement of landing noise.
    The Under-Secretary of State for Trade and Industry (Mr. Cranley Onslow): No, Sir. For reasons explained in the reply given to the hon. Member on 20th October last, it would not be practical or safe to require landing aircraft to comply with maximum noise levels. Regular measurement of noise on landing would not therefore serve a useful purpose.—[Vol. 843, c. 157–81]
    Mr. Jenkins: Is it entirely untrue that the reason why the Government do not wish to introduce regular measurement of landing noise is that landing aircraft regularly break the noise limitation whereas aircraft taking off do not? More than 50 per cent. of landing aircraft break the noise limitation. Would the Minister agree that the reason why he will not introduce measurement of landing noise is that it would reveal this fact?
    Mr. Onslow: The hon. Gentleman is wrong as usual. [HON. MEMBERS: "Measure it."] I understand the hon. Member's anxiety that we should take any reasonable steps to mitigate aircraft noise, but what he says in this case goes too far. The reason is that aircraft approaching to land must, for safety reasons, keep to the glide slope and the pilot must be free to use the engine power accordingly without regard to whether more or less noise is made. If the hon. Gentleman is saying that he puts noise abatement before safety, he is wrong again.
    Mr. Jenkins: In view of the unsatisfactory nature of the reply, I shall seek to raise the matter on the Adjournment.

    Regional Employment Premium
    Mr. Radiceasked the Secretary of State for Trade and Industry what further conversations he has had with the CBI and the TUC about the regional employment premium.
    The Minister for Industrial Development (Mr. Chataway): I have nothing to add to the reply given to the hon. Member on 2nd July.—[Vol. 859, c. 18–20.]
    Mr. Radice: Is the right hon. Gentleman aware that there are widespread rumours that the Government are going to reverse their policy on the regional employment premium or at least put something very like it in its place? Will he remember his democratic obligation to tell the House of Commons first about the Government's intention rather than wait for the parliamentary recess? Will he tell us what is really happening?
    Mr. Chataway: Consultations are being held with the CBI and the TUC, and my right hon. Friend the Chancellor of the Exchequer will be making a statement as soon as possible. I am afraid I cannot give an indication of when that is likely to be.
    Mr. Edward Taylor: Will my right hon. Friend bear in mind that the regional employment premium is vital to Scotland, which gets about £40 million of the £200 million which is going? Will he take every possible step to ensure that if such a subsidy is removed it will be replaced or phased out in such a way that Scottish industry will not suffer?
    Mr. Chataway: My hon. Friend's views on this matter have been known for some considerable time but he will none the less recognise that, in assessing the matter, one has to consider the cost effectiveness of the premium and the likely contribution it makes to the long-term solution of the problems of a region. He will also recognise the very substantial success being achieved by the present measures under the Industry Act, including the fall in unemployment and the significant upturn in investment in Scotland and other regions.
    Mr. Varley: Is not that a complacent reply? Does not the right hon. Gentle-
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    man agree that the overwhelming evidence from both the CBI and the TUC is that the premium should be retained? Will he give an assurance that the Chancellor of the Exchequer, if he is to make an announcement about the retention of the premium, will make it to the House and not to another body?
    Mr. Chataway: I am sure that my right hon. Friend will take account of the point made by the hon. Gentleman. It would certainly be consistent with his past practice for him to give the information to the House at the earliest opportunity.

  "THE TRUCKERS' BIBLE"
  Mr. Ronald Bellasked the Attorney-General if he will refer to the Director of Public Prosecutions the booklet "The Truckers' Bible" published by an organisation called Release which is an instruction book for those engaged in illegal trafficking in drugs containing advice upon, among other matters, the bribing of Customs officers and the concealment of drugs; and whether he will make a statement.
  The Attorney-General (Sir Peter Rawlinson): A copy of the book has been sent by the Home Office to the Director of Public Prosecutions, who is considering the question of criminal proceedings. It would not be appropriate for me to make a statement at this stage.
  Mr. Bell: Is my right hon. and learned Friend aware that his answer will give considerable satisfaction to those who think that it would be quite wrong for such seditious matters to be published without there being any question of a breach of the law? Could he consider inquiring into the connection which appears to exist between the condonation of drug trafficking and the encouragement of drug-taking and certain elements in the Liberal Party?
  The Attorney-General: The last part of what my hon. and learned Friend has said is a matter for the Home Office. I am told that the Director of Public Prosecutions expects to make a decision by the end of the month about the book.

  LEGAL AID
  Mr. Clinton Davisasked the Attorney-General if he will make a statement on the Government's policy concerning increased financial limits for eligibility for legal aid.
  The Attorney-General: The matter is still under active consideration and I will make a statement as soon as I am in a position to do so.
  Mr. Davis: Will the right hon. and learned Gentleman explain his remark that the matter is still under active consideration? It has been under active consideration since about January or February, when the recommendation was first made. Is he aware that the failure to increase the eligibility limit from the income point of view is seriously imperilling the whole legal aid scheme, and that many injustices are arising because too many people who ought to be eligible for legal aid are not being allowed to get it because of the present ridiculous limit? Can he not give an assurance that something active will be done within the next week or so?
  The Attorney-General: The report was made in February and consideration has been given to it since then. I assure the hon. Gentleman that the point he has made will also be considered but I am not in a position to make a statement at present.
  Mr. S. C. Sillkin: The right hon. and learned Gentleman said that he will make a statement as soon as possible. Does he mean a statement to this House? If so, will it be before the recess? If it is not made before the recess, there will be a further three months' delay to add to the time since the advice referred to was given, and that would be quite unsatisfactory.
  The Attorney-General: It is most probable—indeed. certain—that there will be no statement before the recess. The matter is still being considered and a statement will be made as soon as possible.
  Mr. Peter Archerasked the Attorney-General when he expects to receive the recommendations of the Lord Chancellor's Advisory Committee on the
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  availability of legal aid for representation before tribunals.
  The Attorney-General: The advisory committee has only recently started to consider this matter. I cannot yet say when it is likely to report.
  Mr. Archer: While the committee seems to be displaying a commendable sense of urgency, does not the right hon. and learned Gentleman agree that to require comments on the working papers by 3rd September is possibly displaying an excessive sense of urgency, particularly since half the time allowed falls within the holiday period? As some people have been pressing for this sound recommendation to be implemented since it was made by the Franks Committee 15 years ago, would a further month make much difference?
  The Attorney-General: This is a classic dilemma. On the one hand one is pressed to deal with the matter urgently, and on the other hand one must have sufficient time to consider it. I note what the hon. and learned Gentleman has said, but we would consider the matter to be urgent and therefore have asked for the criticisms to be made by 3rd September.
  Mr. Geoffrey Finsberg: Will my right hon. and learned Friend ask the committee to look at the question of the payment of legal costs for owner-occupiers who have their properties threatened with compulsory purchase?
  The Attorney-General: I will ask the committee to see whether that matter comes within its terms of reference and, if so, whether it can take it into account.
  Sir Elwyn Jones: In the meantime, will the right hon. and learned Gentleman consider what further help can be given to community law centres which do a great deal of work before welfare tribunals, particularly in areas undermanned by solicitors?
  The Attorney-General: I appreciate the point. It does not quite arise out of this matter, but I will bear it in mind.

  PROFESSIONS (DISCIPLINE)
  Mr. Cordleasked the Attorney-General whether he will review the law

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  relating to disciplinary proceedings held by professional associations, unions, local education committees and kindred bodies.
  The Attorney-General: In my view, a general review over so wide a field is inappropriate. If my hon. Friend likes to tell me of any point which he has in mind, I will gladly consider it.
  Mr. Cordle: In the light of the problems encountered by the National Union of Teachers at present and by the Teesside education authorities in January last, will my right hon. and learned Friend consider publishing a simpler booklet to which they could refer on disciplinary matters?
  The Attorney-General: The matters my hon. Friend has in mind are not for me, but I will see that what he has said is passed to my right hon. Friend the Secretary of State for Education and Science.

  LAW OF CONTEMPT
  Mr, Arthur Davidsonasked the Attorney-General if, in view of the decision of the Law Lords in Attorney-General v. Times Newspapers Ltd., he now has any plans to amend the law of contempt.
  The Attorney-General: Any amendment to the law must await the report of the Phillimore Committee, which will certainly give full consideration to the judgments in this case. It has been asked to complete its report as a matter of urgency.
  Mr. Davidson: Is not the law of contempt now even more of a shambles than it was before, which is saying something? Does not the right hon. and learned Gentleman agree that, if the law remains as it appears to be at the moment, it will prevent the Press from carrying out one of its most important duties, that of exposing injustice? I acquit the right hon. and learned Gentleman any desire to limit the freedom of the Press, but does he not now agree that legislation is vital in this matter?
  The Attorney-General: It was because of the problems arising from the law of contempt, which are serious and which I
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  much appreciate, that I also played a part in ensuring that the Phillimore Committee would examine the matter and report. What this case sought to do, and what was done by agreement between the newspaper and myself, was to clarify this part of the law. Whether that law is satisfactory will be a matter for this House at the time to consider as soon as we have had the reflections of the Phillimore Committee.
  Mr. Ashley: Will the Attorney-General confirm that he has now sent a letter accusing me of "misrepresenting the facts" after I accused him of an ill-advised initiative in this matter on the Adjournment? As everyone knows, the initial move was made by the Sunday Times, but I was referring specifically to the House of Lords decision which arose specifically on the Attorney-General's initiative and on the initiative of nobody else. Therefore, will the Attorney-General now withdraw this serious charge and offer me an apology? Would he also care to confirm a point he made in his letter, that in his view there should be greater freedom of comment in civil proceedings?
  The Attorney-General: The hon. Gentleman said that this case began on my ill-advised initiative. I will quote to him a letter from the Sunday Times, which states:
  "The Sunday Times welcomes this decision"—
  that was the decision for litigation—
  "as one which is both sensible and constructive and although the Sunday Times has not been asked for or given any undertaking it is not its intention to frustrate the object of the proceedings by publication of the article prior to judicial determination."
  The judicial determination was being sought on the initiative of the Sunday Times. In the course of those proceedings, the editor frankly said that he had been given legal advice that the article which was the subject of the proceedings was in a category different from that of the article published hitherto. It was therefore taken before the courts for the courts to make their decision. The Sunday Times appealed to the Court of Appeal. I appealed to the House of Lords. It was in the contemplation of all parties that we would get a final decision in the highest court in the land. That is what we have on the law as it stands at present.
  Sir Elwyn Jones: In considering the matter of contempt generally, will the right hon. and learned Gentleman bear in mind the recent relaxation in the sub judice rule as it applies to the House of Commons and the fact that this relaxation has extended the freedom of right hon. and hon. Members and, through them, of the Press to report Members' views on matters which are or may be the subject of litigation, with in many cases an advantage to the public interest?
  The Attorney-General: This is clearly a very important matter. The House came to that conclusion and decision, which was welcomed on both sides. It is a matter which I have no doubt that the Phillimore Committee will take into account when it makes its recommendations and doubtless the House will take it into account when, as I hope, there comes the time when we consider whether there should be legislation.
  Mr. Ashley: On a point of order, Mr. Speaker. As the Attorney-General has made a serious allegation about my misrepresenting the facts, and as I have proved him completely wrong in fact, will he apologise—
  Mr. Speaker: Order. The hon. Gentleman must use the usual form.

SHIPBUILDING (GOVERNMENT POLICY)
The following Questions stood upon the Order Paper:
MR. MCMASTER: To ask the Secretary of State for Trade and Industry if he will now make a statement of Government policy in respect of support for British shipbuilding, in the light of the Booz-Allen Report.
DAME IRENE WARD: To ask the Secretary of State for Trade and Industry if he will make a statement on shipbuilding and ship repairing arising out of the discussions which have been proceeding on the Booz-Allen Report.
The Minister for Industrial Development (Mr. Christopher Chataway): With permission, Mr. Speaker, I will now answer Questions 31 and 36.
From the consultations I have had it is clear that there is agreement among both
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unions and employers with the general thesis of the Booz-Allen Report that if the major firms are to survive increasing competition their weaknesses must be remedied, although the report's calculations about the decline in employment in the industry are not accepted by either side. All those consulted accept—as do the Government—the importance of shipbuilding in certain areas of high unemployment.
With the recent upturn in orders, the situation of the British shipbuilding industry, at least in the short term, has dramatically improved since the report was prepared, and there is no doubt that the industry has a unique opportunity in the years immediately ahead to re-equip and modernise. It is also in a better position than Booz-Allen envisaged to finance such modernisation schemes.
I have concluded, therefore, that the next step should be to consider under Part II of the Industry Act investment proposals for individual projects in the assisted areas, and to do so on the same basis, with one important exception, as investment proposals from other industries. Thus, although there may, as with other industries, be some cases for exceptional consideration on employment grounds, our approach will be to treat shipbuilding applications within the same guidelines and the same financial limits as are employed for all other manufacturing industry in the assisted areas.
This, of course, involves a critical appraisal of a company's management, market and product range, labour relations and practices, and general prospects of viability. It means also that the company must agree to provide full information to enable us to monitor its performance.
The normal rules for selective capital assistance are so framed as to encourage the creation of additional employment in assisted areas. As Booz-Allen makes clear, however, a big increase in output per man is a vital necessity in shipbuilding. I propose, therefore, that we should make one exception for shipbuilding to the general guidelines. We shall be prepared to give the same favourable loan terms to modernisation schemes in the assisted areas which do not increase employment as we normally give only to those which do provide more jobs. I

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hope shortly to be able to make an announcement under these arrangements about the first modernisation scheme which I am considering. This concerns the yards at Sunderland, which are owned by a subsidiary of Court Line.
My right hon. Friend the Minister of State for Defence has accepted the BoozAllen view that the Ministry of Defence should concentrate its orders for warships on the three specialist builders. The mixed naval and merchant shipbuilders will, however, continue to be able to tender for Royal Fleet anxilliaries and other Ministry of Defence vessels. Any application for financial assistance for the modernisation of the mixed or the specialist warship building yards in the assisted areas will be considered by my Department under the arrangements I have already outlined. I shall keep the House informed of the progress achieved.
Mr. McMaster: I welcome my right hon. Friend's report and his rejection of the excessive pessimism in the BoozAllen Report. Will he, nevertheless, because of the importance of employment in the areas concerned and the importance of heavy capital industry and the continuing prosperity of the shipyards, expedite his final decisions on the report? Has the rationalisation which was recommended by Geddes been completed? Is there further scope for rationalisation in view of the intense competition from Japan, in particular, whose yards were built up under a protective tariff?
Mr. Chataway: A considerable rationalisation has been carried out since the Geddes Report. I would not rule out the possibility of further moves in that direction. I agree with my hon. Friend that we must always take into account the fact that 90 per cent. of the shipbuilding is situated in the development areas.
It will be important to arrive at as early decisions as we can in relation to some of the modernisation schemes, as clearly there is at present a particularly favourable situation for securing orders overseas. None the less, the House should not underrate the size of the task of looking in detail at a number of major projects, and it may well be a year before decisions have been reached in all the major cases.
Mr. Dell: Can the Minister now say in what form he intends to put capital into Cammell Laird? Can he confirm that he does not expect any decline in employment in that shipbuilding yard?
Mr. Chataway: There have been very difficult negotiations about the form in which the support should be put into Cammell Laird and the nature of the capital reconstruction. These difficult negotiations derive from some very complicated provisions which were arrived at in 1969 and 1970. I hope that we shall be in a position finally to clear that up before too long.
It is certainly not the company's view that there should be any significant number of redundancies.
Dame Irene Ward: I thank my right hon. Friend very warmly indeed for all the trouble that he has taken to consider the Booz-Allen Report and all its implications. Since I am technically in no position to comment today on what he said, when the House comes back after the recess, if there are any points or comments about his statement that have been made by the shipbuilders and the shipping and ship repairing people, either for the assisted areas or about shipbuilding in general, will he then use his good offices to let us have a debate on the whole of the policy that he announced, in view of the fact that various parts of the country must have different attitudes-[Horn. MEMBERS: "Too long".] I know that hon. Members opposite are not interested in what the Minister said. May I know that I shall be able perhaps to have a debate when the House reassembles? I thank my right hon Friend very much for all that he has done.
Mr. Chataway: I know that my right hon. Friend the Leader of the House, who is present, has taken note of what my hon. Friend said about the desirability of a debate. I much appreciate what she said and I recognise that she is right in regarding my statement as perhaps one about procedure. I shall, by the most suitable means, try to keep the House informed as we make further progress.
Mr. Robert C. Brown: Will the Minister resist the temptation to ignore Swan Hunter just because at present it has a good, long order book? It is now

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that it needs some money to modernise to face the rigours of the future, particularly in relation to the former Vickers dry dock, which his right hon. Friend murdered in the name of the lame duck policy immediately after the last election.
Mr. Chataway: I agree that it is very important that the industry should not think that, just because order books are now long, the problem has been solved. That perhaps has been an attitude too frequently adopted in the past. The hon. Gentleman might reflect that he would help the process of speedy modernisation if he persuaded some of his right hon. and hon. Friends who are responsible for policy formulation in the Labour Party to drop their nationalisation proposals.
Mr. S. James A. Hill: How will the shipyards outside the assisted areas, such as Vosper, Thorneycroft in Southampton, which is building warships in competition with yards which are getting the full benefits of any aid that the Government may provide, benefit from my right hon. Friend's statement today?
Mr. Chataway: The shipyards outside the assisted areas, of course, get the benefit of construction grants and shipbuilders' relief. I am referring particularly to merchant shipbuilders outside the assisted areas. But it would not be right to give to yards outside the assisted areas the kind of assistance that is specifically reserved for industry within the assisted areas and which is given for employment reasons.
Dr. Dickson Mabon: Does the Minister realise that many members of the all-party shipbuilding group in the House who came to see him did not accept the reference to a decline in employment in shipbuilding? Would the Minister assure us that, in considering the applications that are being put forward to him-for example, by, in my constituency, the Scott Lithgow group-he will not use as a rather dull and pessimistic criterion the approach that he does not want to increase employment in shipbuilding? Will he confirm that, in the second stage of his consideration, he will process these applications as speedily as possible, and certainly this year?
Mr. Chataway: I shall certainly ensure that we process these applications as
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speedily as is consistent with giving them a thorough scrutiny. Naturally, I want to see as many people as possible employed in viable shipbuilding firms, but we must take account of the recommendations of the Booz-Allen Report in relation to the need for much higher productivity in shipbuilding.
Mr. Edward Taylor: My right hon. Friend referred to the upsurge in shipbuilding orders in our yards. Has he made any assessment whether, over the next two or three years, these orders will prove generally profitable? Could he also say whether he has made any assessment of the progress being made by Govan Shipbuilders, which appears on the face of it to be very encouraging?
Mr. Chataway: I think that considerable progress has been made by Govan Shipbuilders and it would be right to say that, over all, shipbuilders are considerably more optimistic than they have been at many times in the past about the likely profitability of the orders that they have been able to win over the last six months.
Mr. Willey: On behalf of the all-party delegation which met the Minister, may I thank him for making this statement before the recess, as he promised? Would he make a statement also on the progress made in the discussions on the European aspect of aid to shipbuilding? May I be assured that he will get a very early decision now in the case of the Doxford yards? Also, what is the position of Austin Pickersgill?
Mr. Chataway: I am aware that the European Commission has begun to consider the possibility of a Community shipbuilding policy. We are ready to join in discussions on such a policy and to review our own plans in the light of any agreement which might emerge. But it is not clear at present what form such a policy would take, and it would not be right to delay these decisions to await the outcome of discussions which may take a long time.
Mr. Ian Lloyd: Does my right hon. Friend realise that some of us find his statement a little disturbing? What guarantee can he give that large sums of the nation's capital will not continue to be poured into yards which in the long

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term have absolutely no hope of competing with yards abroad? Can he give us any indication whether, on the more positive side, some of the nation's capital will be made available for new greenfield sites which have some hope of competing?
Mr. Chataway: The purpose of commissioning the Booz-Allen Report was that the difficulties, the weaknesses and the strengths of the British shipbuilding industry could be laid out for the industry itself and this House to see. We now have to look at individual proposals for modernisation on the basis of the considerable information that is contained in the report. I agree with my hon. Friend that it would not be right, and that it would do no one a favour, to put Government money into projects with no prospect of viability. It is for that reason that we should be right, I believe, to proceed as I have suggested, by treating proposals for modernisation in shipbuilding on broadly the same basis as we treat proposals for new investment in any other industry, and treating them within the same guidelines—with the one exception that I mentioned.
Mr. Benn: Could the Minister tell the House how much cash, in terms of millions of pounds, the Government have set aside through the Treasury for this support? Second, is he aware that this industry has received £171 million of public money over the last five years and that that, more than anything, explains why the TUC and the Labour Party favour public ownership? Third, is the European Economic Commission required to approve his plans and does he have agreement from the Commission for them? Finally, could he be a little clearer about the redundancies which might be involved, since employment in the industry has declined from 215,000 in 1948 to 73,000 in 1971, and Booz-Allen's lowest estimate involves a further fall to 25,000 or 27,000, which would be quite unacceptable in view, as the Minister knows, of the rapidly growing world market for ships?
Mr. Chataway: On the European Commission, my proposals are consistent with the Treaty of Rome and with the directive on aids to shipbuilding adopted by the Community in July, 1972. Therefore,
1164
individual permissions are not required on these matters. As for the final cost and the final employment figure involved in reshaping the British industry, clearly one cannot at this moment make estimates, because they depend upon the vigour-[HON. MEMBERS: "Why not?"] They depend upon the vigour with which the industry responds to the Booz-Allen Report and the proposals that are put to us for modernisation of individual yards.
As for the right hon. Gentleman's observations about nationalisation, 1 found at least one thing strongly to commend in the proposals that he put forward the other day. That was the exemption of the Marathon Shipbuilding Company from his nationalisation proposals, on the ground, I gather, that it has injected capital and expertise into an area. I only hope that that concern for an American company may in time extend to one or two British companies.

HONOURABLE MEMBER FOR ISLE OF WIGHT
Mr. William Hamilton: On a point of order, Mr. Speaker. You will recollect that on Friday last the hon. Member for Isle of Wight (Mr. Woodnutt) sought to imply that I had not given him notice that I proposed to raise the question of Bembridge harbour during the debate on the Consolidated Fund Bill. I wish to make quite clear that that is completely false. I gave him notice in a letter which was put on the Members' message board on Thursday morning. If he did not get it on Thursday, that is not my fault.
Mr. Woodnutt Mr. Woodnutt rose—
Mr. Speaker: Order. We cannot debate this matter now. I was asked for guidance about the convention of the House, and I said that the convention was that notice should be given. The time of the House cannot be taken up by two hon. Members arguing about whether the notice was adequate.
Mr. Woodnutt: May I seek your further guidance, Mr. Speaker? The hon. Member for Fife, West (Mr. William Hamilton) made most defamatory statements about me on Thursday evening, all of which were quite untrue. If he had

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read The Times on Saturday he would have seen that two of them had been refuted by The Sunday Times and Thomson Newspapers. The hon. Gentleman is obviously perpetuating this matter. I accept that he put a notice on the board for me. I was not here. I was at the Royal Isle of Wight County Show. If an hon. Member proposes to make defamatory statements about another Member, is it adequate notice for the hon. Member—in this case myself to receive the notice on the morning following the day on which the defamatory speech was made?
Mr. Speaker: I was asked for guidance, on a point of order, and I doubt that it was a point of order. The guidance which I gave was that notice should be given when an hon. Member intends to make defamatory or critical statements about another Member. Hon. Members take responsibility for their own statements. It is not a matter for the Chair.
Mr. Hamilton: The hon. Member for Isle of Wight did not give me notice that he would raise a point of order on Friday morning. I was in the Tea Room at ten o'clock on Friday. The hon. Gentleman gave me no notice on Friday that he would raise the matter—

MAPLIN
Mr. Nigel Spearing: 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 publication by Her Majesty's Government of two consultation papers concerned with transport links to and new town proposals associated with the proposed airport at Maplin."
It is unusual that consultation papers should be regarded as a matter of urgency or importance, but in this case there is an important feature of one of the consultation papers, namely, that proposing a new town-and a very large one at that -in association with the Maplin development in that it has been presented after the Bill concerning the airport and seaport has not only been presented to the
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House but has left this House for another place. The Long Title of the Bill did not permit discussion of the principle of any such urban development. That is the main feature which I wish to draw to your attention, Mr. Speaker. The consultation paper is a matter of intent and, therefore, more a White Paper than a consultation paper.
The second important point is that this is an acknowledged national issue. The importance to London of a new town with up to 300,000 people and the importance to the rest of the country in respect of occupations and people in the South-East is beyond question. The importance of the topic is such that I understand that the Prime Minister has taken notice of it. He has said that it is important, and I understand that he has taken steps to let certain hon. Members know that he considers it to be so.
I turn to the question of urgency. The local authorities concerned in this matter have been given 11 weeks in which to reply to the Government's consultation papers-in other words, during the middle of the Summer Recess and the summer holidays for them as well as for everybody else. In that time the Greater London Council will have one meeting, the Southend Borough Council will have one meeting, and I understand that the Essex County Council has no meetings planned.
In addition, there has been no discussion in this House or, as far as I know, anywhere else about how far a new town is necessary as an adjunct to the Maplin project. The Government have given us no opportunity to discuss it, nor has there been a Green Paper or White Paper, either on the Maplin project as a whole or on this substantial urban development.
On Wednesday next the House of Lords will debate a re-committed Maplin Development Bill. Therefore, their Lordships will have the opportunity of discussing the important consultation papers which the public and this House have received today. I do not think that discussion will be ruled out of order in the House of Lords; otherwise, it would make nonsense of the matter. But we, despite having passed the Bill, have not had an opportunity of discussing it. It would be wrong for their Lordships to debate this matter when we have not had

1167
an opportunity to discuss it and they will not know our views.
It is clear that the Government are not sure about their own intentions as I have had contrary statements from two Ministers—
Mr. Speaker: Order. The hon. Gentleman is getting very close to the speech which he would make if his application were granted.
Mr. Spearing: I apologise, Mr. Speaker, for not mentioning that this would not be a matter of urgency but for the fact that the Government, having released the consultation papers, know that the House will go into recess in two days' time.
This morning the Ministers concerned gave a Press conference at their Ministry. Therefore, members of the Press have been able to question them on this matter. No statement has been volunteered to this House today and, therefore, hon. Members have not had the opportunity of questioning Ministers on these matters, including the timetable of the Government's decision and intentions. Therefore, unless we have a debate before the recess, hon. Members will have to wait two-anda-half months to question Ministers responsible for this matter, whereas members of the Press had ample opportunity to question them this morning.
Therefore, in view of the importance of this matter, its urgency and the importance of the House of Commons and the accountability of the Executive, I submit that we should debate this matter before we adjourn on Wednesday.
Mr. Speaker: The hon. Gentleman was good enough to give me notice of his intention to make his application. Also, he did something which has not, I think, been done before in my time in that he submitted notes of his speech and the points which he proposed to make. Therefore, I have had a very good chance of considering his argument and, indeed, of looking at the documents. Under a Standing Order No. 9 application I must give my decision without stating reasons. I merely suggest that hon. Members look at the documents to which reference has been made. I cannot allow the application.

FRENCH NUCLEAR TESTS
Mr. Tam Dalyell: 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 reluctance of the British Government to join the Governments of Canada, Australia and New Zealand, Chile, Japan and other countries to protest against French nuclear testing."
This matter is urgent because an evil atmospheric explosion has already taken place. It is specific because, although the French Government have not confirmed it, we have ample evidence from the New Zealand warship "Otago". If Mr. Trudeau of Canada, with his French-Canadian problems, can afford to protest, so can the British Government.
It is important also because we are in a position to do something about it, in that the British Prime Minister is supposed to have a special relationship with President Pompidou, and President Pompidou can call off these tests. I therefore submit that this is a matter of urgency.
Mr. Speaker: My decision reflects not at all on the merits of the case. I simply have to say whether or not under Standing Order No. 9 we should have another debate on this matter. I cannot accept the hon. Member's request.

MAPLIN
Mr. Anthony Crosland: On a point of order, Mr. Speaker. You ruled on the Standing Order No. 9 application for a debate on the Maplin consultation papers, and that settles that, but may I raise the following point with you, particularly as the Leader of the House is here?
These papers amount to major statements of new Government policy. The House is rising on Wednesday and we shall have no opportunity of discussing them. I say nothing of the widespread rumours that are circulating about the cooking of the various noise statistics that apply to Maplin. May I through you, Mr. Speaker, put to the Leader of the House that the least we ask for is

1169
that the Secretary of State for the Environment should make a statement on these two consultation papers.
Mr. Speaker: Order. No doubt the right hon. Gentleman will consider that suggestion.
Mr. Arthur Lewis: Further to that point of order, Mr. Speaker. I am not going into the reason why the Standing Order No. 9 application has been turned down. May I ask you what is the position? My right hon. Friend the Member for Grimsby (Mr. Crosland) asked the Minister to make a statement but the Leader of the House has not risen to respond. You may not be aware, Mr. Speaker, that, whereas Members of Parliament have only just received this document, the Daily Express has a full-page complete statement which can only have been given through the Minister. Is it not treating the House with contempt for the Minister to give all the information to the Daily Express and not make a statement to the House, and for the Leader of the House to refuse the suggestion of my right hon. Friend that a statement should be made?
Mr. Speaker: That is not a point of order. That is a matter for the Minister. The Leader of the House is present, he has heard the right hon. Gentleman's suggestion, and it now rests with him.
Mr. Crosland: May I press this matter, Mr. Speaker? It is not just the question of an interview with the Daily Express. I understand that the Secretary of State for the Environment today—and I make no criticism of this—has given or is giving a large number of television and radio interviews and making statements to the Press on this question. Major matters of national policy are involved here-a huge new town in the South-East and access routes which, incidentally, will involve the demolition of thousands of houses—
Mr. Anthony Fell: On a point of order—
Mr. Crosland: I am on a point of order. May I, Mr. Speaker, through you press the Leader of the House to rise to his feet and assure the House that the Secretary of State will make a statement tomorrow?
Mr. Speaker: Order. That is as far as the matter can possibly go. This is more a point of business than of order. I allowed the right hon. Gentleman to ask the question, but it is entirely for the Leader of the House to decide whether or not he responds to it. That is for him.
The Lord President of the Council and Leader of the House of Commons (Mr. James Prior): Further to that point of order, Mr. Speaker. The document which has been published today follows a long series of documents which have been published on the Maplin project. The House is well aware that before a final decision is taken there will have to be another debate in this House. From that point of view, it did not seem unreasonable that documents outlining the possible routes and the area of the new town development should be made available. With this in view, my right hon. and learned Friend, naturally, thought it correct to make these documents available to the public and local authorities at the earliest possible moment. All these matters will be in order for discussion in future debates on Maplin. My right hon. and learned Friend and the Government have made clear that before the project can go ahead there must be further debates. The House will have ample opportunity later to debate these matters.
Several Hon. Members Several Hon. Members rose—
Mr. Speaker: Order. The one thing that the House is not going to do is to debate it now.
Sir Bernard Braine: On a point of order, Mr. Speaker. The document under discussion touches almost wholly upon my constituency and makes proposals which will involve massive changes to the community which I and my hon. Friend the Member for Southend, East (Sir S. McAdden) represent. The document has been delayed and has appeared just before the recess. Surely it is in order to ask that note be taken that a statement should be made so that questions may be asked before we rise?
Mr. Speaker: That is not a point of order. It is more a question of business. I allowed the right hon. Member for Grimsby (Mr. Crosland) to put that point

1171
to the Leader of the House. How the Leader of the House answers is not for me. It is not a matter of order.

HARRIER AIRCRAFT
The Minister of State for Defence (Mr. Ian Gilmour): With permission, Mr. Speaker, I should like to repeat a statement that has been made in another place by my right hon. and noble Friend the Secretary of State for Defence about the progress that the Government have made in their consideration of the project for a maritime version of the Harrier aircraft. The statement reads as follows:—
"The evaluation of the results of the project definition studies has now been completed, with technically satisfactory results. There still remains, however, the question of the priority to be accorded to the project in comparison with other important projects which compete for defence budget resources. The usual annual review of the forward defence programme in relation to public expenditure as a whole is in progress and meanwhile it would be premature to authorise full development of the aircraft. Pending a final decision the present design effort work at the firm will continue to be supported."
Mr. Judd: Does the Minister accept that the fact that the statement was originally made this afternoon in another place is yet another manifestation of the unfortunate situation with which the House is confronted on defence policy? The Opposition believe that the place for the Secretary of State for Defence is in this House and this House alone.
The Minister referred to the technically satisfactory results of the evaluation. Will he comment in more detail upon the all-weather viability of the aircraft for naval service? On the policy front, will he accept that leaving the decision in limbo once again-which is what the statement does-is yet another chapter in the endless story of procrastination by the Government in making up their mind about this significant project? Will not the continuing uncertainty have an adverse effect upon the morale of the long-suffering personnel of the Fleet Air Arm?
Does the Minister appreciate that the Opposition will want to watch closely the expenditure involved and that, above all, we believe that we owe the Navy a clear-cut policy statement as soon as
1172
possible, especially in view of the misgivings about whether we have a coherent, economic and completely effective policy for air support for the Fleet?
Mr. Gilmour: I do not think that the hon. Gentleman will expect his first question to be taken seriously. I certainly take his other question seriously. As I said, the results of the evaluation of all-weather capability were technically satisfactory. The hon. Gentleman accuses us of procrastination, but he will understand the desirability of not ordering a project and then having to cancel it. He will understand also that we are anxious to avoid the mistakes of our predecessors in this respect.
The hon. Gentleman referred to the morale of the Fleet Air Arm. He believes that the morale of the Fleet Air Arm is much more fragile than it is. The morale is very good. However, I accept that the Fleet Air Arm, like everyone else, would like a decision as soon as possible.
The hon. Gentleman spoke fairly about the Opposition's view on expenditure. I know that he has a personal interest in this item of expenditure and I am sure that he recognises that on the Opposition's defence programme there could he no possible chance of the maritime Harrier being ordered.
Mr. Wilkinson: Does my right hon. Friend agree that this is a sad day for the Fleet Air Arm? Does he realise that the total number of take-offs and landings at sea for this aircraft exceeds 1,500, that it has an approved weapons system with export potential, and that all that is now needed is a little faith in the aircraft? Will he look into the proposed transfer of the artillery facilities from Shoeburyness to the North of Scotland at a cost of £40 million? If the Minister wants to develop this aircraft, will he examine the possibility of obtaining funds from that source?
Mr. Gilmour: I accept that the Navy wants this weapons system; otherwise, it would not be asking for it. But I think that my hon. Friend is overdoing it a little when he says that this is a sad day. We deferred the decision for about two months. I agree with what he said about the export potential of the aircraft. It is a very fine aircraft and we hope to order it, but we have to take into account

1173
the general situation in regard to public expenditure on defence.
Dr. David Owen: Is the Minister aware that the defence cuts promised by the Chancellor of the Exchequer have not yet been revealed to the House? Is he further aware that those of us who are becoming increasingly concerned about the defence budget in future years will press upon him some caution in accepting projects which will involve substantial expenditure, bearing in mind that the unit cost of the cruiser is now over £70 million and that with the equipment, such as helicopters and the V/STOL, it will be £80 million? Does he agree, without committing himself to any future expenditure, that by the time the cruiser comes into being, this will amount to £100 million unit costs? Does he not agree that this is a substantial expenditure which has to be looked at with great caution?
Mr. Gilmour: I do not necessarily accept the hon. Gentleman's figures, but I accept that the cruiser and the weapons system that go with it are a large item of expenditure. This is why we are scrutinising the matter carefully and have not come to a final decision today.
Mr. Wiggin: I accept that the Harrier may not be an ideal naval aircraft, but will my right hon. Friend say what future aircraft will fly off the through-deck cruisers if it is not to be the Harrier? Will he assure the House that the absolute necessities for the defence of the nation will not be subjugated to the penny-pinching of the Treasury?
Mr. Gilmour: I hope that the defence needs of this nation will never be subjected to the penny-pinching of the Treasury, and I would not accuse my right hon. Friend the Chancellor of the Exchequer of any such attitude. My hon. Friend the Member for Weston-superMare (Mr. Wiggin) has slightly misunderstood what I said. We came to the conclusion that the Harrier is a very good naval aircraft, and there is no question of flying any other fixed-wing aircraft, apart from helicopters. This is a question of expenditure.
Mr. Dalyell: The Minister said that he did not accept the figures put to him by my hon. Friend the Member for Plymouth, Sutton (Dr. David Owen). Since
1174
those were very modest figures, in what respect does he not accept them?
Mr. Gilmour: For reasons which I have given to the hon. Member for West Lothian (Mr. Dalyell) before, he knows full well that we do not reveal our figures of expenditure on particular projects.
Mr. Adley: Does my right hon. Friend accept that criticism from the Opposition about delay in the Harrier comes a little ill from the Labour Party which did what it did to the TSR 2? Will he note that many of us think that we have been fairly patient waiting for the go-ahead on the Harrier? Will he accept that we believe that in due course the vertical take-off aircraft will have a big future and that we shall place ourselves in an invaluable position if we push ahead with this form of defence technology?
Mr. Gilmour: I accept that my hon. Friend and many others have been very patient about this matter. It has taken a very long time, and I am sorry to have disappointed him and others of my hon. Friends by what I said this afternoon. What he said about the TSR2 relates to the point 1 tried to make a little earlier in answer to the hon. Member for Portsmouth, West (Mr. Judd). We are anxious to avoid what happened under our predecessors-namely, that projects were ordered and then shortly afterwards cancelled.
Mr. Frank Allaun: How far have the Government gone with the through-deck cruiser? In view of the indecision over the Harrier, is it not sensible not to proceed with the vastly more expensive project of the through-deck cruiser? Some of us would like to see neither.
Mr. Gilmour: I know that the hon. Member for Salford, East (Mr. Frank Allaun) would like to see no defence expenditure at all, but that is a different matter. The answer to his first question is that we have ordered one cruiser. The answer to the second question is that the primary capability of the cruiser is in anti-submarine warfare and command and control and air defence. The maritime Harrier has always been a bonus on this capability.
Sir H. Harrison: May I thank my right hon. Friend for his statement and for

1175
assuring the House that he has this project in mind? When he makes his next statement to the House, will he bear in mind what he said about getting the financial side of these projects right, and will he be able to give some outline of the cost?
Mr. Gilmour: I am grateful to my hon. and gallant Friend. He is right to say that we keep the financial aspect of these weapons system very much in mind all the time.
Mr. Judd: Is not the correct interpretation of the Minister's answers that he has come to the conclusion that for economic reasons this is not a feasible project? Would it not be fairer to the Navy to have the guts to say so now and be done with it?
Mr. Gilmour: I do not think that that interpretation can be read into any of my answers this afternoon. I made clear that the project is very feasible indeed. It has come very well out of the project definition studies. But we cannot yet be certain that we could order this aircraft without cancelling possibly even more important weapons systems.
Major-General Jack d'AvigdorGoldsmid: Will my right hon. Friend clarify one point? Since this is a British aircraft, do the Government intend to sell it in future to other countries but to deny the use of it to our own Navy?
Mr. Gilmour: It is a British aircraft and it is already used by the Royal Air Force. We shall also be willing to sell it to any other country that wishes to have the advantage of this extremely good aircraft. It is not a question of denying it to our forces since the Royal Air Force has it already.

ORDERS OF THE DAY

  CONSOLIDATED FUND BILL
  Considered in Committee; reported, without Amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith, pursuant to Standing Order No. 93 (Consolidated Fund Bills), and agreed to.
  Bill accordingly read the Third time and passed.

  PAY BOARD AND PRICE COMMISSION
  4.20 p.m.
  The Secretary of State for Employment (Mr. Maurice Macmillan): I beg to move,
  That this House takes note of the Reports of the Pay Board and the Price Commission (House of Commons Papers Nos. 363 and 374).
  Mr. Deputy Speaker (Mr. E. L. Mallalieu): I have to inform the House that Mr. Speaker has selected the Opposition amendment, to leave out from 'House' to the end of the Question and to add instead thereof:
  'believes that the Price Commission and the Pay Board, neither of which is accountable to Parliament, are proving to be unfair and un workable; and calls upon Her Majesty's Government to adopt policies in Stage III for dealing more effectively with inflation'.
  Mr. Macmillan: The Government gave an undertaking during the passage of the Counter-Inflation Act that the work of the two agencies which it set up would be debated in this House before the Summer Recess. Inevitably, this means discussing reports covering a very short period, which must include the difficulties of new organisations starting work on an untried code. Both reports cover the two months of April and May. The work of the Pay Board began on 2nd April, but since the stage 1 arrangements lasted a month longer on the prices side, the Price Commission began its stage 2 work effectively from 29th April.
  I hope that I am expressing the views of the whole House in thanking the commission, the board and their staffs for the extra effort and work involved in preparing and presenting their first reports

  1177
  so promptly in response to a request from this House, especially since we can all appreciate the work required anyway in setting up new organisations.
  The promptness and nature of the reports and the wide range of matters covering every aspect of the agencies' work that could be raised in today's debate in themselves make it difficult to assert that the Price Commission and the Pay Board are not accountable to Parliament. This point was discussed at length and in some depth during the Committee stage of the Counter-Inflation Bill.
  I have already expressed my gratitude to right hon. and hon. Gentlemen on both sides of that Committee who moved amendments, some of which the Government were able to accept and others which enabled us to alter the Bill on Report. I have no doubt that as a result the Act is a great improvement on the Bill.
  There was always in the Bill the ability which remains in the Act to use parliamentary Questions to probe the effect of decisions in individual cases, either by putting the matter directly to the appropriate Minister or by challenging his failure to use the powers contained in Schedule 2(6). A number of Questions have been put to my right hon. and learned Friend the Minister for Trade and Consumer Affairs, some of them in considerable detail.
  Then there is the requirement on the commission and the board to make quarterly reports to the Government so that Parliament may debate them. On this first occasion the reports cover two months only. From now on they will be made every three months, partly because that is what we agreed and partly because it fits in better with the parliamentary timetable.
  After setting out their work, the reports themselves list the statutory instruments. The code itself was debated in draft, as will be any new code or substantial amendment to one.
  The terms of the Opposition amendment show that the whole House is at least agreed on the overriding importance of controlling inflation. In criticising the work of the Price Commission and the Pay Board and in suggesting policies for stage 3, I hope that the whole House will pay some regard also to the world situa-
  1178
  tion and its inevitable effect on the United Kingdom.
  I do not want to repeat too many of the points made in the more general debate that we had last week. However, in order to assess the workability and fairness of the Price Commission and the Pay Board, we need to consider the circumstances which led to their being set up and to recall the results of every past effort to deal with this problem of inflation.
  As right hon. and hon. Members on all sides of the House will admit, it is a problem that has concerned every industrialised country pretty well since the end of the Second World War, and it has intensified with the increasing prosperity of the primary producing countries. In that sense, it is a problem of prosperity, and in that sense, too, it is less damaging than the appalling suffering and waste of pre-war decades. It is a problem not of depression but of rising expectations and of maintaining more steadily the rise in our standard of living which since the war has been continuous though jerky and uneven in its impact.
  Over the past 25 years the share of employment incomes in national income has risen from 65 per cent. to 75 per cent. while that of net trading profits has fallen from 13 per cent. to 7 per cent. Over the past 15 years the all-industry wages index has increased nearly three times as much as the retail price index over the same period. I know that price increases have been too great, but wages have increased nearly three times as fast as prices. In that 15-year period the increase in the all-industry wages index has been 285 per cent. Over the same 15-year period the increase in the retail price index has been 96 per cent. I am not saying that the increase in prices was not too fast. I am saying that wages increased nearly three times as fast. Even between June 1970 and April 1973 average earnings went up by 38 per cent., which is faster than at any comparable period since the war. In that same period the rise in the retail price index was 26 per cent.
  Mr. Anthony Wedgwood Benn: It will be remembered that the right hon. Gentleman or the Chief Secretary made the same point in Committee. We asked then whether the object of the Government's policy was to reverse

  1179
  the trend in favour of profits at the expense of employment income. From the figures which the right hon. Gentleman has just given, it would appear that that is what the Government have in mind. Will the right hon. Gentleman confirm that?
  Mr. Macmillan: I think that that point will be answered a little later, if the right hon. Gentleman is patient. In any event, it is not the object of the operation and, as the figures will show, it has not been the result of the operation.
  The difficulty which successive Governments have tried by various means to overcome is to maintain full employment and a steady expansion of the economy while trying to find ways of keeping down the rate of inflation by methods which do not themselves tend to slow down the rate of growth, which do not increase taxes, direct and indirect, and which do not so depress profits and investment that unemployment increases.
  The previous Administration tried policies of wage restraint, deflation and mounting taxation. It was no wonder that investment and employment took some time to recover. Then the Labour Administration let go their restraints too soon, with the result that in 1970 not only were prices rising very rapidly but there were more price rises still to come due to the pre-election wage explosion.
  The right hon. Member for Coventry, East (Mr. Crossman) made clear what had happened when he said on 15th April 1971:
  "The main fact is that we won the 1966 election by choosing the moment of wage inflation before the prices had really been felt to rise, and obviously we were seeking to do it again in the election in 1970."
  That is the situation in which this Government acted effectively through 1970 and 1971. The high and accelerating rate of inflation was virtually halved. However, the miners' strike touched off a new bout of inflation. Settlements were being reached at levels unprecedented in postwar years. They were reaching nearly 17 per cent. above the previous year. They are still very high, despite the standstill and stage 2. Taking the year-on-year increase in wage rates, it was 15·4 per cent. to June of this year. Taking the year-onyear increase in earnings, the figure to May was 14·2 per cent. Although both
  1180
  food and all items show smaller monthon-month increases, of course the rise in the retail price index is still far too high at 9·3 per cent. year-on-year. But, as several of my right hon. and hon. Friends pointed out in last week's debate, in only the last year have world food prices and costs of basic materials risen so violently —nearly double in the last year or so.
  It is in this situation that the Price Commission and the Pay Board are having to administer the code for stage 2. The Price Commission, applying the prices code, has given approval to price increases because of this rise in costs and because the degree of absorption of costs enforced and accepted during the standstill could not be carried through into stage 2. One can see this bearing in mind the effect on manufacturing industry of rises in the price of basic materials in the last seven months—up by about 17.3 per cent., or almost the same in the last seven months as in the whole six years of the Labour Administration.
  Mr. J. Bruce-Gardyne: My right hon. Friend cites figures for the growth in wage rates over the past 12 months to June at 15·4 per cent. and the growth in retail prices at 9·3 per cent. I am not clear whether that is advanced as a measure of the success of the Price Commission and Pay Board system or as a measure of its failure. Could he elucidate that?
  Mr. Macmillan: I am advancing these matters to set the situation, as my words made clear, in which the Price Commission and the Pay Board have had to operate the stage 2 code. It is part of the situation with which we are faced and in which they have to apply the code. I added that in the last seven months since the standstill the increase in the costs of manufacturing industry through its basic raw materials had advanced by almost the same amount as was experienced during the whole six years of the Labour Government, and I pointed out that this was a problem. The code, although it cannot enforce the same degree of cost-absorption as was accepted during the standstill, can and does limit the degree to which these costs may be reflected in prices by restricting the costs which are allowed, by the productivity deduction which generally disallows 50 per cent. of increases in labour costs, by

  1181
  ensuring that the benefit of lower unit costs as a result of increasing output up to the time of the proposed price increase is offset against cost increases, and by the limitation on profit margins, which is likely to become increasingly important in future.
  Mr. Charles Loughlin Mr. Charles Loughlin (Gloucestershire, West) rose—
  Mr. Macmillan: I have given way a good deal, and I do not wish to take too much of the time of the House.
  During the one month of its full operation, the Price Commission has inevitably concentrated on category 1 firms, that is, the larger firms which have to seek approval of price increases before they introduce them. I think it worth noting that, despite the massive increase in world prices and despite the effect of the rise in cost of materials to manufacturing industry, less than half of the firms which could have sought approval in this period have done so, and less than half of the 100 or so which have applied to the commission for price increases have had their increases approved as submitted. The cut-back has been significant, as the report shows in Appendix 6, Table 4, in its impact on the consumer and consumer prices.
  The first quarterly report on category 2 firms, that is, those which do not have to pre-notify but have to report price increases, is due by 10th August. The Price Commission will not hesitate to roll back such prices where they rise beyond the code. My right hon. Friend the Prime Minister reported to the House last week how the chairman of the commission intends to step up action in three main ways.
  Mr. Tam Dalyell: How is it intended—
  Mr. Macmillan: No, I cannot give way. I am not pretending that this is a perfect system. The code is complicated. The report itself sets out some of the misunderstandings and misinterpretations which have arisen, and it describes the commission's activities to deal with those by the giving of information and publicity about the provisions of the code to those who are in doubt either generally or, in particular, as to what it means in their case. But there can be
  1182
  no doubt that the code and the work of the Price Commission have had a considerable effect and will have an increasing effect in restraining price increases—
  Mr. Dalyell: Will the Secretary of State give way?
  Mr. Macmillan: —and it has not produced the side effects which would have been most damaging for the future. Profits have not been so restrained as to discourage investment. It is true that, after allowing for stock appreciation, gross trading profits of the company sector accounted for 11½ per cent. of total domestic income in the first quarter of this year, but it is equally true that if the gross trading profits of the company sector during the first quarter of this year had been running at the same average level in relation to total domestic income as they were under the Labour Government, the proportion would have been not 11–1 per cent. but 13 per cent. I think that that goes some way to meet the point made by the right hon. Member for Bristol, South-East (Mr. Benn).
  Mr. Dalyell Mr. Dalyell rose——
  Mr. Macmillan: Industrial investment is now forging ahead. The last two CBI surveys show that the balance of firms expecting to increase spending on plant and machinery over the next year is the highest on record.
  Mr. Dalyell: Will the Secretary of State allow me?
  Mr. Deputy Speaker (Mr. E. L. Mallalieu): The hon. Gentleman must not keep rising to ask the Secretary of State to give way if it is clear that he intends not to give way.
  Mr. Macmillan: For the Pay Board, the task—[Interruption.] Right hon. and hon. Members will have ample opportunity to make their points if they succeed in catching the eye of the Chair, and my right hon. and learned Friend is fully capable of answering them, especially with reference to the Price Commission, when he winds up.
  Mr. Dalyell: On a point of order, Mr. Deputy Speaker. At the beginning of his speech, the Secretary of State was good enough to pay a tribute to hon.

  1183
  Members on both sides who, according to him, had worked hard on Standing Committee H. Is it not a bit rough that on a point of clarification he will not give way?
  Mr. Deputy Speaker: Order. It is for the Minister to decide that.
  Mr. Macmillan: The task of the Pay Board is not easier than that of the Price Commission but it is simpler in the sense that the Pay Board is applying the relatively simpler pay code to increases which normally take place annually, and within the limits set by the code the details are settled not by the board but by the negotiators. The board is concerned only with implementing the code, which imposes an upper limit of £250 on individual pay rises, but, apart from that upper limit, negotiators are able to settle within the negotiating groups total limits as suits them best. This leaves room, as both the TUC and the CBI specifically requested, for a bias to be given in favour of the lower paid in addition to that which is inherent in the mixture of flat-rate and percentage expression of the pay limit.
  In addition to satisfying itself that the general requirement has been met on settlements which are notified to it, or arising from spot checks, the board has to monitor the special increases outside the limit which, since they are designed to give extra help where it is most needed, the board will permit and, I hope, encourage. I refer here to progress to equal pay, completion of the move to a 40-hour week and a third week's holiday, and improvement in pension and benefit schemes.
  During the period of this report the board dealt with 1,704 settlements, affecting about 4 million workpeople. Very few settlements had to be modified to bring them within the limit, and no restrictive orders had to be made. Notice of intention to restrict a settlement had to be given in only one case, and that a minor one. I understand that subsequently the board has cleared more settlements so that there are now 8 million men and women who have concluded agreements since March with the very minimum of difficulty.
  1184
  Part of the reason for the ready way in which settlements have been made within the code and for the board's judgment having been accepted is that the country as a whole, including those who have reached stage 2 settlements, recognise that the Government have done everything possible to devise a pay code that is as fair as it could be made and that the Pay Board itself has dealt with applications and reports—and, indeed, with the many requests that it has received for information—as quickly and as effectively as possible, and in all cases within the statutory time limits.
  I must be fair to the right hon. Member for Bristol, South-East. This morning I received from the right hon. Gentleman a letter casting doubt on the statement that in all cases the board has dealt with matters within the statutory time limit. I hope the right hon. Gentleman will appreciate that 1 cannot give him an answer to that today. It is, as he recognises, a question of legal interpretation, and I am having the matter looked into as rapidly as possible.
  There is another reason for the general acceptance of the code and the work of the Pay Board. It is that the stage 2 policy is very far from being a standstill on wages. When we refer to "settlements" we mean increases. On the Pay Board's figures, large numbers of people have received substantial pay increases and improvements in conditions over recent months, averaging about 7 per cent. to 8 per cent., with more for the lower paid. I am glad to say that 220 of the first 1,704 settlements took about 300,000 women further towards equal pay.
  I am not trying to pretend that the code and the Pay Board are perfect. They are not, and there have been difficulties. There have been problems of interpretation, to which the report refers. It is fair to say that the board has coped with them sympathetically and with common sense. All that I have sought to do is to show that on the pay side the policies which the Government have been forced to adopt are as fair as it was practicable to devise, and I hope that no one will suppose that my right hon. and hon. Friends, and least of all myself in my present position, like the idea of this detailed statutory interference in wage negotiations. We tried very hard to find

  1185
  agreement on means as well as ends to achieve a voluntary method, and we shall continue trying in our further talks with the CBI and the TUC.
  I am only too well aware that there may be undesirable side effects. My hon. Friends have said that there may, for example, be strong pressures for exceptional treatment on various grounds—economic, social, and so on. There may be unevenness in the application to smaller firms which could lead to attempts to "poach" labour by evasion of the spirit if not the letter of the code. It is fair to say that the board investigates complaints from those who claim to have lost labour, including key employees, in this way.
  The problem does not signify in its report, and the board has denied that the code is at the root of the problem. This is a matter that we shall have to watch with care, especially as, to some extent, what is happening is a feature of the increased mobility that always happens in an expanding economy. This is what Mr. Derek Robinson, the Deputy Chairman, pointed out at a conference last week.
  Right hon. and hon. Gentlemen on the Opposition benches have given other examples. They say that they effect is uneven, disturbing relativities between people working closely together, but that was true even under completely free bargaining which did not do much over the years to improve the relative position of the lower paid either.
  The self-employed—real and bogus—are a difficulty, and I think that typical is the construction industry lump, which was recognised both by the board and the commission in the setting up of a special joint panel.
  Mr. Dalyell Mr. Dalyell rose—
  Mr. Macmillan: But those who totally reject this policy must face the consequences of containing inflation merely by fiscal and financial methods and by drastic reductions in the money supply, and openly admit that those methods may mean bankruptcy and high unemployment, both concentrated in areas where economic activity tends to be relatively low—
  Mr. Dalyell: On a point of order, Mr. Deputy Speaker. May we have from a
  1186
  Minister of the Crown a definition of who are the bogus self-employed?
  Mr. Deputy Speaker: That is for the Minister to decide, not for the Chair.
  Mr. Benn: Further to that point of order, Mr. Deputy Speaker, May I, through you, appeal to the Minister to help us with questions? The board and the commission are not accountable to Parliament. Questions cannot be put down about them. We are not able to put down Private Notice Questions about them. Unless the Minister can help backbenchers—and Front Benchers, too—with points of fact, the whole debate will proceed in ignorance and we shall have to wait for the Minister who is to reply to the debate to answer the questions that are asked. This is an unusual situation, and I wonder whether, Mr. Deputy Speaker, you would allow me through you to appeal to the Minister, if necessary by lengthening his speech, to answer the questions that have been asked.
  Mr. Deputy Speaker: It is not for me to answer those questions. It is for the Minister to decide what to do. The right hon. Member has doubtless heard what has been said.
  Mr. Loughlin: May I put a further point of order, Mr. Deputy Speaker. It is appreciated that Ministers have to use copious notes. Such notes allow for interventions from either side of the House. If there are no interventions, and if the Minister is using copious notes to the extent that he is today in that he has read every word of them, is not that contrary to the rules of the House?
  Mr. Deputy Speaker: There has been nothing disorderly on the part of the Minister so far, but it is nearing the point of disorder for hon. Members continually to raise as points of order matters which do not come within that category.
  Mr. Macmillan: The right hon. Member for Bristol, South-East knows that a considerable number of questions have been put down to my right hon. and learned Friend on the operation of the code. In addition, a few letters have been received by my Department. No Questions have been put down and no efforts have been made to raise any points of detail on the pay side. The report of the Price Commission is detailed, and the

  1187
  Pay Board indicates the number of settlements with which it has dealt, without going into immense detail. I have given a summary of the facts. I think the right hon. Gentleman knows that there were opportunities for him to raise matters, and one of the purposes of the debate is to enable right hon. and hon. Members on both sides of the House to make the points that they wish to make on the operation of the Pay Board and the Price Commission.
  On the point made by the hon. Gentleman, I must say that I have heard from hon. and right hon. Gentlemen opposite themselves that there was a certain amount of bogus self-employment in what is known in the construction industry as the lump. I was referring to the criticism made from the other side on that aspect.
  Those who totally reject this policy on the ground that it should be dealt with differently have to accept the consequences. Hon. and right hon. Members in opposition must, in the face of their own past experience, explain how any policies to contain inflation can work, whatever other elements they may contain, unless they contain the elements of wage and salary control, knowing that wages and salaries form a substantial part of the cost, up to two-thirds of the total. They must remember, when they come to explain what they believe should be the more superior policy for the future, one of the truest things ever said by the right hon. Gentleman the Leader of the Opposition, which is that one man's pay increase is another man's price increase.
  In the circumstances in which the Government were forced to take drastic action, and in the face of sudden and very recent increases in world prices, the situation would have been a great deal worse if we had followed either the advice of the Opposition or their example when in office.
  The Pay Board and the Price Commission have in their reports indicated how they believe present policies can be better administered. By the end of the year the Pay Board in its advisory capacity is due to report to the Government on the question of relativities of pay both within and between groups of employees. Its report on the anomalies
  1188
  arising out of the standstill and stage 2 will be laid by 15th September.
  I hope that this debate will itself make a significant contribution to our stage 3 policy, and indeed to the future discussions with the TUC and the CBI later this month. As my right hon. Friend the Prime Minister has told the House, we have been examining methods of providing for pay increases in the face of the inevitable uncertainty about the movement of world prices, including what have become well known both in the House and outside it as threshold agreements. We have now concluded as a Government that we should positively propose to our partners in the talks about stage 3 that this type of agreement should be allowed for as part of the machinery.
  I hope that in the talks about stage 3 the arrangements we make can provide for greater flexibility without loss of control, because I am sure that most people. including most of the trade union leaders and trade union members—and perhaps some hon. and right hon. Gentlemen opposite—do not want a return to the free-for-all that has proved so disastrous a result of the too-sudden and complete relaxation of restraint. That is one of the many reasons why I hope that we can find as a result of the talks some sort of agreement that will make so many of the difficulties which have been put forward in criticism of our policies as a whole that much easier to deal with, and reach a voluntary agreement which will in due course gain the approval of the House.
  The talks with the CBI and the TUC are due to start soon. If there are changes in the code, or a new code, they will be laid before the House in draft and debated in draft, as the Government have previously undertaken. Meanwhile, I commend to the House the first reports of the Price Commission and the Pay Board.
  4.55 p.m.
  Mr. Reg Prentice: I beg to move to leave out from "House" to the end of the Question and to add instead thereof:
  "believes that the Price Commission and the Pay Board, neither of which is accountable to Parliament, are proving to be unfair and unworkable; and calls upon Her Majesty's Government to adopt policies in Stage III for dealing more effectively with inflation".
  We have just listened to a speech incredible in its complacency in view of

  1189
  the fact that it comes from a member of a Cabinet which has presided over the worst inflation this country has ever known in peace time. We were entitled this afternoon to hear from the Secretary of State a more complete justification—indeed, some attempt at justification—of the Government's policies over recent months. Much more importantly, we were entitled to hear from the right hon. Gentleman some indication of future policies as seen by the Government, and the approach they are making to the vital talks with the CBI and the TUC. I believe that the House will insist on going on to discuss these matters, and it is a great pity that the discussion was not started off by a speech from the Government side which made a proper and constructive introduction.
  I want first to make a brief reference to the form of these two reports. I do not want to spend much time on this point because I want to get on to discussion of Government policies, and particularly the prospects for the future. But the Secretary of State quite rightly said that in Committee we demanded, and we moved amendments to ensure, that there would be frequent reports from both bodies. We did so with a sense of urgency because of the way in which the Counter-Inflation Act was drawn up so as to deprive the House of any kind of control over the development of policy and the way in which policy decisions were removed not only from the House but from Ministers of the Crown. Against that background we wanted frequent reports.
  I am bound to say that the reports are rather disappointingly brief and arid. They relate to a two-month period which is now two months in the past. They related to April and May. When the Government publish future reports two things would make debate better and more meaningful. The first is that there should be a much shorter interval between the closing date of the period covered by the report and its availability to and debate in the House. The second is that the reports themselves should discuss the development of policy, the alternatives as they present themselves to the Pay Board and the Price Commission, and future trends so that we have in front of us not merely a dry and factual account and a series of figures but policy
  1190
  choices that we can discuss more effectively than we can anything now before us.
  Having said that, I must say that my main feeling about the members of the Price Commission and of the Pay Board and their staffs is one of some sympathy for their having to play a prominent role in a situation of rampant inflation which they did not create and which they have very little power to influence. if the Price Commission has become popularly known as the "rising price commission", it is the Government's fault and not the commission's. If the Pay Board is forced to forbid the implementation of an agreed threshold arrangement in the newspaper industry at the very time that the Government are themselves thinking of threshold arrangements, the fault is that of the pay policy and drafting of the pay code and not that of the board itself. It is a policy which the Government are now discussing, and we must recognise that the two authorities have little scope for initiatives.
  The Secretary of State expressed the hope that in this debate we should make a contribution to the policy for stage 3. I agree that we should. It is perhaps a further piece of evidence of the remoteness of the House from development of policies in these matters that important talks are to take place next Friday and in subsequent weeks when the House will be in recess for more than two months. We can this afternoon comment on what we hope will happen, but by the time we meet again the talks between the Government, the TUC and the CBI will either have succeeded or failed—I still want to keep open the hopes of their success, even if I am not optimistic—and we shall then be able to debate only the fait accompli, not the situation as it developed. I am glad, as I am sure are most hon. Members, that the talks are taking place. We wish them well. As a trade unionist, I am glad that the majority of trade unions have followed their leaders' advice that they should take part. It is hoped that the talks will lead somewhere.
  The one thing we must ensure as essential if any future counter-inflation policy is to have a chance of success is that it is based on a far greater degree of consent than exists today. We have argued, and

  1191
  shall argue again this afternoon if hon. Members wish, the relative merits of statutory and voluntary policies. But, however that is decided, no policy is likely to have any considerable measure of success unless it is broadly acceptable to the main body of opinion. Therefore, the talks among the three parties are crucial. If they are to succeed, the leadership of both the TUC and the CBI will face a challenge to their power to get acceptance to what is agreed, but the biggest threat will be to the Government.
  There are two questions at issue. The first is whether the Government are capable of achieving agreement in talks with the TUC and the CBI. Given that they were elected on false promises to bring prices down, that they have presided over the greatest ever peace-time inflation that we have known, and that they have contributed to that inflation by their own deliberate policies, is it possible for the Government to make proposals to the TUC and the CBI which stand any chance of success at this time?
  The second question is whether Ministers really want to reach agreement in these talks, or whether the talks are seen by Ministers merely as a smooth public relations exercise to create the impression that Ministers are trying to get agreement and that it will be somebody else's fault if they fail.
  Much as been made by the Prime Minister and other Ministers of the claim that, as distinct from last time, no subjects are barred in the tripartite talks. On the last occasion the Prime Minister was insisting that many of the vital matters that the TUC wanted to discuss were political decisions on which he was not prepared to negotiate with the TUC. This time he has said that all subjects may be discussed. That seems, on the surface, to be a step forward. But is it? Was it simply an indication that the public relations exercise this time would be more sophisticated, that an attempt was being made to pretend to the country that everything could be discussed when Ministers had already made up their minds that they did not want agreement with the other parties?
  The test of the Government's good intentions is the extent to which they are prepared in these talks to make voluntary
  1192
  changes in those policies which have been so disastrous in causing inflation. All we heard in last week's debate, repeated by the Secretary of State today, was the Government's new thinking about threshold agreements. This is the only new idea to be brought forward. Personally, I think that a lot can be said for threshold agreements, but only if they are part of a much wider arrangement which will take care of many other matters on which Ministers have remained silent. Threshold agreements simply grafted on to existing policy will not be widely accepted.
  The test is how far Ministers are prepared to say "We, the Government, are responsible for this inflation, or partly responsible, and we are prepared to recognise that we have to bring to the talks voluntarily a change of course in some of the major policies that have stoked up inflation." We have often repeated our major criticisms of the Government's policy, and I shall refer to only two examples of what seem to be the minimum steps the Government should take if they are to stand any chance of getting agreement with the TUC and the millions of people represented by it.
  The first is the Industrial Relations Act. The Act is the main symbol of that period in which the Government were fighting a civil war against trade unions in Britain. If the Government were to come forward and say that they would repeal the Act, or drastically amend it, that of itself would help to create a major change in the climate. It is not sufficient for Ministers to say, as in the past 12 months, that they are prepared to discuss amendments suggested to them by trade unions and others. The Act was the Government's Act, and the damage it has caused is the Government's responsibility, and it is their responsibility to produce proposals for changing it.
  Mr. Adam Butler: I took it that the right hon. Member intended to refer to policies which had been so "disastrous" in causing further inflation. The first of these policies, apparently, is the Industrial Relations Act. Would he like to show the House how the Industrial Relations Act has been disastrous in this way?
  Mr. Prentice: In order to achieve an agreed policy acceptable to the trade

  1193
  unions and to working people generally, a new atmosphere is required. If the Government's course of declaring civil war on the trade union movement is not reversed, they are not in a good position to say to trade unions "We want your help in dealing with inflation." The Government's inflationary measures have led to the most damaging period in industrial relations since the 1920s, and the hon. Member for Bosworth (Mr. Adam Butler) has only to look up the strike statistics of last year to see that they were the worst figures since 1926. Industrial disputes are themselves inflationary as well as damaging in other ways.
  My second example is the Housing Finance Act. Nothing has caused more cynicism in the country about the Government's intentions than that, at the same time as they were asking others to bail them out and to make sacrifices to fight inflation, the Government were insisting, and passing laws to ensure, that there would be increases in rents, rents being the most sensitive single item, with the possible exception of food, in the weekly budget of every family. At the very moment that the National Union of Mineworkers was balloting its members about whether to have a national strike, miners in the north of England had notices of rent increases of £1 a week coming through their doors. The Government and the country were lucky to escape a strike in the mining industry.
  Mr. Hugh Jenkins: It would strengthen my right hon. Friend's case to say that the Greater London Council last week asked the Department of the Environment not to insist on a further 50p rent increase in October. The Department refused and insisted that the increase must be sanctioned. Surely that is inflationary.
  Mr. Prentice: I am grateful to my hon. Friend. The point he makes is that the Labour-controlled GLC is trying to fight inflation but is being frustrated by the Conservative Government who at the same time ask other people in the community to fight inflation for them.
  One could go on with such examples. Unless there is a reversal of policy on one or more of these major controversial
  1194
  items, the Government will not have demonstrated either a capacity or a will to secure an agreed strategy in fighting inflation.
  I should like to turn to the problems of incomes policy and to make some references to the operation of incomes policy as illustrated in the Pay Board's report. My right hon. Friend will later concentrate to a greater degree on the report of the Price Commission. I should like to begin by reiterating what I have said many times from this Dispatch Box, that any Government of this country have to have an incomes policy. The question is: what kind of incomes policy, and to what extent is it regarded as fair and reasonable by people throughout the country?
  The need for an incomes policy was reiterated only a few weeks ago by the Labour Party in its policy statement "Labour's Programme for Britain". I quote from that policy statement. It speaks of the need
  "to hammer out an agreement for the orderly growth of incomes with stable prices".
  It goes on to say:
  "We accept that a policy of price restraint cannot succeed for very long if wages and salaries are moving out of line with the growth of productivity."
  Let us not hear any more, as we heard from the Secretary of State this afternoon, this weary repetition of the myth that somehow or other the Conservative Government are the Government with an incomes policy and that the Labour Party is weak on these matters. I have advocated an incomes policy for many years, as a member of a trade union, long before I was in this House, and it has been discussed at great length in the Labour movement.
  If one goes on to ask, as hon. Members are entitled to ask, "How would your incomes policy work?", we have to start from the position that neither this country nor any other country in the free world has yet made a success of an incomes policy on either a statutory or a voluntary basis. But that is not a reason for accepting a counsel of despair, which, no doubt, we shall hear from the right hon. Member for Wolverhampton, South-West (Mr. Powell) later. It is a reason for continuing to try to reconcile the difficulties of getting a stable cost of

  1195
  living with full employment and economic growth.
  Mr. J. Enoch Powell: If the right hon. Gentleman found that in all parts of the world attempts to fill a sieve were proving unsuccessful, would he say it was a reason for continuing to try?
  Mr. Prentice: We are talking about something infinitely more complex than the right hon. Gentleman is ever prepared to admit. I believe we need to try to find an answer to how to reconcile full employment, economic growth, a stable cost of living and a healthy balance of payments. As the right hon. Gentleman admitted himself in his article in the News of the World yesterday, the policy that he advocates could only lead to very high unemployment.
  Mr. Powell: No.
  Mr. Prentice: He did.
  Mr. Powell: The right hon. Gentleman clearly did not read what I wrote.
  Mr. Prentice: Yes, I did.
  Mr. Powell: I said that any policy which succeeds in slowing down inflation, whatever that policy is and whatever is the method, must temporarily cause unemployment. The unemployment is the result of slowing down the inflation. It is not the result of the method by which it is done. That is what I said.
  Mr. Prentice: In other words, what the right hon. Gentlman said was that he believed in a reduction of the money supply in order to slow down inflation and he believed that any policy that slowed down inflation would lead to an increase in unemployment.
  Mr. Powell Mr. Powell indicated assent.
  Mr. Prentice: What the right hon. Gentleman has to recognise is that we find it unacceptable to plan for an increase in unemployment of this kind. We are striving to find a method of reconciling full employment with a more stable cost of living. We are going on trying, even if he is giving up the attempt. That is the difference between us.
  I want to go on to examine the way in which this policy has been working
  1196
  from the point of view of its acceptability to ordinary people. I believe that there has developed in this country an increasing sense of the unfairness of the policies of phase I and phase 2. When the Secretary of State told us that he thought they were being accepted by the people, I think he was incredibly complacent on this point, as he was on so many other points. The fact is that people accept these policies in the sense that they do not go on strike against them, and they do that, I think, partly because the authority of the law is behind the policies but partly also because the policies of phase I and phase 2 have been temporary policies and what is building up is an expectation that somehow or other there will be a fairer and more reasonable system in phase 3 and beyond.
  The most useful thing we can do on the incomes side of the policy is to identify those elements of it which are unfair and, while identifying them, thereby point the way to lessons in the future.
  I want to mention in particular five aspects of this policy which are resented, and rightly so, by people who are affected by it. The first is the aspect which emerged from the exchange between my right hon. Friend and the Secretary of State during the Secretary of State's speech. The policies of phase 2 represent a deliberate cut in the living standards—I stress, a deliberate cut—of wage and salary earners in this country. The Secretary of State went out of his way this afternoon to talk about the growth in the share of the national product which has gone to wage and salary earners over the last 30 years. The simple fact is that the intention and the formula in phase 2 was to reverse this trend. At the time when we debated the code in this House a month or two ago, we were suggesting that at the very least what would be involved would be that the share of the national income taken in wages and salaries would be reduced, although we did not know at that time whether there would be an actual fall in living standards of wage and salary earners.
  We now know that the cost of living increased in excess of the percentage increases allowed under phase 2. When people are told that by law they may have an increase only after a 12 months' interval, and the increase is

  1197
  less than 8 per cent.—in gross pay terms—then when the cost of living goes up, according to the official index, by over 9 per cent., clearly this policy is having the effect of reducing living standards, and reducing them at a time when the national product is growing.
  Therefore the question arises; what happens to the growth? What other sections of the community are getting what the workers are not getting? Certainly, as one looks forward to phase 3, the first test that has to be faced by the Government is whether the formula which they propose would allow some improvement in the real living standards of wage and salary earners in this country and whether they will begin to reverse the trend of phases 1 and 2.
  My next point is this. The most serious decline in living standards is among the lowest-paid people. The Government have shed a lot of crocodile tears over the lower-paid and have tried to indicate that the formula is designed to help the lower-paid. There is one point on which the House should have more information. In paragraph 26 of the Pay Board's report it is indicated that there have been some cases, in both the private sector and the public sector, where the wage or salary increase to a group has been distributed in such a way that the lower-paid have got proportionately more than the others. We ought to know how many such cases there have been, and what has been the nature of that distribution.
  Certainly all my information is to the contrary, that in the vast majority of cases the lower-paid have not been getting any more than the formula intended in phase 2. This means an increase of £2 a week or less for the lower-paid, and it can mean an increase of as much as £5 a week to people earning £100 a week at the moment, plus the fact that the lowest-paid are the hardest hit by rising food prices because they have to spend a larger proportion of their income on food, plus the fact that they get the smallest benefits from tax changes. which in April meant hundreds of pounds a year to the wealthiest members of the community. In other words, this policy is operating to increase the divisions in our society, to increase the gap between the better-off and the lowest-paid.
  The Secretary of State mentioned one group of low-paid people in his speech.
  1198
  He mentioned women and progress towards equal pay for women. But he should recognise and acknowledge that part of the price of his policy has been a refusal to implement Section 9 of the Equal Pay Act 1965, so that such progress as he boasts about was far less than it would have been if the Labour Government's intentions in regard to equal pay had been carried out. The right hon. Gentleman will not fool many women trade unionists by talking, as he did today, about making progress towards equal pay for equal work.
  The third main criticism is that during the period of phase 1 and phase 2, the 12 months' period represented by the two phases, there will have been no progress towards productivity deals and no reward possible to workers for making productivity agreements. This is unfair, particularly to those who improved their productivity radically just before last November and were given either precise or implied promises that their incomes would benefit as a result. Not only is it unfair; it may have struck a permanent blow against the willingness of working people to enter into productivity agreements. It may be permanently bad from that point of view.
  The fourth main criticism is that there has been a tremendous disruption of agreements about comparability between groups of workers. The Secretary of State says that there has been acceptance of his policy, but he should talk to some of his own civil servants about this and recognise the intense anger throughout the Civil Service in terms of the Priestley Report. Civil servants have traditionally lagged behind others, having had to rely for pay increases on reports on pay research, making comparisons between themselves and people in outside employment. This arrangement has been completely disrupted by the policy. But it is equally vital that we should recognise that we are not here talking only about well-publicised groups, such as civil servants, hospital workers and others—strong as their case may be—but about many millions of people in smaller groups whose pay arrangements have been disrupted in this way.
  If there is one simple point that should be registered with the Government it is that, whatever recommendations come from Mr. Derek Robinson's report on

  1199
  anomalies, there has to be in phase 3 sufficient resources to enable something substantial to be done to rectify the injustices under this heading that arose under phase I and phase 2.
  The fifth major criticism is that during this period there has been an almost complete disappearance of arbitration from the industrial scene. In many cases in the past, workers in dispute with their employers, about earnings or other matters, have been content that the matter should go to an arbitrator or to a court of inquiry, or to someone else who could take an impartial look at the issues in dispute. That satisfied their sense of fairness. That satisfaction is no longer available to them.
  It is significant that during the gas dispute a few months ago the unions were saying to the Government "Give us a settlement consistent with phase 2 but, at the same time, allow us a court of inquiry that would report on the merits of our claim, so that we have on the record what we are entitled to when the pay restraint can be relaxed." But that kind of avenue has been closed. It ought to be opened again. As long as it is closed it does terrible damage to industrial relations and destroys the progress built up in so many industries over many years by those who have painfully erected systems of conciliation and arbitration, only to have them destroyed in the course of this policy.
  Mr. Bruce-Gardyne: The right hon. Gentleman has been very generous in giving way. I am a little mystified by his argument. He draws attention to five ways in which he thinks that the operation of the prices and incomes policy has been unfair. But the Opposition's amendment calls upon the Government
  "to adopt policies in Stage III for dealing more effectively with inflation."
  Whether these policies have been fair or unfair, would not the right hon. Gentleman agree that if their effect has been—as he argues that it has—that, in general, prices have been rising more rapidly than earnings, which some might dispute, that in itself is an effective policy against inflation? Is he arguing that earnings can now rise more rapidly than prices and that that would be an effective policy against inflation?
  Mr. Prentice: What I was arguing earlier is that for any policy, in the long term or the medium term, to be effective, it must be based on an element of consent which is at present missing. That is the whole point on which I am trying to address the House. Therefore, we should pay attention to those elements of the present policy which are unfair and are seen to be unfair by those who are affected by them.
  In phase 3 we have to be more flexible on this matter. If we are not, there will be a great degree of anger and possibly—I put it no higher than that—a considerable amount of industrial unrest during the autumn and winter. I hope that that will not happen, but it may well happen. If it does happen, and if it happens because the Government have not seen the warning lights, the Government will have only themselves to blame.
  No one doubts the damage of inflation to our society in recent years. No one doubts the danger of continued inflation, with which we are at present threatened, particularly if that continued inflation turns out to be at a faster rate than the inflation of other industrial countries. We are competing in world markets. Our inflation has been faster than theirs in the recent past. It would be disastrous for us if that continues to be so. Certainly, the British public have no doubt about the gravity of the situation. One opinion poll after another shows that people regard inflation, and particularly the cost of living, as being one of the most important political issues of the time.
  We should be aware also of this fact. The deep feelings of pessimism and cynicism with which people regard the Government's record in this matter are themselves contributory causes of inflation. Inflation feeds upon itself. If people have an expectation that the value of their money will continue to decrease at the alarming rate of recent years, this itself has an effect on their conduct and leads in turn to a further twist to the inflationary spiral.
  Furthermore, the degree of cynicism and pessimism that we see is bad for democracy. Some of the disenchantment with politics that we see at present is due to the belief that what we are saying and doing in this House is having no effect on

  1201
  the problems which worry people most of all.
  It is time, therefore, for new policies, It is time for a new attempt to create a social contract between the unions, industry and the Government of this country by which we can make a cooperative attempt to fight inflation. If that will not come from the present Government, they ought to make way for a Government who will carry out such a policy.
  5.29 p.m.
  Mr. John Page: As secretary of the fan club on the Conservative benches for the right hon. Member for East Ham, North (Mr. Prentice), I feel that the long-playing HANSARD of this afternoon will not be among his best sellers. He is the straightest man on the Opposition Front Bench. The weakness of his speech today lay in having to attack a policy in which he really believes, and trying to pick holes in reports which, if he were on the Government side of the Chamber, he would be commending with real enthusiasm. It was noticeable also that he did not read out the amendment, or rarely mentioned it, except in a matter early in his speech. He does not really believe that the Price Commission and Pay Board are proving to be unfair and unworkable. That is why he was less convincing today than usual.
  I am in a different position, because I am trying to say something nice about policies in which I do not believe, instead of saying something nasty about policies in which I do believe. I shall try to avoid being quite so philosophical as the right hon. Gentleman. I have always felt that a short, sharp freeze is acceptable, but it has yet to be proved to me that a statutory prices and incomes policy is workable. I am amazed at how well phase 2 has gone so far. However, statutory prices and incomes policies are like Dartmoor and debt—they are much easier to get into than to get out of.
  We have only to witness the difficulties in the United States. That country was spotlighted as an example by my right hon. Friends when their policy was introduced. When we were in phase 1 the United States was in phase 2. Now we are in phase 2 the United States finds
  1202
  that its phase 3 does not work, and its phase 4 is to go back to phase 2.
  I said that the Government's policy had been accepted more than I thought it would be. On the pay side, it is considered, in the words of the right hon. Gentleman, to be broadly acceptable to the majority of people in this country. It may be wrongly so, but it is accepted as fair. The formula for pay is extremely simple. It was acceptable because a 7 per cent. or 8 per cent. wage increase in any year is not too bad, no matter how high inflation may be running. Moreover, in a boom, when there is plenty of overtime, wage packets are likely to be fatter than they were previously.
  I congratulate the Pay Board and the Price Commission on the clarity of their documents and the courtesy of their employees, both in correspondence and on the telephone. This may be because they are located in Page Street.
  I declare an interest, as a director of a plastics and rubber company. I wish in a rather pedestrian way to deal with some of the nuts and bolts of phase 2, which are worrying businesses in this country.
  First, I want to raise the question of indirect exports by component manufacturers. These are parts which are manufactured by one British company and sent to another British company for inclusion in a car, domestic appliance or toy, which is then exported. The export price of the ultimately manufactured product is not controlled, but the price of the components is controlled. Therefore, the component manufacturers are giving a subsidy to the manufacturers of the finally exported goods.
  There is another anomaly in the export sector, to cite a case on the other side of the same coin. An international company with factories in this country and abroad naturally wishes to buy goods and components from the cheapest supplier. Therefore, it may be found, and I believe it is being found, that orders which would normally be placed for exports either in an overseas country or directly for export from this country are being purchased by a United Kingdom office of an international company at United Kingdom prices and then shipped to the firm's factories abroad. Thus, again, the British

  1203
  companies are not able to achieve or obtain for their products the full uncontrolled export prices which they would have been able to obtain if the products had been directly exported. The supplier is again the loser.
  Do the Government wish to take a view on this? It may be possible, as it was on a previous occasion under a Labour Government when there were control quotas on imported goods, to reckon on the proportion of those goods manufactured which are indirectly exported.
  Another aspect of the problem is the great inconvenience to manufacturers, particularly those dealing with plastic foil and chemicals, resulting from an international shortage of certain plastic chemicals and foil. British manufacturers are starving their United Kingdom customers in order to maximise their profits by selling abroad. This is a perfectly legitimate activity, and the company would probably be wrong if it did not take part in this activity. But I am sure that my hon. Friend the Member for Oswestry (Mr. Biffen) would agree that it would be particularly stupid for a manufacturer who wishes to get a material in this country and is starved of it at the British price to have to buy the same product after it has been exported and then re-exported from Rotterdam. That is another anomaly which is extremely annoying and which makes the Government's policy less attractive and acceptable to those affected.
  If my right hon. Friend cannot give exact answers to all these questions, I shall forgive him. As the holidays are approaching, I hope he will be kind enough to answer them by letter.
  There is a strange anomaly relating exclusively to the home market. It is laid down that goods can be sold to any class of United Kingdom customer at the highest level being paid by any member of that class of customer which was existing before 6th November 1972. Thus, a company which had negotiated a good and favourable price for itself could be told that under phase 2, as well as under phase 1, the price could be raised to the level which its most inefficient negotiating competitor was having to pay. Is it possible for an agreement to be made
  1204
  for the charging of higher prices if there is a willing buyer and a willing seller?
  Mr. Arthur Lewis: What about the trade unions?
  Mr. Page: I am pleased that the hon. Gentleman is following my speech so closely. I shall now turn to complaints and discussion of the pay aspects of the subject which we are discussing.
  It has been remarkable how few complaints there have been at individual factories about the operation of the phase 2 criteria. I have given before some of the reasons. It is noticeable that some of the more extravagant trade union leaders —I do not like the word "militant" -have not been able to persuade some of their members to revolt against agreements which come within the arrangements of the code. This proves that by most people the pay scales are considered fair and just.
  My right hon. Friend said that on 15th September we should get a report from the Pay Board on the anomalies brought out during phase 2. It will be significant and interesting. I shall give my right hon. Friend one anomaly now. In the pay code, it is said that when a company opens a new plant or office in a certain area it should subscribe to the general level of wages in that area. What are the criteria for measuring the general level of wages? It is difficult to decide what a general level of wages is. However, I should like my right hon. Friend's views of a company opening a new office in a neighbourhood and paying rates generally accepted to be 15 to 20 per cent. higher than others locally.
  Mr. John Biffen: My hon. Friend should reflect that the Price Commission and the Pay Board seem to have had the difficulty he mentions. Paragraph' 2.4 of the commission's report says:
  "The shortfall reflects the difficulty of recruiting sufficient numbers of staff with the requisite specialised qualifications."
  Mr. Page: That is a neat point, although I was not referring to a new organisation in central London where, apart from the question of finance, it is very difficult for the board and the commission to recruit the staff they need because of the scarcity of people with the immediate expertise required.

  1205
  I was talking of a more simple kind of clerical staff who may be paid 15 to 20 per cent. higher than the general wages applying in a locality but for the very good reason that they are part of a national company with a policy that all employees in its factories and offices throughout the country should receive the same wage scale. What is the Government's policy towards that situation?
  I do not accept the view which is fairly generally stated that phase 2 is causing a large number of people to move from one job to another. The Department's own figures do not prove that to be the case, but I also feel that firms which may be bidding up in the context of phase 2 would probably be bidding up in ordinary circumstances.
  The other report which my right hon. Friend mentioned is that on relativities of pay between one group of workers and another, which we are to get at the end of the year. I wonder whether it is a kind of reconnaisance into a national job evaluation. I hope that the report will go quite wide and throw a spotlight on the relationship between, say, the pay of nurses, teachers and stenographers. It might also be able to help me to understand how it is, for example, that a lavatory attendant working for a motor company is probably paid twice as much as his colleague doing the same job when employed by a local authority.
  The right hon. Member for East Ham, North said that phase 2 did not do enough to help the lower-paid. But there is no doubt that the criteria do help the lower-paid. The most interesting quotation I can give on this is also from a speech by Mr. Derek Robinson last week at a Financial Times conference. He said:
  "To close the gap between two objects, it is necessary to be able to influence both of the objects. To change the pay relationships between two groups of workers it is necessary to ensure that action taken to move one of the groups is not negated by independent action by the other group. This means that if we want to help low paid workers we must bring into the discussion the high paid. If we want to change the relativity of certain groups we must at the same time discuss the pay of other groups."
  Later he went on:
  "More importantly, those who will be required to exercise restraint are frequently those who have great power. It is of course the lion who has to moderate his strength in the cause of social justice, not the mouse."
  1206
  There has been a little talk today about threshold agreements, or indexing agreements, or safeguarding agreements, or whatever the "in" name is at the moment. At present, not a lot of information is readily available about industries which have some form of indexing, but Messrs. Goodman and Thompson in the British Journal of Industrial Relations this month suggested that about 20 per cent. of all wage earners receive part of their increases by some form of indexation, and that the operation of indexation-induced increases—a ghastly expression—accounts for only 5 per cent. to 10 per cent. of the total net change in weekly rates. They also say that during the last 20 years nearly 80 industrial bargaining units have operated some form of indexation.
  This proves that, although not many industries have thresholds or indices in their agreements for wages, a lot of information and practical knowledge about such techniques is readily available. I am delighted that my right hon. Friends the Prime Minister and the Secretary of State for Employment should be interested in the idea that phase 3 might have threshold agreements, because that seems to me to be the most respectable exit they have from phase 2 and from a statutory policy. It has always been my belief that threshold agreements can and should form a large part of the wage negotiation system used by most industries in normal times.
  Lastly, getting on to a hobby horse of mine and leaving it to others who know more about the subject to talk about money supply, I strongly recommend to my right hon. Friend that soon after we return he does something to curb violent picketing and the subsidisation of strikes through social security benefits. There will never be a perfect time to introduce those measures. So, if there is not a perfect time, the sooner my right hon. Friend does it the better.
  5.50 p.m.
  Mr. Neil Kinnock: Because of the shortage of time I shall have to leave the hon. Member for Harrow, West (Mr. John Page) galloping off on his hobby horse into the Valhalla of at least some back-bench Tory Members—the marvellous Utopia in which nobody receives social security benefits when on

  1207
  strike and we no longer incur a massive inflation because of militant picketing.
  I take as a starting point the words used by my right hon. Friend the Member for East Ham, North (Mr. Prentice) concerning the prospects of talks between the Trades Union Congress and the Government. I concur with my right hon. Friend that it is, taking all things into consideration, necessary for the leaders of the TUC to meet the Prime Minister and his colleagues in 10 Downing Street or wherever a meeting of that nature is convened.
  However, it would be a mistake for the Secretary of State or anyone else to run away with the idea that the TUC is a willing partner in such negotiations. It is only realistic to recognise that the TUC, as it constitutes the fourth estate in our society, cannot afford not to accept the invitation of a Prime Minister to attend talks of this kind. The TUC is showing great sense and sensibility in acknowledging that it would weaken the position and image of trade unions throughout society if a Prime Minister who is as deft and able at public relations promotion as this Prime Minister is, even if he is useless at everything else, were able to say "We invited the TUC to speak with us about important affairs of State, but it turned down the invitation."
  The TUC is obviously over a barrel. It must attend, even though it is a reluctant partner. I ask the Secretary of State not to place too much reliance on or hope in the prospect of a deal being done over the Industrial Relations Act, not that he appears too anxious to do one. Just in case there is any lingering feeling that the leaders of the trade unions or the rank and file want to do any deal over the Act, it might be well to look briefly at the history of the Act as it has operated. The Act and all the institutions established under it have been completely neutered so as to become in practice inoffensive to the conduct of trade unions in their national and day-to-day affairs. There can be no deal over the Act. For all practical purposes, the Act, fortunately, has ceased to exist because of the activities of trade unions and trade unionists.
  My remarks from now on will be aimed more at the report of the Price
  1208
  Commission than at that of the Pay Board. The Secretary of State spoke, as the Price Commission's report speaks, of the success that has been achieved or is implied by the fact that so few companies have applied for increases under the Counter-Inflation Act and the price and pay code. Great comfort is taken from the fact that there seem to be a large number of category 1 companies which are content to continue trading on the basis of the system as it existed before the introduction of the code.
  In view of some of the profits being made in British industry, it is small wonder that those companies have not had to make an application for an exceptional price increase. They are doing more than nicely even without having to seek an increase.
  A list was given in last Saturday's Evening Standard. Eastwood—
  "best known for its chickens",
  as the correspondent puts it—had an increase in profits in the year to last March of almost 380 per cent. to nearly £4·8 million. Montague Meyer, the timber group of major importance to construction costs, had an increase in profits in the same 12 months of nearly 200 per cent. to £10 million. Allied Breweries and Scottish and Newcastle Breweries each had major increases in profits in excess of 20 per cent. Tesco—known generally as the housewife's friend, as the correspondent puts it—increased its profits by 31 per cent. and registered a pre-tax profit of £21·7 million for the 12 months to the end of the last trading year. Courtaulds, the textile giant, pushed profits up 53 per cent, to £65 million, General Electric up 56 per cent., Great Universal Stores up 28 per cent., Boots, the high street chemists, up 65 per cent., Barclays Bank up 75 per cent., Thorn Electrical Industries up 43 per cent. The list continues.
  The charge is often made against hon. Members on this side that we have a basic, almost biological opposition to those who make profits. The charge is frequently overstated. When we are supposed to be in a period of general restraint, subordinating individual or group interests to superior national interests, it is difficult to equate growth in profits of that magnitude with the

  1209
  imposition on individuals of a ceiling of £1 plus 4 per cent.
  It is not surprising that there have been so few applications for price increases under the Price and Pay Code. Obviously the companies concerned do not require any additional revenue, because they are doing quite well under an unrestricted system of profit making.
  The Price Commission's report is characterised by a kind of injured innocence. Its conclusions are gentle admonitions to business not to play the game quite so dirtily. The first awakening to this feeling was a report by Mr. Graham Turner in the Sunday Telegraph a few weeks ago. His report about the attitudes of individual members of the Price Commission, including the chairman, was more than borne out by the report when it eventually appeared. Paragraph 4.5 states:
  "There are important and sensitive areas which are excluded from the field of control for which the Commission is responsible. The main exclusions of general public interest are fresh foods; imported goods and services —which covers a wide range of basic materials; goods and services, such as coal and steel, covered by international agreement; rent, rates and interest."
  They are not simply holes that exist in the price code. They are nails that have been knocked into the coffin of the Government's incomes policy. The Price Commission says this at the end of the paragraph:
  "The goods and services included, even if less emotive, do in fact account for nearly two-thirds of total goods and services entering into consumer expenditure."
  They are invariably goods of elastic demand, goods for which a substitute can be found, goods whose consumption can be postponed. The goods that are not subject to the scrutiny of the commission are goods which, by their very nature, constitute the absolutely irreplaceable basis of a family's consumption pattern and standard of living.
  It is not until a Government are willing to tackle these elementary parts of a family's consumption, these elementary facts of their standard of living—their food, rents and mortgage interest—that we are ever likely to get any consent for or conformity with a national incomes policy.
  The weakness which is betrayed in this incomes policy and the way in which it is
  1210
  outlined by the commission is further emphasised by a report in last Friday's Economist, which puts the matter as blandly as anyone has done during the discussion since the introduction of the Counter-Inflation (Temporary Provisions) Bill several long months ago. It says that the commission
  "… works to a set of rules that sets out which increases in costs may be passed on in higher prices and which may not. In practice this means almost everything except higher wages."
  Yet, when we on this side and trade unionists have continually claimed that the prices and incomes policy is not intended—indeed, is specifically so designed—to control wages only, we have been scoffed at derided and dismissed by those who support an incomes policy of this type. Time is proving them wrong, even if the commonsense arguments of several months ago did not convince them.
  The commission continues throughout Section 4 on the price and pay code with an air of innocence which would do credit to the most virginal adventurer on the economic scene. It talks, as the Secretary of State did today, of misunderstandings and misinterpretations by business in the operation of the code.
  Several months ago, several hon. Members on this side, including me, tried to point out the weaknesses in the code. We spoke of loopholes and light-fingered accountants, of the ability of business to subdivide itself, to find continual excuses. So it is in some ways heartening, but in other ways disappointing, to find that, despite the expertise and sophistication of those chosen to serve on the commission, it has taken them two or three months to discover that business was out to con them all the time, to subvert the code from its inception.
  There is a general tut-tutting air about the whole section, especially when it says:
  "Many people overlook the fact that if total costs have increased less than allowable costs, then the price increase is limited to the amount justified by the increase in total costs".
  There is even talk of the poor standard of arithmetic of the applicants. There is a general air of euphemism about this section. Possibly, this is a subtle way, chosen by some of the more erudite members of the commission, gently to

  1211
  nudge big business and put a warning shot across its bows to the effect that the commission has rumbled the great game of "dodge the code" which is being played.
  But the commission will have to come up with something far more efficient than simply nudging or attempts publicly to cajole business to conform with the code. Such a system will require stringent powers backed by Government if it is to have any effect. I would obviously support such stringent powers, which are elementary to an effective incomes policy in any society. But, while those who feel strongly about such issues can debate the efficacy of such a system, in general it is obviously nonsense to hope that by nudging, suggesting or cajoling we shall get people who are responsible for large business empires to subordinate their interests to a voluntary code like this. It is simply not on.
  For the commission to talk of large companies "erring" and "making mistakes" as it does in paragraph 4.10 is a gross misunderstanding of the processes that those companies have been following over the last months to find ways through the code and to charge what the market will take.
  I have come to the opinion in recent years, even after the disastrous experience, as I would think, of the incomes policy introduced by the Labour Government and the even more disastrous experience which confronts us a consequence of this incomes policy, that nevertheless incomes policies are about to become as permanent a feature of modern economies as income tax or other systems of income rationing and sharing. It has become my conviction, reluctantly, over these months that, one way or another, the democratic State tan only take enough power to itself to bring about the necessary redistribution of wealth, the control of inequalities and the control of incomes, the encouragement of—
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. The hon. Member for West Ham, North (Mr. Arthur Lewis) knows that he should not read newspapers.
  Mr. Arthur Lewis: On a point of order, Mr. Deputy Speaker. It is correct, is it
  1212
  not that an hon. Member is allowed to have a newspaper if he wishes it for debate? The headlines in this paper talk of yet more price rises in baby foods, chocolates and tyres. The newspaper says that hundreds of increases have been announced, from 1·4 per cent.—
  Mr. Deputy Speaker: Order. I got the hon. Member's point. It is perfectly all right if he is going to quote from the newspaper if he catches my eye. There is no need to make further points which are not points of order for me.
  Mr. Lewis: I thought that you had risen, Mr. Deputy Speaker, to call me to order, and I wanted to make sure that you understood that this is all relevant to the debate.
  Mr. Kinnock: I trust that my hon. Friend's chances of catching your eye, Mr. Deputy Speaker, have not been diminished by that intervention.
  I was saying that I believe that incomes policies are about to become a permanent feature of our system of economic management—as if they have not been so already for some considerable time. But I believe that we are now embarking on this system formally. It is a logical development of the way in which we run our economies, for good or bad, in modern societies. But such policies are bound for absolute disaster if they try to freeze the pattern of distribution of income. They will be disasters if they provide a fallback for managements which, like the girl in the song, "can't say no" to extravagant—"militant" is now going out of fashion, according to the hon. Member for Harrow, West—trade unionists, and if they are used as a deflationary weapon. Such policies will lack any element of fairness, consent or even economic efficiency which would provide them with a start towards the rationalising of incomes and the increasing of fairness and efficiency in our society.
  If, on the other hand, such policies apply to all incomes without exception, if they embrace progressive taxation policies, if they are redistributive as well as rationalised, if they seek to take from the rich and give to the less well-off as well as seek to decide between the less well-off how much they should get, they can begin to succeed. If they are conducted—this is the absolute basic essential—in the

  1213
  strictest accord with the representatives of labour power, we shall begin to see the dawn of success for such policies.
  This policy lacks all the necessities for an efficacious or even a useful incomes policy. The Times and others are arguing for deflationary policies. The CBI is asking for a slackening of the controls. The commission argues subtly but nevertheless positively for a tightening of the price controls.
  In spite of all those pressures, the Government are likely, in view of the other characteristics of our economy, to take upon themselves the function of making the income side of the policy more deflationary, of making the pay conditions much tougher, and justifying it on the basis that over 12 months wage incomes will probably have increased by about 12 per cent., and of not cracking down further on the prices side. The consequence is bound to be a further reduction in the standard of living even harsher than the one referred to by my right hon. Friend the Member for East Ham, North. That is why it is necessary for us on this side of the House, for trade unionists and for all conscientious citizens to fight against the Government's policy.
  6.11 p.m.
  Mr. J. Enoch Powell: I share the apprehension of the hon. Member for Bedwellty (Mr. Kinnock) that prices and incomes policies may be well on the way to becoming an established feature of our society. It is ironic that that should be so, despite what was recently described as
  "their unique and comprehensive record of failure".
  One thing which seemed to emerge with absolute clarity from the hon. Gentleman's argument was that if a prices and incomes policy will not work when it is compulsory, it will not work if it is voluntary and that the alleged desirability of substituting a voluntary policy for a compulsory policy lacks logical foundation.
  It is perhaps worth the while of this House to look back for a moment and contrast the atmosphere and arguments used from the Government Front Bench today with those which were popular a year ago. There was hardly a garden fete or public meeting a year ago at which my right hon. Friends did not take the
  1214
  opportunity to emphasise if not the unique then at any rate the overwhelming role of the trade unions in the causation of inflation. Certainly my right hon. Friend the Prime Minister never allowed a Tuesday or Thursday afternoon to go by without giving at least one supplementary answer in which he firmly nailed trade union power as the decisive cause of the phenomenon of inflation from which the country was suffering.
  It was above all as a means of dealing with that supposed cause of inflation that stage 1 of the prices and incomes policy was introduced in the autumn of last year. Of course, it included prices, dividends, and so on; but no one who listened to the speeches made at that time and in the months leading up to the introduction of the policy could be in any doubt or ambiguity that the main factor against which the policy was directed and which, in the view of my right hon. Friends, had to be brought under control was the power of the trade unions to extort excessive and what were called inflationary wage settlements.
  Well, we have had eight months of the policy—five months of freeze and more than two months of stage 2. There is no question but that the policy has been implemented. There is no question of any accusation that far and wide trade unions, abetted by employers, have infringed the law. Almost universally the unions have obeyed the law. Indeed, not only have they obeyed the letter of the law, but employers and unions alike have shown what some people might consider to be an almost excessive anxiety not to be accused of departing from what they were informed by the Government was the spirit of the law as well as the letter.
  Therefore, whatever the policy was to do, whatever the legislation was to achieve in respect of the crucial factor of wages, pay and incomes, there has been no failure. The policy has been implemented 100 per cent.—the freeze and stage 2, so far as it has gone. Yet the result today is that inflation is running at approximately the same level as it was a year ago, with the additional fact that it is visibly accelerating. All this is true, although the policy has coped, within its terms, completely with what was regarded as the major cause of inflation and the major reason for its introduction.

  1215
  What is more, as my right hon. Friends move to stage 3, they talk about threshold agreements. Such agreements are not an element which would be built into the talks with the trade unions, which would not be envisaged in stage 3, if it were the unions who were the culprits responsible for the continuing inflation. A threshold agreement is something which one makes to deal with the victim, not with the culprit. If my right hon. Friends still believed in the overwhelming significance of this factor, they would not be approaching stage 3, as my right hon. Friend the Secretary of State did today. saying to the trade unions, "If we find that prices are rising "—presumably as a result of the behaviour of the trade unions themselves?—" then an automatic addition can be made to the levels of pay agreed under stage 3". A Government who go into stage 3 with the offer of threshold agreements on a plate before the discussions start is no longer a Government who regard trade union power as the leading, if not almost the exclusive, factor in the causation of inflation.
  It is no wonder that we have heard very different language in the last few months. Ever since it became evident that these two things would coincide—the complete implementation of the prices and incomes policy so far, and the resumption of an accelerating rate of inflation—we have heard entirely different language. Today all the talk is about world prices. Apparently, the trouble is the rise of prices in world markets—something of which the trade unions are as much the innocent victims as anybody else. World prices have stepped into the place which, in the speeches made 12 months ago at garden fetes and from the Government Front Bench, was occupied by trade union power. That place is now occupied by world prices—
  Mr. Arthur Lewis: And the weather.
  Mr. Powell: —including the weather, the behaviour of the anchovies off Chile, the appetities of the Argentinians and the most regrettable shortages in the USSR and China. There has been a complete change of scene.
  But, alas, the new explanation, though it has not yet been as decisively disposed of by experience as the previous one, is no more satisfactory. It fails totally to account for the fact that the movement
  1216
  of the price of goods which are not imported, of those articles which in many cases are exclusively of home production, has followed the general trend. We should be prepared to listen to the argument about world prices, and to admire the sleight of hand by which they have been substituted in this drama for the trade unions, if it was the price of articles dependent on world trade which alone had risen while other prices had, on the whole, remained stable in obedience to the success of the prices and incomes policy.
  My right hon. Friend the Foreign Secretary a few days ago, in an attempt to defend the story of world prices, was remarkably selective. He remembered the beef; he recollected the tomatoes; but he said nothing about the humble herring or the domestic haddock. Wherever we look, however we examine the behaviour of prices, we shall find little or no trace of the exclusive and predominant power of world prices suddenly to step into the shoes of the greedy and rapacious trade unions.
  Everyone knows that prices alter relatively to one another whether or not there is inflation. No one denies that all the time some articles are becoming scarcer and dearer and others are becoming more plentiful and relatively cheaper. But this movement of individual prices goes on all the time, whether there is deflation, stability or inflation. It has nothing to do with the phenomenon of inflation itself.
  My right hon. Friend the Chancellor of the Exchequer is under no misapprehension about where the root cause, the driving force, behind inflation lies. Why did my right hon. Friend come to the House on 21st May to announce, admittedly only as a first instalment, very tentatively—his colleagues had not allowed him to go very far, for they were not sufficiently alarmed—a reduction in the estimates for this year and next year? I do not believe that my right hon. Friend did that out of sheer sadistic delight in cutting estimates. I do not imagine that he found it easy to get it past his colleagues in the Cabinet. Why did he do it? He knew that if public spending continued at the rate which was projected without being curbed, then one or both of two consequences would follow. Either

  1217
  he would presently be obliged to increase taxation or he would himself be fuelling the very inflation which he and his colleagues were purporting to deal with by the prices and incomes policy.
  Why has my right hon. Friend the Chancellor of the Exchequer shown such acute interest in and anxiety about the uncovered deficit on this year's Budget? Why has he devoted so much attention to funding the Government's borrowing requirements? This is not some doctrinaire attachment to Treasury doctrine. Everyone knows what will be the consequences if not merely a large part but the whole of that deficit cannot be funded by my right hon. Friend the Chancellor of the Exchequer. The consequences will be that the Government's own behaviour, the balance between the public spending which they control and their revenue, will produce an addition to the forces of inflation that will sweep away anything else that can be done. While the pantomime of a prices and incomes policy is being played, with reasons produced—first one, then another—to underpin such a policy, my right hon. Friends at other times make no secret of their understanding of the true, unique and indispensable cause of inflation. Indeed, my right hon. Friend the Chancellor of the Exchequer has talked of the Government not providing money to finance more than a given level of inflation.
  It is totally irreconcilable to use that language and to apply that policy while pursuing a prices and incomes policy based on the assumption that prices rise because individual suppliers choose to put them up and that wages rise because unions choose to demand them and employers choose to concede them, and that a system can be erected which by dictating individual prices will keep all in order and ensure the predetermined march of inflation—not perhaps at 5 per cent. but at something nearer to 5 per cent. than to 10 per cent.
  That brings me to the two agencies—the Pay Board and the Price Commission. They were not necessary during stage 1 —a freeze is a freeze is a freeze, and everybody knows that nought equals nought. But though stage 2 is a freeze in the sense that it imposes a flat rate code, since it is a flat rate x degrees above the level it has to be administered
  1218
  in detail; for it has to be interpreted. The code, although it is the most accurate description of a flat rate arrangement which can be devised, nevertheless has to be interpreted case by case; and over time it must be policed. These are the functions of the agencies. They have performed them to the best of their ability and, so far as I can judge, in a blameless fashion. In stage 2 they are merely interpreting, case by case, in as nearly as may be a judicial manner the application of a flat rate code.
  Then comes stage 3. Nobody doubts that sooner or later—and it must be in stage 3, 3a, 3b, 3c or 3d—prices and wages, and wages especially, have to begin once again to move relatively to one another. We can wrap this up and talk about eliminating unfairnesses, removing anomalies and redressing relativities; but the underlying economic reality is that one cannot indefinitely in a living economy keep prices, including the price of labour, rigid. Everything has to start to move again. Things have to change in relation to one another.
  I agree totally with the Opposition Front Bench when they say that if the administration of stage 3 is to be entrusted to the agencies, it would be intolerable that the agencies should not be directly responsible to this House. While one can imagine and accept the judicial application of a code which has been debated in this House, what is unacceptable is that arbitrary and unique decisions about the relative values of articles, labour and the whole range of prices and incomes should be made by bodies which are not responsible to this House. But we shall be saved from that embarrassment by the very impracticability of stage 3.
  The fact is that there is no stage 3. There cannot be a stage 3. No rules can be laid down in advance, or administered by any body of men or Government, so as to decide, prescribe and order, without the most evident and unacceptable injustices, without arbitrary interventions, anomalies and unfairnesses, how all prices and wages are to start to move in relation to one another as well as all moving up together at whatever rate of inflation it is decided to accept for the time being. What is important about stage 3 is that there is no such

  1219
  thing as stage 3; or, as one of my right hon. Friend's predecessors might have said, "There ain't gonna be no stage 3."
  What are the possibilities? There are two routes of escape.
  The first is a sham in terms of a voluntary agreement which all the parties know cannot and will not be honoured because it is uninterpretable and unenforceable. Even worse would be a voluntary agreement backed by statutory powers, which means that those powers would be used arbitrarily and in the manner of a bully in one case or another. That is one direction. That is one way of avoiding the central fact that there is no stage 3.
  The other is to try to go on with a new version of the flat rate accompanied by ever more stringent compulsion. That will last for a time; but it will not last for ever; for, with every week it goes on. the contradiction between such a policy and the realities of a live economy will become more screamingly intolerable.
  There is, however, a third course; and whatever the modalities, I appeal to my right hon. Friends to accept it, for it is implicit in so many of their words and certainly implicit in the Chancellor of the Exchequer's budgetary policy. They know where the key to inflation lies. Let them do their duty. Let them do what only the Government can do; for only government can cause inflation and only government can stop causing inflation.
  At the beginning of the debate there was an exchange between myself and the right hon. Member for East Ham, North (Mr. Prentice). Our difficulty, I think, arose out of a mutual misunderstanding. I have never said or believed that unemployment is a necessary condition of the stable value of money. I have never believed it, I have never said it, and I have never thought it. But what I have said over and over again—and I challenge anybody to dispute it—is that when inflation in an economy is running at 10 per cent., then anybody who says that that rate can be reduced to 5 per cent.—whether it is done by prayer or by lighting candles or by juju or by a prices and incomes policy or by control of the money supply—without causing unemployment is deceiving himself or others. Whatever the method, the result
  1220
  will be the same. The result will be temporary dislocation, including unemployment.
  As was said earlier in the debate, in a period of inflation everybody anticipates that inflation will go on—everybody extrapolates. If one then defeats those expectations, sure enough defeated expectations spell dislocation and, for the time being, unemployment. The temptation is thus enormous for any Government to inflate on the one hand while pretending on the other hand to be "fighting" inflation through a prices and incomes policy.
  I ask my right hon. Friends, who have a duty in this matter, to make a reality of their profession to give the people of this country stable money, to give them a relief from the continuing and mounting anxieties of inflation. After all, the Conservative Party has promised to do this. We fought the election on this promise. It is no excuse to say that to do it in very truth would be painful. Nobody but a knave or a fool can doubt that. The only way to achieve it is to be candid about what one is doing, why one is doing it, and what the price will be, so that we take the public into our confidence and the people fully understand the cause, the policy, the nature of what we intend, and why we have confidence in what we propose to do. Then and only then, if my right hon. Friends will so act, will they give the people of this country what we have promised them—and give it to them not in the form of a sham but in truth.
  6.35 p.m.
  Mrs. Renee Short: I want first to apologise to the Front Bench speakers for not being here earlier in the debate, but with some of my colleagues I was engaged upstairs in the proceedings of the Expenditure Committee.
  The right hon. Member for Wolverhampton, South-West (Mr. Powell) said that we are suffering from accelerated inflation, and he is absolutely right. He appealed to his Government to relieve the people from the burdens of the policy which they are now pursuing. But he must feel that that appeal falls on stony ground, because as long as the Government intend to pursue their policy and erect all manner of "phoney" façades

  1221
  to try to persuade the people that something is being done to tackle what they themselves have created, there will be no respite for the people of this country.
  The right hon. Gentleman might have gone on to attack the Prime Minister, who, in this situation of acute inflation, is determined to go ahead with grandiose schemes like Maplin and the Channel Tunnel and to continue to waste money on Concorde at a time when inflationary pressures are so great and when those resources and the skill and manpower employed could be used for other purposes.
  There has been a rapid decline in the economic well being of this country and the standards of living of ordinary working people, and there has been a decline in the standards of public and private life. We live in a state of continual crisis, and the Government sit back and hope that somehow or other the fat years will return, that food prices will settle down, that in time unions will be less militant than they have been, and that phase 3 will be settled amicably.
  I do not want to become involved in any conflicts within the Conservative Party or in the internal affairs of that party, and I cannot answer about what is said at Tory Party fetes. But we know that the unions have been made the whipping boy over the period of rising prices. Wage earners have been blamed whenever they took the only steps open to them to campaign for better pay to meet rising prices, and the Tory Press has carried the message day after day week after week ever since the Government were returned that it was the trade unions who were responsible for the difficulties in which we find ourselves. There was no sympathy on the Conservative benches or in the Tory Press for the lower paid workers such as the railway workers or hospital ancillary workers who did what they had to do to improve their position. The Prime Minister and his party never blamed the profiteers or those masquerading in the city as respectable business men doing their legitimate business of making increased profits year after year. They never entered into the picture. It was a question of blaming the workers, a matter of divide and rule, the classic recipe which reactionary governments always use to maintain power.
  1222
  Therefore, we had wave after wave of increases right across the board not only in food but in household durables, clothing, footwear and every manner of thing. The Prime Minister has now blamed all our difficulties on world prices—and little Sir Echo, the Minister of Agriculture, says the same thing. A Parliamentary Secretary was appointed to the Ministry of Agriculture who was supposed to be the housewives' watchdog. She is not much of a watchdog, as we see at Question Time week after week when the Department is answering Questions. She has no voice with which to bark and no teeth with which to bite. After all the phoney sunshine words that we heard from her about the peak of rising prices being reached, we see prices continuing to rise. If the hon. Lady had any sense. she would resign.
  Let me cite a few rising prices which I have extracted from the journal of the Transport and General Workers Union —[Interruption.] It is a very good organisation. I happen to be a member of it. The journal gives some indication of price increases that occurred over a range of food products in March and April, before the Price Commission got going. The first item concerns canned meat. For a 12 oz. tin the increase was 4½p. That may not sound very much in today's decimal money. But when it is translated into what very many people still regard as real money it means 11d. That is the increase on a 12 oz. tin of meat, all in one go. Then the price of one brand of breakfast cereal rose 7d in old money for an 8-ounce packet. The price of cooking oil rose 5d for a 16 oz bottle. The price of self-raising flour rose 5d for a 3 lb bag. Something called Wall's Raspberry Ripple Mousse—I do not know what that is—went up by 4d. The most staggering increase of all was for 1 lb of honey, the price of which rose from 22p to 32p—an increase of 2s per lb. It is incredible, and it is not surprising that people wonder what has hit them.
  After the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food we had the Minister for Trade and Consumer Affairs. His appointment also seems to have been rather pointless. It is difficult to see what he has done to help the consumer—
  Mr. Arthur Lewis: That is unfair—
  Mr. Deputy Speaker: Order. Does the hon. Lady give way to the hon. Member for West Ham, North (Mr. Arthur Lewis)?
  Mrs. Renee Short: I might as well.
  Mr. Arthur Lewis: I am sure that my hon. Friend does not want to be unfair to the Minister for Trade and Consumer Affairs. She said that the right hon. and learned Gentleman had not done anything. She may be interested to know that I took up a case with him last December. He sat on it for six weeks and did nothing about it. Then he referred it back to the local weights and measures inspector. Only today I went to court in order to give evidence. The case was postponed. My hon. Friend will see from that that the right hon. and learned Gentleman occasionally does something even though it may have a gestation period of nine months.
  Mrs. Renee Short: From what my hon. Friend has said, it appears that the right hon. and learned Gentleman is acting as a postman—[Interruption.] I must be careful what I say. I do not want to tread on the corns of any Post Office worker.
  Apparently the Birmingham housewives gave the Minister for Trade and Consumer Affairs short shrift when he went on a walkabout exercise there. Perhaps the right hon. and learned Gentleman will come to Wolverhampton. I shall see to it that he gets a warm welcome if he cares to meet Wolverhampton housewives.
  Following the enormous wave of price increases which we saw after June 1970 and which became even more acute after the beginning of phase 2, we had the Price Commission set up. The commission was another part of the confidence trick. In setting it up the Government sought to wash their hands of unpleasant phenomena like rising prices, and thought that they could hide behind the commission. But the shocks have come non-stop since it was set up three months ago. The report that is before us deals with only two months' working of the commission, and there are pages and pages listing applications to it which have not yet worked through the pipeline but which presumably will hit us when the House is in recess.
  Since the Price Commission was set up it has put about £250 million in increased
  1224
  prices on the backs of our unfortunate housewives. A large sector of manufacturing industry escapes the commission's attention because it deals only with the top 200 firms. The rest are able to do as they like. The medium- and small-sized firms can do as they wish. There is no attempt to control them.
  The report indicates that only 11 out of 441 applications for price increases have been refused. In addition 62 have been withdrawn, most of them because they were incorrectly made. But they will be back when they have learned how to make an application to the commission. Nearly half of the 441 of the original applications are still in the pipeline.
  The chairman of this body gets £16,000 a year for acting as the Government's stooge. He must feel a very frustrated man. If he wants to do a real job of work, he will be better advised to resign his present job and to go back to Boots from whence he came, taking his commission with him.
  In his Budget speech the Chancellor of the Exchequer made great play with the fact that there would be reductions in the prices of certain foods with the introduction of VAT and the ending of SET and purchase tax. This was another part of the confidence trick. For a few weeks the prices of some confectionery lines and biscuits went down a bit, but they have gone up again rapidly since then.
  Looking at the trading profits of some of the 190 or so firms which have been allowed to raise their prices, it is seen that some of them are included among those firms which we were told would reduce prices when VAT was introduced. The Director magazine gives an indication that profits between 1972 and 1973 of 60 of the top companies rose by 23 per cent., and that five of them doubled their profits in a year. Allied Bakeries, for example, which was allowed to increase its prices in the first two months of operation of the Price Commission, had an increase in profit from £24 million in 1971 to £28 million in 1972. Birdseye Foods and Vanden Berghs were allowed to increase their prices. They are part of the enormous complex of Unilever, which makes huge profits. They went up from £120 million to £141 million. Cadbury Schweppes Limited was allowed to increase its prices. Its profit went up

  1225
  from £24 million to £31 million. Esso Petroleum Limited was allowed to put up its prices. Its profit went up from £32 million to £63 million. ICI's profit went up from £130 million to £141 million. Lyons Bakery's profit went up from £5 million to £7 million. Rank Hovis McDougall's profit went up from £31 million to £37 million. The list goes on, with Spillers and the rest.
  In the list of the large number of firms allowed to put up their prices I can find only one which has not shown an increased profit from 1971 to 1972. That exception is the Metal Box Company. It has been allowed to put up its prices, perhaps, because its profit fell from £20 million to £19 million in the period.
  This is a situation which bewilders the ordinary person who does not understand what is going on and why firms which make enormous profits year after year are allowed to put up their prices. If ordinary housewives do not understand. it means that the trade unions do not understand, either.
  We know that many of the price increases which have occured since the beginning of the year and which are reflected in the cost of living index are not within the control of the Price Commission but are due to the common agricultural policy—another of the Prime Minister's follies. The prices of butter, sugar, meat, fish and bacon have all gone up tremendously, either because our existing subsidies have had to be removed or phased out as being unacceptable or because we have had to impose import duties in order to fit in with the CAP. However much the Prime Minister continues to deny this, people know that it is true.
  That is all the more reason, then, for the Price Commission to take a tough line with those British firms which are already making large profits but which still want to increase their prices and so place even greater burdens on the unfortunate housewives.
  From the information which we have, however, it is clear that the Price Commission has done nothing to ensure that reductions in world prices are passed on to the consumer. My hon. Friend the Member for Renfrew, West (Mr. Buchan) referred to this in his letter to the Minister of Agriculture. The Fatstock Market-
  1226
  ing Corporation has surprised itself by the increase in profits which it has made this year. On the other hand, we understand that the price of some imported Argentine meat fell by 10 per cent. between April 1972 and February 1973. That reduction has not been passed on to the consumer. Indeed, as I have already said, the price of some tinned meat went up between March and April this year, in one of the largest increases on record.
  The cheaper beef imported from the Argentine is used in manufacturing processed foods. Plainly, there has been a dereliction of duty on the part of the Price Commission and the Minister responsible, who is content to sit back and watch this state of affairs continue month after month, and presumably year after year, so long as this Government are in office.
  United Nations statistics show that the rise in food prices in this country between June 1970 and March 1973 has been the largest among all the Western European countries. In France, food prices rose by 20·7 per cent., in Italy by 17·9 per cent., in Belgium by 15·3 per cent.—in America, incidentally, the rise was 16.8 per cent.—but in Britain the rise was 32 Per cent. It is a scandalous situation and
  Mr. Tom King: In citing those figures, has the hon. Lady given any thought to the contribution made by domestic agriculture and how much individual countries are affected by the need to buy on world markets?
  Mrs. Renee Short: I am aware that we have to import a great deal of food, but we are not the only food importer among the countries which I have mentioned. One can take the matter further. In Eastern Europe food prices increased by about 5 per cent., and not all those countries are self-supporting. There is a fantastic contrast between what other countries are doing and the increasing burden which the British consumer has to bear. In this year alone, as those who are constant readers of that very good magazine the Grocer know, there have been over 5,000 increases in food prices.
  It is clear that the Government's policy is a sham and a charade. They do not intend to do anything serious to peg prices. Their only intention is to attempt

  1227
  to peg wages and to keep down the standard of living of working people. Their policies are understood by the mass of the British people as unfair and unworkable, and leading us to the verge of bankruptcy.
  In my view, the Opposition amendment is too restrained. My right hon. and hon. Friends should be asking for the resignation of the whole of the Price Commission and for the resignation of this incompetent unfair Government, with all their unworkable policies.
  6.53 p.m.
  Mr. Ian Lloyd (Portsmouth, Lang-stone): The hon. Member for Wolverhampton, North-East (Mrs. Renee Short) referred, as have several other hon. Members, to what she calls the decline of the standard of living in this country over recent months and years. I have here the latest OECD report, published yesterday, and I think it right that the House and the country should know precisely what the figures are. At market prices, in 1971 and 1972, and 1973 estimated, the rise in our gross domestic product is shown as 1·7 per cent., 3·4 per cent., and 61 per cent. If one applies the implicit GDP price deflator, as the hon. Lady would doubtless do, these figures are reached: 0–6 per cent., 2–6 per cent., and 7 per cent. as the estimate for 1973.
  The hon. Lady may have her own views about the distribution of wealth within the community during that period, but I cannot imagine that anyone facing the statistical facts honestly could assert that this country's industrial production has fallen. Our national wealth and income are standing at an all-time record. The dispute between the two sides of the House, I am sure, is essentially about the distribution of that wealth rather than about its production or its existence.
  Mr. Norman Buchan: That is an astonishing statement, and I did not follow the conclusion that the hon. Gentleman drew from the figures. In fact, this year there has been a fall between the first and second quarter of about 0·1 per cent. We do not need predictions. The facts are there.
  Mr. Lloyd: I can only give the latest figures available from the OECD. The prediction for this year is a rise of 7 per cent. If the hon. Gentleman thinks that
  1228
  the figures are wrong, it is up to him to disprove them statistically when he has opportunity.
  Both the hon. Lady and her hon. Friend the Member for Bedwellty (Mr. Kinnock) based some of their attack on the fact that profits are increasing. There is no dispute that a number of important companies have recently declared increased profits. However, I draw attention to an article in Lloyds Bank Review about six weeks ago which took the record of profits in this country as a percentage of gross domestic product over the past 15 years. Whether those profits are taken gross before tax, with historic depreciation as the factor or with inflationary depreciation, that is, allowing for rising prices, or net after tax—whichever form of curve one takes, all three slide right across the graph from top to bottom. That is the situation which the country now faces.
  The general reward for investment has been declining continuously over a secular period. That is the fact, whatever standard one chooses. All hon. Members opposite want those who own capital to invest more, while at the same time they say that profits must be taxed the moment they emerge. I should have expected them to welcome the emergence of profits. They believe in swelling the public sector coffers.
  Where do the profits go? In this country, between 75 per cent. and 80 per cent. of declared gross profits disappear into the tax man's bag. Do hon. Members opposite want that or not? If they want it, do they want profits to emerge? If they do not, what is their alternative? Do they believe in a real return on investment or do they not? If they believe in such a return, how do they reconcile it with their claims for greater investment now as an essential condition of recovery? These are the arguments which hon. Members opposite, generally speaking, do not face.
  As one would expect of him, my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) gave the House a profound and most interesting analysis of the central economic problems facing this country today. With much of what he said I agree. I share his general philosophy that the total control of the price system or total

  1229
  control of the economy is something which successive Governments in the West have tried through the ages. But having tried it, in the end they have had to retreat and admit defeat. They have succeeded in sustaining the illusion longest only during a period of war when the communities which they govern are prepared to accept total control. During periods of peace, however, their retreat has usually been precipitate, usually occurring after 18 months at the most.
  However, when my right hon. Friend the Member for Wolverhampton, South-West declares, as I believe he does, that the villain of the piece is public expenditure and that the sole responsibility in this situation lies with the man who has the levers of public expenditure under his control, I believe that he is falling into a fallacy of which he accuses others. It seems to me that the argument that there is one unique and indispensable—I think that was his phrase—cause of inflation is not one which bears serious examination. For ours is a most infinitely complex cybernetic system. What my right hon. Friend said will have some impact on the forces that the Government are seeking to control, because of the considerable influence of what he said, of his thinking, of his sincerity and all that accompanies these qualities.
  This is part of this immensely complicated thing which successive Governments have failed to control, and I should like to quote to my right hon. Friend what the OECD said on this:
  "Another valid fear could be that even if governments are not reconciled in advance to accepting higher rates of inflation than in the past, they are uncertain as to how to proceed. In a number of countries the restrictive demand management policies of 1970–71 were followed by recessions which went beyond the 'cooling off' period they were designed to produce. The trade-off between inflation and unemployment"—
  this lies at the core of the argument—
  "proved more unfavourable than previously envisaged and the price relief was in most cases small and in virtually all cases short-lived. While demand management is likely to—and indeed must—remain an important weapon for achieving reasonable price stability in the sense that when demand becomes excessive the battle is lost"—
  as my right hon. Friend will argue—
  "governments will probably be searching, with increasing urgency, for effective complementary policies."
  1230
  That is the point where I should like to continue my own argument, because the control of inflation, if ever it is likely to be successful, will be the result of a series of interlinking, interlocked, rational, effective, but complementary policies, of which the central part will be a monetary plank as a fundamental component. I go so far as to agree with my right hon. Friend in saying that it will be an indispensable component, but by itself, ignoring all these other factors, I doubt whether it would produce results which everyone in this Chamber desires.
  I beg leave to doubt that because I do not think that a single lever policy will work. If one asks the Chancellor, sitting at the lever, whether he can apply it in the way suggested, whether he will apply it in the way suggested or, perhaps a more important question, whether he will be allowed to apply it in the way suggested and how quickly can he apply it, one must start asking and attempt to answer questions of this kind.
  Are the consequences of his application of that lever unpredictable, or, as some would assert, economically controllable? Many would argue that its consequences would not necessarily be economically controllable, and some of the evidence in the OECD analysis of Western Europe in the last two or three years suggests that it has not been.
  Then one comes to a much more central point, and that is whether the consequence would be politically acceptable. Here again, the answer that if the Chancellor were suddenly to apply the brake to the monetary mechanism and to that alone, not taking into account the whole range of complementary policies designed to achieve a reasonably comfortable lurch from a position of gross inflation to minimal inflation, he would find himself in grave political difficulties.
  I should like now to turn to one or two problems that are at the heart of the situation. I think hon. Members will recall that a great Member of this House, Sir Winston Churchill, once said, when confronted with the problem of the Battle of the Atlantic, how willingly he would have exchanged a full-scale attack by invasion for this shapeless, measureless peril expressed in charts, curves and statistics. It is fair to say that what we

  1231
  are talking about this evening is a shapeless, measureless peril expressed in charts, curves and statistics. The battle of inflation and the Battle of the Atlantic are expressed in charts, curves and statistics and if they are to be beaten they require a united national effort. Both have nearly brought this country to its knees in terms of policy, or the defeat of policy.
  There are, however, fundamental differences between the two. The Battle of the Atlantic was associated with large-scale physical destruction for which there was no economic compensation. Our present degree of inflation is associated with rapid growth and physical output. It is of fundamental importance to remember at all times, however disastrous the social consequences of inflation, that this remains a positive gain, and it is understandable that Governments throughout Western Europe, in attempting to reach forward to a solution, feel that whatever else they abandon this is something which they must not abandon—the concept of holding on to real growth. Although I believe that it creates a major philosophical problem of another kind, which need not detain us here, in the context of today, the immediate future and immediate policy, it is a reasonable attitude for any Government to take.
  The right hon. Member for East Ham, North (Mr. Prentice) said that if there is to be a successful policy it must be broadly acceptable to opinion in this country. I think that we come here to one of the central problems in the battle against inflation. The right hon. Gentleman has stated the problem in tautological terms, because if the policies are right they will not necessarily be acceptable to public opinion, and if, on the other hand, the policies are acceptable to public opinion they will not necessarily be right.
  That poses the dilemma which confronted the Labour Government, which has faced this Government and, as the OECD analysis shows, has confronted every Government in the North Atlantic Community. If the policies are right they are not necessarily acceptable, and if they are acceptable they are not necessarily right. Because the skill of economic management and political management are closely intertwined and linked, they
  1232
  seem to require a resolution of this dilemma.
  May we ask ourselves what is the significance and weight of public opinion which, in a climate where the increase in real output over a prolonged period has been about 2–9 per cent. to 3 per cent., insists in a significant number of cases in demanding an increase in its monetary income of 15 per cent.? My right hon. Friend will argue that this is not a central cause, that this situation is allowed to develop because of monetary management. I do not believe that that is so.
  The existence of excessive liquidity in the economy may create conditions in which this type of demand is more readily met and in which employers more readily concede demands. But that situation having existed, and this result having followed, I believe that the exact and specific consequence of it is inflationary, and I see no easy or ready escape from that unless policy operates on that front as well as on the front of monetary and demand management.
  The dilemma is a central one in a democratic society. Economic reality as we attempt to apprehend and understand it is complex. It includes as a component of reality the public concept of what that reality is. But does not the disparity between economic reality and the public concept of that reality lie at the core of the problem of inflation?
  Reality is a controversial matter. Hon. Members, given the same set of statistics and figures, will, without any difficulty, interpret them differently, and I go so far as to say that people outside this House, with possibly less political motivation for interpreting figures differently, would also do so quite honestly and genuinely.
  Reality is complex. The understanding of economic forces is a difficult thing. It was Max Planck who said to Keynes —and I apologise to the House for recounting this, but it is relevant—that economics was far more difficult than quantum physics, and that is an opinion that sometimes tends to be unheard because there are so many armchair strategists on economics that one tends to assume that this is a fundamentally simple situation. I believe that part of the problem is that it is fundamentally immensely difficult and complex. It was

  1233
  Lewis Carroll who, in defining arithmetic, described it as uglification, derision and distraction, and it is fair to say that when strongly pressed by political forces we all resort to a bit of uglification, derision and distraction.
  It seems to me that here we come to the facts of the problems of price control. Price control is something that is now being looked upon as an essential to economic management, and of great virtue. It was said in the House just the other day that it is really a preferable alternative to rationing by the purse. This is a highly emotive phrase and one understands why it appeals in certain circumstances, but the pattern of supply reflects changes in the structure of scarcity in our Western civilisation and industrial economy.
  As technology opens up new resources which were not thought of three or four years ago, as education creates new skills which were not defined in any books of statistics ten years ago, as depletion of our basic national resources affects the basic pattern, only the price system can effect the rapid and necessary adjustments between these complex sets of factors. I know of no superhuman set of beings who, even in control of some vast set of computers and receiving all the information that can possibly be supplied, can achieve a better and more efficient resolution of these complex matters than can the price system.
  It therefore seems to me that we must argue further and say that this system is one of the central pillars of a free society and something that we must seek to maintain whatever other forms of control we seek to impose on our economy. We do not want to go to the computer-coupon society any more rapidly that we can possibly help. I believe that prices are the signals of a cybernetic process. We live in a vast cybernetic system. Unless we use every possible technical means of reconciling human demand and resources—and we in this House are perhaps now at a peculiar pinnacle in which both have their impact—we shall most certainly fail.
  7.12 p.m.
  Mr. Michael Meacher: We have listened to a most thoughtful speech from the hon. Member for Portsmouth. Langstone (Mr. Ian Lloyd).
  1234
  I agree that the discovery of an explanation of the reality about inflation is highly complex, and one in which there is infinite variety, but the explanation of this phenomenon has certainly escaped the Price Commission, whose report we are now discussing.
  The most remarkable thing about this report—like Sherlock Holme's dog that failed to bark in the night—is not so much what it says as what it fails to say, and in part this is not the commission's own fault, because several important and sensitive areas, such as food prices, imported goods and services, rents, rates and interest, are entirely excluded from its purview. That means that more than one-third of all consumer expenditure is outside its jurisdiction. That is a pretty major limitation.
  Secondly, even within its own lights the claims of the commission are excessively modest, as well they ought to be. It says that it aims
  "to stop prices rising as fast as they otherwise would."
  Just how excessively moderate has been the achievement of the commission is revealed in its statement that in April and May the average price increase it granted was only 5–6 per cent. as compared with the 6–7 per cent. applied for. Since companies obviously apply for more than they seriously expect to obtain, to reduce the level of prices that is asked for by merely one sixth is not very much to write home about, and it is doubtful whether it represents a net improvement upon what might otherwise have been expected to happen.
  Similarly, in its comments on the causes of the current inflation, what the commission does not say seems to be more important than what it does say. It merely reflects the conventional wisdom of official circles in blaming world commodity prices, though surely this is to tell only part of the story. I would not go so far as the right hon. Gentleman the Member for Wolverhampton, South-West (Mr. Powell). I do not think that the increase we have seen can be entirely ignored, but it is equally wrong to inflate it into prime importance, as the Government have done. What has made the impact of world commodity prices a great deal worse on us than on our competitors is the sinking value of the pound, due to

  1235
  the unprecedentedly bad balance of payments situation, for which, again, the Government must take responsibility. Since the float began in the middle of last year the value of the pound has sunk by no less than 16 per cent. below the pre-Smithsonian level and recently we have seen a further decrease of 4 per cent., which is bound considerably to aggravate domestic prices.
  But the most extraordinary omission is that of the Minister for Trade and Consumer Affairs who, in welcoming this document, said:
  "I am constantly seeking to sharpen competition".
  If the right hon. Gentleman can say that he can say virtually anything. What he says entirely ignores the fact that there are much more profound reasons for attributing to the Government themselves direct responsibility for the current inflation. The Government's whole economic strategy has been geared towards engineering a consumer boom at any cost in order to promote private investment and boost profits, and within the limits of their own goal the Government have succeeded. That has been their central theme.
  Mr. John Page: The hon. Gentleman has not stated what I believe to have been the Government's central goal, which was the reduction of unemployment below a level of 1 million.
  Mr. Meacher: In the first place. that is bogus, in the sense that the Government have regularly understated the unemployment level. One has only to look at the census figures to know that. But, more than that, the Government deliberately inflated the figures, and merely to deflate them as the boom gets going cannot be considered the central economic goal of the Government.
  Over the last three years profits have climbed steadily month after month. They are the only thing that has climbed constantly under the present Government, and that trend is accelerating. Profits have climbed every quarter since the Government came to power, and are now accelerating to a level 18 per cent. higher than that of a year ago. They are now going up twice as fast as prices. Our situation can properly be described as a profit-push inflation. It was never a
  1236
  wage-push inflation, and there is evidence now to suggest that it is profit-push that is the main force behind inflation. But the cost of this gain for business and shareholders which has been placed almost entirely on the shoulders of the work people has been enormous, and constitutes the main cause of the current inflation.
  The boom has been largely fuelled through a prodigious expansion of consumer credit. I cannot see how anyone can deny that argument, which has been propounded so forcibly by the right hon. Member for Wolverhampton, South-West. It is an undoubted fact that the main substance behind the consumer boom has been the deliberate expansion of consumer credit, with the total hire-purchase debt outstanding by February of this year standing at no less than a staggering 28 per cent. higher than the year before. Not only that, but Government spending in the year to the next budget was planned to rise twice as fast as Government tax receipts. As a result, total Government borrowing has rocketed to around £4,500 million and the unprecedentedly high interest rates used to cover this gap by attracting savings have proved enormously inflationary, especially for house purchase and private investment.
  The result has been that the money supply was being expanded last year at a rate no less than 14 times the annual rate at the end of the 1960s. This fantastic expansion of the money supply could be non-inflationary only when matched by a comparable growth in real economic activity, especially an increase in domestic investment.
  Precisely the opposite has happened. Manufacturing investment last year was 17 per cent. down on the level of 1970, and, although it has improved in the past few months, all that has happened is that it has risen a little from the bottom of a low trough and it is still considerably lower than two or three years ago.
  But British investors did not stop investing. This is the fallacy of supposing that if one increases profits they will all be ploughed back into domestic investment. That is not what has happened. British investors lost confidence in the British domestic economy, but what has expanded enormously has been their

  1237
  investment abroad. Last year it increased to no less than double the level of 1970, and it managed in that year to be almost as much as the total investment in United Kingdom manufacturing industry.
  This huge outflow of British capital had to be financed, and that, too, has proved extremely inflationary. Net foreign currency borrowing by United Kingdom banks in order to finance overseas investment rose massively last year, by no less than eight-fold over a two-year period from 1970. This evidence shows incontrovertibly that the Government largely created the unparalleled inflation by their own policies in order to get the boom going.
  There is a further insidious process over which the Government purport to have jurisdiction, but they have so far taken no real action to stem the potent underlying cause of inflation. It is the remorseless growth of corporate monopoly power where the Monopolies Commission—I regret to say that this has been true of other Governments—has been made conspicuous by the relative absence of referrals to it.
  In 1972 that process took a marked turn for the worse. Acquisitions and mergers in that year reached a new peak, with mergers totalling over £2,500 million. That was well over the rate of previous years, the value of mergers in the last quarter exceeding the total value of mergers throughout 1971.
  The consequence of this enormous growth of monopoly power has been that just 100 companies now control more than half the economy. The effect of this advent of monopoly, which is what we are now seeing in this country, is a virtual decline and collapse of competition, and that is inevitably used by private corporate power to put up prices and to boost profit rates. The competitive market in Britain has now failed. With the collapse of market checks and balances, as we have seen over the past few years, and never more so than last year, it is the consumer who is having to pay the price.
  This is confirmed by work carried out recently by the Manchester Business School, which found that the motive for takeovers mainly quoted by successful executives was not an increase in effi-
  1238
  ciency but a clear aim deliberately to eliminate competition in order to increase monopolistic trading power. This is precisely what has happened—a greater concentration in an industry, increase in prices and a sharper boost to the profit rate.
  Until the Government take steps to slow down and ultimately reverse this intensifying trend towards monopoly, the public can only expect a further twist to the inflationary spiral. Whatever the Price Commission and other similar agencies may say or do, in the short term—apart from taking the necessary steps to reduce domestic overheating, which is now reaching an intolerable point, and stopping this increasing trend towards monopolistic trading throughout industry—there is an unanswerable case for short-term subsidies to phase out over a longer period the veritable price explosion over the last few months.
  There is also an unanswerable case for increasing family allowances, partly in view of the Prime Minister's pre-election commitment and partly because the only argument used by the Government — that the level of the tax threshold had rendered the claw-back principle virtually inoperative—has been undermined by the Government's own action in the last but one Budget.
  Limited rescources could have been used much better to reduce the retail price index by I per cent., and that would cost about £300 million. That is precisely what the Government are giving away this year to the rich in reduced taxes on unearned income—a perverse order of priorities at a time of food price crisis. But not one of these remedies has been adopted by the Government, either long or short term, and, for a Government that won an election on a price-cutting commitment, that is a deception unparalleled in postwar politics.
  7.26 p.m.
  Mr. Hugh Fraser: One of the troubles of our present economic dilemma is probably that we have more economists per square inch than any other country. I do not propose to take up the interesting conclusions that the hon. Member for Oldham, West (Mr. Meacher) read into the fairly brief report of Sir Arthur Cockfield and Sir Frank Figgures. I shall deal with the question

  1239
  of what indications we have of the likely success of phase 3. Judging by our present experience, this is a factor that must exercise all our minds during the coming months.
  My fear is not the same as that of my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), with most of whose arguments I wholly agree, but the more positive fear that phase 3 could be a positive institutionalisation of inflation. That is the fear to which I should like to address my mind.
  It is clear from the admirable, fair and frank report of Sir Arthur Cockfield that the areas on which price control can be effective in the economy are extremely limited by nature. This is one of the immediate problems facing us. The hon. Member for Oldham, West spoke about the various areas excluded by Government policy. But even if those areas were put back into Government policy, even if a Labour Government were prepared to control rents, food prices and so on, there would still be about 40 per cent. of production outside control, first, because it is imported, and, secondly, because of the nature of the control, as set out by Sir Arthur in his report, of the various divisions of industry into three factions, for it is clear that the third faction, which runs into tens of thousands of firms, is just outside the possibilities of effective price control.
  Another consideration which should be borne in mind by my right hon. Friends on the Front Bench is that there is a danger that not enough money is going into investment and not enough being put to profits from which new investment could be made, and so there is a danger of distortion of the economy, even in the present phase 2, where profits arise mainly probably not in manufacturing but in distribution. The profit is probably accruing more in distribution than in manufacturing, so far as the larger firms are concerned. Here is a dangerous distortion of the economy, with profits arising not in the area where profits are needed but where the social function of investment is at the lowest point.
  The next stage is to comprise discussions between the Government, the trade unions and the CBI. It is quite clear that
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  we have a very determined Government, a Government who are determined to get some sort of success; a trade union movement which is determined not to be outflanked, which will not actually agree but which will make some sort of an agreement with the Government; and the CBI, in which I confess I have very little confidence. These three parties are to get together at Chequers or some such place and will try to work out some system which will be generally acceptable to the trade unions, to a point at which they will not positively revolt against it. This will build in a permanent blast of inflation, and inflation in this country will skyrocket. It is this which I fear.
  Let us take a few instances of what this could mean. As we have seen over the last 15 months in this country, and as we have seen in Europe, phases 1 and 2 have always been a limited success because the workpeople, the managers and the general population are prepared to call a halt for some time until the anomalies in an incomes policy become absolutely intolerable. Anomalies in an incomes policy become intolerable, roughly speaking, after 18 months, and we shall see these anomalies becoming pretty intolerable by the end of this year.
  As a small industrialist, I know that labour is being taken away because new firms can offer far higher rates. The hon. Member for West Lothian (Mr. Dalyell) knows what is happening in the North of Scotland, where there is a fantastic shortage of labour because people are dragged away by excellent wages, but the people who wish to compete are not able to offer their workpeople the same money because they are tied by an incomes policy.
  These anomalies will increase. We have seen how they have increased in America. I had the pleasure the other day of talking to the gentleman who brought in phase 2 for the American Government. He admitted that he did not know the answer to inflation, but he said, "I know that after a time there are so many anomalies in the system that the system becomes pretty well unworkable."
  Unfortunately, there are three bodies which will gather together at Chequers or Downing Street or some such place and try to work out some form of system which will appear to be acceptable, or just acceptable. I believe this will build

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  into the economy an institutionalised rate of inflation which is bound to push the value of the pound down further and, therefore, increase the cost of raw materials which we bring in. This is the main thing that we have to avoid.
  Hon. Members opposite may say that the Government have failed completely. I disagree. The Government have had a remarkable series of successes. They have done a great deal for industry. It was quite right to start a consumer boom. It was quite right to float the pound. But the time has come when there has to be a change of policy. It had a U-turn before, and it is time for another U-turn back in the direction of the policy advocated by my right hon. Friend the Member for Wolverhampton, South-West.
  After all, this is the issue on which we were elected. I know that my right hon. and learned Friend the Minister for Trade and Consumer Affairs will introduce a series of vetting shops, rather like Ladbroke's, all over the country, to see whether people are being swindled or not. I would rather go to the root of the problem, and that is a switch in policy. That involves various things.
  One thing which it involves is cutting the throats of various new sacred cows which we see trotting across the Foulness wastes. Also we have got to see some control of the money supply and a Budget bringing back control. These are the bases on which we fought the last General Election and they are the bases on which the Government could and will win an election if they stay true to the principles for which they were elected. We were elected to see that the value of money ceases to decline. That is the only issue in which the people are interested.
  For all my right hon. Friend's complicated systems of checks and balances, counter-movements and weighing-up, the chain of vetting shops all over the country and all the rest of the policy, my fear is that we shall see the institutionalisation of inflation, which would be a national disaster.
  7.36 p.m.
  Mr. John Golding: The right hon. Member for Wolverhampton, South-West (Mr. Powell) has pointed out that the Govern-
  1242
  ment no longer can or do use the trade unions as a scapegoat. They are now concentrating on world prices, even though the Government by their devaluation have successively increased the prices that we have to pay for commodities in the world market.
  My right hon. Friend did not mention the newest scapegoat of the Government. It appears that in the last two or three weeks they have tried to persuade the housewives that it is their husbands, the men, who are the cause of their difficulty, and that it is because the men have refused to hand over their wage packets that the standard of living of the family has declined. I am very pleased that the Sun has put an end to that myth.
  It really is time that the Government conceded that they have been responsible for the decline in the standard of living of trade union members and their families. Value added tax, unprecedented mortgage repayments, very high interest rates, rents, the withdrawal of subsidies —all these are the stuff of inflation, as is also the massive handout to the rich which we saw in the Budget.
  The defence of the Government is that they are protecting those on low pay from inflation. Those on average pay are not living in comfort. Those on above-average pay are not living in comfort. It is no comfort to a man whose wage packet is £35 a week to be told that the extra 50p rent applies only to him and not to the lowest-paid. At present it is very hard for the man on average or just over average pay to find the additional money to pay the rent increase.
  I wish to turn to the report of the Pay Board because I think it raises certain important questions. First, I should like to declare my interest, as an officer of the Post Office Engineering Union, a union which has a claim being studied by the Pay Board at the present time. I do not, however, want to argue the merits of that claim, except to say that both the employers and the union believe that it fits entirely the pay code. I should like, from experience of that claim, to ask the Minister when he winds up to say something about the machinery of the Pay Board. Perhaps he could tell me what the machinery laid down in paragraph 7 means in practice. Does it mean that the Pay Board, after having

  1243
  studied a claim for 28 days, can then have another 28 days to study the details and implications of the settlement with the employers without reference to the trade union concerned? Is the period of 14 days' notice, which has to be given to a trade union before a settlement is stopped, included within the two months' period or is it additional to that? That is a practical question of some consequence. One of the disadvantages of the present Pay Board procedure is the built-in delay. The Minister would concede that the Pay Board has itself reported that unfortunately delays are longer than it would have wished. The Minister should say what action he is taking to ensure that the delays are not quite so long.
  What is perhaps more important is that this raises the issue of the involvement of the union in the talks with the Pay Board. What happens at present is that the union agrees a pay increase with an employer and the joint settlement is submitted to the Pay Board, but the Pay Board, to obtain details of the claim and to discuss it, talks only to the employer. Once a settlement has been reached and that settlement is the subject of study by the Pay Board, I believe that the board should approach the employer and the union separately. Within the precedure the union ought certainly to have equal opportunity to that of the employer to discuss the process of the claim through the Pay Board. Psychologically, if for no other reason, it is wrong that the Pay Board should have discussions only with the employer.
  The Pay Board has referred in its report to problems of interpretation and to problems which have arisen in the determination of what constitutes a principal increase and in the application of the rules relating to personal increments and to pre-standstill settlements. But nothing is said in the report about productivity agreements. Have there been no difficulties about productivity agreements? How is the Pay Board dealing with them? What principles is it applying to these agreements?
  I am one of those who believe that it is very important, despite pressure within the unions to the contrary, that productivity agreements continue. I cannot see
  1244
  how the Price Commission can look forward with confidence to reductions in the unit cost of commodities without increases in productivity. Yet in the Price Commission's report it is implied that the commission looks forward to stabilisation in prices not so much from a reduction in the world price of raw materials but from a reduction in the unit costs of commodities. Stripping away the jargon, that means that there have to be increases in productivity, either from investment and the introduction of new equipment or by increasing labour productivity.
  Let us spell it out quite clearly. The Government and the employers will not get increased labour productivity without productivity wage agreements. If the Government disrupt the productivity agreements that have been concluded in the past, not only will there be no future productivity agreements but the pressure in the unions to rescind the productivity agreements that have already been made will be very great.
  The events of last November were like the events of 1963 in that they shook confidence in the conclusion of long-term wage agreements based on rational principles. The blows in the Civil Service last year were equivalent only to the trauma that occurred within the Post Office and the Civil Service generally when the principle of comparability was breached by a former Chancellor of the Exchequer in 1962–63. It took many of us a long time to persuade our members that they could trust once again the principles of pay determination negotiated and freely entered into between Government and public employees. The events of last November have also shaken, once again, the confidence in free arbitration. The point made by my right hon. Friend the Member for East Ham, North (Mr. Prentice) was important. Whether or not the awards are implemented, it is important that cases can at least be presented to arbitration tribunals so that the tribunals may declare what award, if the existing agreements were continued, would be given.
  If the Government think that they can have a system of threshold agreements without guaranteeing an end to Government interference in long-term contracts, they will have to think again. One of the problems that the printers faced when they entered a claim in all faith,

  1245
  honesty and trust was that they would accept less at a certain point of time in return for a cost-of-living-related increase. They have been let down very badly. They have seen, as the civil servants and other groups have seen in the past, that it is often better to fight hard at a particular time to get as much as possible rather than to take less on the promise of more to come later.
  I should not have thought that it was in the interests of the Government to try to push the trade unions into that type of thinking. It would be better for the Government to reach agreements with the trade unions which would encourage productivity and rational, longterm wage agreements, rather than force the unions to fight for every penny that they can get at a particular point in time.
  Will the Minister tell us something of the detailed working of the Pay Board and of the practical proposals that it will put to the trade unions in the autumn which will make it possible for the unions to carry their members in a way which relates to the principles of social justice?
  7.50 p.m.
  Mr. Tom King: I seem to make a habit of following the hon. Member for Newcastle-under-Lyme (Mr. Golding). I am particularly pleased to follow him on this occasion because the whole House will have appreciated the serious way he addressed himself to what is essentially the subject of the debate. I wish I could extend the same tribute to some of his hon. Friends. He particularly concentrated on the detailed aspect of the working of the Pay Board.
  Like the hon. Gentleman, I begin by declaring an interest. I am connected with a food importing company and a food manufacturing company. I declare this interest not out of embarrassment but as a qualification to speak in the debate, because hon. Members are well aware that food companies are at the heart of the problem which we are tackling and the dilemma which the Government face.
  I wish to express my appreciation of the work of the Price Commission and the Pay Board. The hon. Member for Wolverhampton, North-East (Mrs. Renee Short) was the only Member who attacked the Pay Board and its work.
  1246
  Even in his severe indictment the hon. Lady's constituency neighbour, my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) made clear that he was in no sense blaming the Pay Board and the Price Commission. He was blaming the brief under which they were operating. It was that which he criticised.
  I was pleased that the right hon. Member for East Ham, North (Mr. Prentice) also made the point that criticism, if there is any, is not of the way in which the Pay Board and Price Commission have done their work but of the tools that they have been given to do the job. I express my appreciation of the way in which they have tackled an extraordinarily difficult job. The right hon. Gentleman described the reports as arid, but answered himself in his next sentence by admitting that the board and commission were reporting on only two months' work. He made the point that the reports must be published promptly, and I also believe it is essential that they appear at the earliest possible date following the quarter to which they refer because, with the volatility of world events, we shall otherwise find it difficult to remember the situation to which a particular report refers.
  If one stands as an impartial observer outside the House and sees the party confrontation taking place, and reviews the present pay and price regulatory mechanism, one is left with two views. One is that it is becoming a good and effective mechanism, and the other is that it is an utter farce. With the usual political hyperbole with which both sides dress up the situation taken away, the country recognises that it is an attempt, in an impossibly difficult situation, to introduce some real control of pay and prices. When I say "impossibly difficult situation", I particularly have in mind the work of the Price Commission against the most difficult background ever known in food prices, raw materials and commodities. Hon. Members know this. Anyone who has made only a perfunctory study of the situation knows what is happening.
  The Opposition's case appears to be that price rises should not be allowed. The attitude of the hon. Lady the Member for Wolverhampton, North-East appears to be that every price increase is a total defeat for the work of the Price

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  Commission. That is an unrealistic point of view. There are situations in which the only alternative, if price increases were not allowed against some of the world increases in raw materials, would be the withdrawal of certain lines. We have come close to that, for there have been occasions when lines have almost been withdrawn. But, for all the delays that the Price Commission has instituted into its workings as part of the attempt to restrain price increases as much as is reasonably possible, as far as 1 am aware not a single line has been withdrawn because of failure to get a price increase.
  That has not been the situation in the United States, where some supermarkets have been unable to supply foods because the price controls were not flexible enough. Lines have been withdrawn because manufacturers were not prepared to make them and pay more for the raw material than they received for the finished product. That sort of situation arises when price increases are not permitted to manufacturers forced to buy in world markets. It is an untenable situation.
  There is a lot of talk in the House about the energy crisis. The subject comes up frequently. It was mentioned at Question Time today. But not many hon. Members appreciate that there is also a protein crisis of very real dimension. There are hopes that it is temporary. The hon. Lady spoke of the fat years. Funnily enough, a little earlier my right hon. Friend the Member for Wolverhampton, South-West had been interpreting for me Joseph's interpretation of Pharaoh's dream of the seven fat years and the seven lean years. In today's Press it is stated that the Japanese Government are proposing storage facilities like the Pharoah, to prepare the world for the grain shortage that may occur.
  I am advised that wheat cif prices for September through to December this year will be about £65, whereas the comparable figure for last year for hard wheat was £29. The price of soya bean, if one can get it, is probably treble what it was. The protein supply situation is serious.
  This country should not feel lonely in this matter. We read in the newspapers each day about other countries
  1248
  facing identical problems, trying to tackle them in different ways. There has been the United States, with President Nixon's new proposals, Australia, with proposals for tariff reductions—and today it is reported that the Italian Cabinet is peparing what I understand to be a form of pay and prices commission for Italy. The situation is not the result of the British Government's policy. Nothing could be more obvious. There are indeed interacting forces at work—and I am sorry that my right hon. Friend the Member for Wolverhampton, South-West is not present, as I recognise the force of his argument. However, there are many other factors at work, and that of world prices needs the closest attention.
  Mr. Arthur Lewis: Did the hon. Member and the Prime Minister not know in 1970 that world prices had an effect on internal prices? If they did know, why did the Prime Minister say that he would cut prices at a stroke?
  Mr. King: I am pleased that the hon. Member has raised that point, for he has repeated something which, no doubt inadvertently, was also said by the right hon. Member for East Ham, North. I can lay that one smartly. There was never a promise to cut prices. The promise was to reduce rises in prices. This is an important point and it completely answers the interjection. The hon. Gentleman is continuing to repeat something which was never said. He knows it was never said.
  Mr. Lewis: Did the Prime Minister promise to cut prices or did he not? It seems that the Prime Minister is a liar.
  Mr. King: I am concerned about the unevenness of the bite of the various controls. Many companies are placed in an extremely embarrassing situation over the application of the controls on prices. Many have been virtually forced out of production, perhaps to be rescued only on the brink.
  There are other cases where the controls seem to bite much less effectively. There are anomalies in the way in which companies are being treated. I have a relatively small company in my constituency of whose case the Department has knowledge. It is being treated as part of an enormous group and is being required to pre-notify, which is a substantial obligation for a small company. I

  1249
  have made representations to my right hon. Friend the Minister of Agriculture and have been promised some information, but that promise is now more than two weeks overdue for fulfilment and I ask for the matter to be looked at, because it is of great concern.
  In considering the lack of bite, one is concerned also about the question of the returns on retailing. There is a considerable difference in balance between the profitability of manufacturing and the profitability of retailing. Inevitably in the present situation, retailing companies are reporting but are not required in any sense to pre-notify. So their profits will only shortly come forward for examination.
  In that situation for retailing companies, if prices for manufacturers go up and they maintain their percentage margins, inevitably their profits will increase. This is understood and recognised in the case of manufacturing companies. There may be a justification for their profits to increase because they have to buy in raw materials at higher prices and, therefore, need increased capital to finance their work-in-progress stocks. But the efficient retailing companies have in fact a positive cash flow and there is no need for them to increase the margins to that extent. Although a substantial part of their profits are prior to even the freeze or phase 2, there is concern that they are not sharing equally in the load being borne at the moment by many manufacturing companies.
  I echo the words of my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) about the Pay Board. I am very concerned about, and have evidence of, the amount of poaching going on between companies. Companies will stick a situation for so long, but in the end in their own interest they are forced to take whatever measures they can to retain essential people. I hope that proper measures will be taken to ensure that, if some companies are carrying the load, others are suitably encouraged to keep in line.
  In considering phase 3, I am concerned also about the position of incremental payments. I was a critic of this aspect in the Government's original proposals, and I still think that it is grossly unfair to many companies and their employees
  1250
  whose pay system does not happen to include an incremental scheme. In this situation, there must be some inbuilt flexibility to allow people who do not enjoy automatic incremental increases to share fully in whatever is the possible limit of increase under the Government norm, because in their case it will not be additional to an increment.
  I said when phase 2 was introduced that I hoped that company pensions, representing an area of permitted improvement under the original scheme, would be greatly encouraged. I should be interested to know whether my right hon. Friend has any information whether this has, in fact, happened or whether any effort is being made by his Department to encourage further something which should be a most important and valuable byproduct of the difficulties we are facing.
  In general, I welcome these reports as a start on what I reckon is the second best road open to us. I should have preferred a voluntary policy, but that did not prove possible. I am, therefore, determined to do all I can to try to improve and make workable the policy we have at present.
  8.5 p.m.
  Mr. Eric S. Heller: The hon. Member for Bridgwater (Mr. Tom King) correctly pointed out that inflation is not peculiar to this country. Without doubt, however, a great deal of the inflation that we are suffering is the direct result of Government policy. The hon. Gentleman was also correct in saying that inflation is affecting not only certain advanced industrialised countries but some under-developed countries. The interesting point is that all the affected countries have the profit-making capitalist system.
  The United States, for example, has the profit-making, private enterprise capitalist system. Australia, although at present it has a Labour Government, still has the capitalist economic system of profit as the basic motive force. Italy is also part of the capitalist world. Northern Italy is highly industrialised and is part of the capitalist world, and Southern Italy—the Mezzogiorno—suffers considerably, partly for historical reasons. As the hon. Gentleman implied, inflation is primarily a crisis of advanced industrialised capitalist countries. That is the

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  essence of the argument. If we are to be serious, we must face it.
  The right hon. Member for Wolverhampton, South-West (Mr. Powell), in a brilliant speech, talked in terms of the present economic system. His argument was that there would be disruption, which would lead temporarily and unavoidably to a certain measure of unemployment, and so on. According to his argument, that was essential if we were to deal with the problem. His answer was to cut the money supply.
  If we consider the question in the context of our type of economic society, we see that no one really has an answer to the problem of inflation. Economists, whether of right, left or centre, all have different answers, and they go round in circle after circle trying a million different ways to deal with the problem of a highly industrialised country with full employment. Before the Second World War, we had heavy unemployment. That was a different situation. In such circumstances, one can have a different type of incomes policy, determined by the fact that five or six men are waiting for the next man's job. That keeps wages down.
  Therefore, the problem that we must face is that of a highly industrialised capitalist system with relatively full employment. Every Government must face it, whether they be Conservative, Labour or—God forbid ! —Liberal, although a Liberal Government is never likely to materialise.
  All Governments must seek an answer to the problem of wages. This Government have made a U-turn on this question. We all remember the speeches made by the present Prime Minister and others on the Treasury Front Bench—ably supported by the hon. Member for Oswestry (Mr. Biffen)—when they were in opposition and argued equally passionately that we did not want this type of statutory incomes policy. We argued this in the House late at night. I can remember how late we used to go when all those orders came forward—all the votes and all the heart searching that went on. Present Ministers, then in opposition, said that in no circumstances would they accept such a policy. What they introduced was the Industrial Relations Act, which was intended to do much
  1252
  the same job. That Act has been an utter failure, primarily because the trade unions have kicked it into touch and ignored it.
  The Government then had to come back to what all Governments in our type of society seek—to control wages by means of a statutory so-called prices and incomes policy which is basically an incomes policy. The statistics contained in Appendix 8 to the Report of the Price Commission show that since November prices have risen but wages have risen much more slowly. The right hon. Member for Wolverhampton, South-West is right to that extent—the policy has been successful up to a point, because that is what the Government wanted and that is what they have got. The Government banked on the trade unions being such good boys that, once this law was enacted, they would not be prepared to fight over it. The Industrial Relations Act was different.
  It is the organised working class movement—trade unionists—who have been affected by the incomes policy. What about the unorganised people? What about those in the building industry—I am sorry to bore the House with this, but I must keep coming back to it—who work on the lump, or in labour-only subcontracting? I go on about this so often that I begin to bore myself.
  Paragraph 25 of the Report of the Pay Board states that
  "The second principle of the Code is to apply the pay limit fairly, irrespective of the form of any increase or the method of determining it. The Board has kept this principle very much in mind and has applied similar criteria to all settlements at all levels whether arrived at by collective bargaining or any other method."
  I have a note there saying "rubbish", because it is rubbish. Those working on labour-only sub-contracting do not give a damn about the criteria. People in the building industry not under the national agreement regulations are earning between £60 and £100 a week. Not only have they driven a coach and horses through this so-called incomes policy; they have driven the Royal Scot and every locomotive which came after it.
  Then it was admitted that there was a problem, and it was decided to set up the Construction Panel, which was
  "To consider means of securing the most effective application in the construction industry

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  of the Price and Pay Code and to report finally by 31 December 1973 to the Chairmen of the Price Commission and the Pay Board."
  By 31st December 1973 there will not be any pay code, because organised workers in industry, particularly those in the building industry, are getting particularly fed up when they see what is happening on the same site, or on the site next door, to unorganised workers. That is why labour-only sub-contracting is beginning to spread from the construction industry to a whole series of other industries. This policy is basically responsible for it. If I were a worker on a building site and wanted to get a decent wage so that I could provide a proper living for my family, have a decent house and run a decent car, even as a good trade unionist I should be tempted to go and do likewise. The report which is to be rendered by the end of the year will not be worth the paper it will be written on.
  Mr. Tam Dalyell: In view of what my hon. Friend is saying, does he not think that all these pious statements from the Secretary of State about the bogus self-employed are pretty wide of the mark?
  Mr. Heffer: They are pretty wide of the mark. I return to my point about the attitude of trade unionists. One right hon. Gentleman has rightly stressed that from the Government's point of view the trade union movement has been very good in accepting the terms—and, he almost said, the spirit of the legislation. The unions will accept it for only so long. They are not accepting it now at grass-roots level. Why do the Government think that the AUEW conference instructed Hughie Scanlon not to attend the "phoney" talks that are about to take place in Downing Street? It was because they have had enough of it. Why do not the Government understand that at grass-roots level the feeling is growing that they cannot continue with this for much longer?
  One hon. Member speaking in a recent debate—I cannot remember the hon. Gentleman's constituency, but he spoke in military terms—said that we were sitting on a volcano, and that this movement was taking place among workers. That is absolutely true.
  If the Government believe that they can go into these talks with the TUC
  1254
  with the ability this time to convince the TUC to accept some permanent incomes control, they may as well forget it. Trade unionists and their leaders have a job to do. Their job is to increase wages and better conditions. That is what they are paid to do, and if he agreed to a permanent structure of threshold agreements—incidentally, with no margin to go beyond the cost of living—a trade union leader might as well pack his bags and forget the trade union movement; he would do better as a beet farmer in the Common Market, where he would make a lot more money.
  The Government must understand that this revolt is taking place now. My advice to them is to forget phase 3 and return to normal union negotiations such as we have had in the past. The Labour Party must learn the lesson from all these years and understand that the answer to inflation in the long term is not tinker with the capitalist system or try to find a solution in this context at all, but to ensure that, when we return to power, we intervene in economic matters so as to transform the system and build a Socialist society. That, in the long run, is the answer to inflation.
  8.22 p.m.
  Mr. Adam Butler: The hon. Member for Liverpool, Walton (Mr. Helfer) is always colourful, usually exaggerates, but certainly should not be ignored. I want to take up one or two of his points.
  He referred to threshold agreements, which, he said, the trade union movement will reject. I believe I understand the reason—that unions are basically negotiators—but I suggest that, if the unions do reject this kind of arrangement, the country will reject them. It is an arrangement that can be seen to be fair. If the cost of living is to rise and if, through a threshold or safeguard arrangement, a percentage is built in to take that increase into account, the country at large will see that to be fair. So I say to the hon. Member, "Reject it at your peril."
  The hon. Member also picked up a theme of one of my hon. Friends, about inflation being associated with industrialised countries with a capitalist system, adding that it required full employment to complete the picture. But I suggest that unemployment at the level of last

  1255
  year did not prevent rapid inflation. It was not unemployment but the measures taken by the Government to deal with unemployment that contributed to the present inflation.
  I hoped that the hon. Member would lead on from his implied suggestion that inflation was the prerogative of industrialised capitalist countries to look at the Far East. He might have considered the example of Communist China, where the claim is—there is no reason to doubt it—that there has been no inflation since what they term the "liberation" in 1949. If we were looking for an example of a successful prices and incomes policy, perhaps we should consider Red China. But the features of Red China are total State control, rationing of essentials like cotton and rice, and —this is not always realised—profiteering on luxury items. There is no trade union movement for free negotiations in Red China. There is a low standard of living and gross under-utilisation of labour. But perhaps the most important feature of that economy—again, highly relevant to this debate—is that the Chinese economy is virtually isolated from world price movements.
  I want to refer back to the speech of the right hon. Member for East Ham, North (Mr. Prentice), because I took him up on his point about the Industrial Relations Act being inflationary. That is absolute nonsense.
  Mr. Kinnock: And he did not say it.
  Mr. Butler: He did—perhaps the hon. Member was not here at the time—and when I challenged him on it, he admitted that what he had been trying to say was that the Act was inflationary and that industrial disputes are inflationary because they raise costs. To that extent, what he said was true, but in the first half of 1970, when inflation was rampant under the hon. Member's Government, would he claim that there were many industrial disputes? I doubt it, because wages were allowed to rise unhampered. In 1972, compared with the present time —and particularly the first parts of each year—inflation was lower but industrial disputes were numerous. The number of disputes this year is five times lower than
  1256
  the number last year, and inflation is higher. So to suggest that disputes are automatically inflationary is nonsense.
  Mr. Kinnock: Of course it is nonsense, and that is not the case that my right hon. Friend was making. He talked of the condition in which the Government, the State, could talk to the representatives of labour. He said that the atmosphere had been prejudiced by the passing of the Industrial Relations Act. The hon. Member then insisted on misinterpreting my right hon. Friend and led him down a garden path that he should not have followed. But the hon. Gentleman has considerably weakened an already tenuous case by misquoting my right hon. Friend. He should desist from doing so if he is to get on with his speech.
  Mr. Butler: I should not like to misrepresent the right hon. Gentleman, but if I may remind the hon. Member—I am sorry to take up further time on this, but perhaps he was not listening carefully—his right hon. Friend referred to certain Government policies which had had a disastrous effect on inflation. He then went on to give two examples—the Industrial Relations Act and the Housing Finance Act. By mentioning the latter, he was trying to show that rent increases also were inflationary.
  One must ask the Labour Party whether it would prefer a blanket subsidy for all council house tenants—which has been more or less the habit in the pastor putting money where it is most needed, using the balance for slum clearance. If it is to have the blanket subsidy and, presumably, go for slum clearance and improvement as well, it will be injecting more money into the economy. That itself will be inflationary. Therefore, the second main policy which the right hon. Gentleman put forward falls to the ground.
  I wish to touch on various points in the Price Commission's report. First, there is the Opposition's claim that the commission and the Pay Board are outside the control of Parliament. Both bodies make absolutely clear in their reports that they were set up by statutory instrument, that they have virtually no discretionary powers, and that they judge all cases within the various codes laid

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  down by the House. That seems to indicate clearly that they are within the control of this House, and if the regulations and details which have been decided in this Chamber are not correct it is up to us to correct them. We have, as we are experiencing for the first time today, opportunities to debate their reports.
  I was impressed by the fact that the pre-notifiers, as the report calls them—the large companies—account for about half the manufacturers in this country. I find some assistance in this, because if they are carrying out their work correctly, as I believe they are, and if they are operating over 50 per cent. of manufacturing industry, this must bring about a further amelioration of prices. However, the point in the report which strikes me most is the emphasis laid on the benefits of economic growth. The report stresses on more than one occasion the simple, elementary fact of industrial economic life, that higher production will bring about lower unit costs. That is support from an independent body of the Government's main plank in their present platform, which is to go for growth, and to continue to go for growth, for a wide variety of reasons, not least because of the effect which it has on unit costs.
  Those are a few miscellaneous points from the Price Commission's report. I wish to concentrate on only one aspect of phase 3 policy. I have no doubt that there are many points which require changing in detail so far as the regulations concern the Price Commission and the Pay Board. I wish to deal with a point which concerns profits.
  A great deal has been said about profit in this debate. The hon. Member for Oldham, West (Mr. Meacher) tried to concoct some theory that we were suffering from profit-push inflation. I should have liked to ask him, if he was present in the Chamber, where he thought profits went. If they are withdrawn from circulation, clearly they are deflationary. During the past few months of the Government's statutory incomes and prices policy we have experienced a restraint on dividends, so they cannot have been pushed back into circulation in that way. There has been too little investment, so they have not been pushed back in that way. What has happened is that, generally, companies' liquid position, which
  1258
  has been in a very bad state, has improved. Therefore, higher profits, rather than causing inflation, have helped to reduce the amount of money in circulation and thus have been helpfully deflationary.
  If a nationalised industry runs at a loss, which tends to be more usual than not, and if the Government write off capital and deficits, which is more usual than not, this injects money into the system. Therefore, the absence of profit in the nationalised sector is not deflationary if it is replaced by money from the State, as has happened.
  Mr. Kinnock: What about putting up prices?
  Mr. Butler: If the price of coal had been increased after the last strike, it would have had exactly the same inflationary effect as if we had written off, as happened, £200 million of deficit in the last two years of the National Coal Board's operations.
  I strongly support what I understand to be one of the CBI's proposals to the Government; namely, that the profit limitation in phase 3 should go. I want to see, regretfully, a continuing tight control on prices and authorisation for price increases at least as strict as it is now. I certainly want the continuation of dividend restraint, because that is part of the same picture.
  If we continue to restrain profit margins we affect industry in several ways. First, we reduce its efficiency, or its attempts to be more efficient. There is no point in cutting administrative and overhead costs if that has to be followed by a price reduction. We may get the ridiculous situation of a company deciding to undertake additional expenditure, let us say in a fruitless promotional exercise running into large sums of money, to maintain its costs and restrict its profit margins so that it does not have to reduce its prices. That is nonsense. We want competition to play its part. I do not subscribe entirely to what the hon. Member for Oldham, West said about monopolies, but we do need effective monopoly legislation.
  The other good reason for allowing profits to grow is investment. The Government may take heart from the improved liquidity position of companies to

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  which I have referred, but there can be no joy for anyone in the drop in the share of the cake taken by profits referred to by my right hon. Friend in his opening remarks. If we are to return to the operation of a free system, that is the way to start.
  If profit is evil to some—and judging by the speeches from the Opposition benches it is completely misunderstood—let us work towards profit-sharing in industry. We cannot legislate for this but we can encourage it at all levels of industry. I hope that it will form part of a growing partnership between employers and employees in the coming years.
  We have been debating two creatures of this House. I accept that these first reports indicate that they are doing their job adequately, although it is early days. They are faced with difficult circumstances, and I have pointed only to one way in which I should like to see the Prime Minister's work altered.
  8.38 p.m.
  Mr. George Wallace: The hon. Member for Bosworth (Mr. Adam Butler) made a fleeting reference to council house rents. There are two price control bodies, the Price Commission and the rent scrutiny boards. The Price Commission's duty is to try to moderate price increases, but it appears that the duty of the rent scrutiny boards is to double council house rents.
  The first decision taken by a rent scrutiny board in the North of England last week is alarming to other areas of the country. The Lees decision indicated a doubling of rents and it has caused considerable concern in my constituency. There are in Norwich 22,000 council house tenants, many of whom are low-wage earners who are likely to be considerably affected by this inflationary danger. At present half of our tenants are on rent rebates. The hon. Member for Bosworth might say that rent rebates help to reduce rents, but the point to be considered is: who pays for the rent rebate? The fact is that, after all the form filling and additional staff required, the estimate for 1973–74 is a charge on the general rate fund of £108,000 in respect of rent rebates. This is inflationary. There appear to be some noisy interruptions to my left which have
  1260
  nothing to do with my speech. They are most distrubing and not at all helpful.
  Mr. Arthur Lewis: I apologise to my hon. Friend the Member for Norwich, North (Mr. Wallace), but I would point to the unfairness of the way in which speakers are selected. Since that is a reflection on the Chair, I shall withdraw it.
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Order. That is a reflection on the Chair and the hon. Gentleman should not make it.
  Mr. Lewis: I shall withdraw from the Chamber.
  Mr. Wallace: Naturally. Mr. Deputy Speaker, I shall not comment on that incident.
  The housing account in the city of Norwich, prior to this situation, was self-balancing. The situation is that on the one hand £108,000 is being taken away and with the other hand it is being placed as a burden on people, including council tenants, who pay rent and rates. The present rents in Norwich average for a pre-war house £3–50 and for a post-war house £4–25, but the Lees decision could mean rents of about £5 and £6–50 per week, plus rates. For some houses with rent, heating, rates, and in some cases plus the cost of a garage, this could mean rents of £10 per week. If these increases take place, as is a distinct possibility, 75 per cent. of our tenants will be on rent rebates of some kind or another, and this in turn will increase the charge on the general rate fund.
  I submit that all this talk of containing inflation is sheer hypocrisy if rent increases of this size are allowed as a result of deliberate Government policy. Since my area is a low-wage area, as is the whole of East Anglia, the effect on low-wage earners could be serious.
  I wish briefly to refer to early day Motion No. 250. It calls for meetings of rent scrutiny boards to be held in public so that councils which wish to put forward their proposals would appear before the rent scrutiny boards to explain their reasons. This procedure would also provide for tenants to be present. The situation at present is that rent scrutiny hoards take their decisions in secret and are accountable to nobody, not even to the Government. When their decisions are

  1261
  known, such as the decision to double council rents, the only alternative that is open to tenants or councils is to appeal. We all know about the delays, frustrations and worries involved in an appeal. Furthermore, while an appeal is pending the full rent must be paid.
  I believe that it would be sensible to alter the procedure so as to allow councillors or council officials who put forward proposals to scrutiny boards to be there to make their case in person instead of the evidence being produced in written form. The present situation is that these rent scrutiny boards approximate to secret courts. This is not British democracy as we understand it. Councils are in a better position to assess the rents in their area for they know their people and the types of property. Most councils are very good managers—far better managers than a group of totally unnaccountable Government nominees.
  We must never forget that increases in council rents mean increased pressure for higher wages. I have said before, and I say again, that it is a simple fact that pressure for wage increases comes from the home. It is caused by pressure on the family budget and by the knock on the door of the rent collector asking for an increased rent. That is a basic fact of life which some people simply do not understand.
  At the moment the Government are themselves creating inflationary pressure on rents by the force of law, which is downright ridiculous. I ask the Government to think again. We have heard talk of U-turns today. In my view, the Government should take a double somersault. They should suspend further action on rent increases, or, better still, repeal the Act. It is a festering sore to the trade union movement and it prevents any possibility of some sensible negotiation of wage increases.
  One further matter which I have put forward before, and which I still think should be investigated, concerns the work of the Price Commission. It checks on prices and decides whether increases are justified. I should like to know whether those checks include any detailed examination of price structures from the point of production overseas to the retail outlet in the United Kingdom. What check is there on speculation and on
  1262
  monopoly practices in respect of shipments of food from overseas, especially those in short supply? This is a serious factor which needs attention. I speak with some experience in the handling and importing of wholesale meat. I know how at times of shortage there is a great deal of speculation which adds greatly to the price of food without any additional constructive service being put into its distribution. Matters such as this must be looked at all the time.
  I conclude by asking the Government again to think about rents and to ease the anxieties of many of my constituents who cannot understand what is to happen to them and who in their hundreds have written to their local councillors and to their Member of Parliament asking for some protection from the Government's inflationary policies.
  8.47 p.m.
  Mr. Wyn Roberts: A year ago this month I urged the Government to take firmer action against inflation on the lines of the American standstill and phase 2 which had proved so successful. As we approach our phase 3 we do not have a successful American parallel to which we can refer. The American phase 3 which began in January was a dismal failure. The relaxation of controls was very short-lived, and we now see the Americans embarking upon a return to controls with their phase 4. The American experience suggests that we should not think of our phase 3 as a period of relaxation and that we should prepare ourselves for a continuation of controls.
  I believe that the people as a whole will tolerate controls. If I may be heretical, I think they will tolerate a bit of price inflation, too, provided that they are assured that their incomes from whatever source will keep ahead of prices.
  During the three years since the Government took office, wages and pensions have kept ahead of prices. I do not think that anyone quarrels about the figures: wages are up by 38 per cent. and pensions by 35 per cent., and the retail price index has risen by 26 per cent. The concern centres on the last few months, and whether what has been happening recently represents a continuing trend. This is the nub of our present problem.

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  What are the facts? In the 12 months ending November 1972 the monthly index of average earnings, which covers all workers, rose by 16·6 per cent., while the index of retail prices rose by 7·6 per cent. Earnings, therefore, had a 9 per cent. lead over prices in the year ending last November. In the five months from November last year to mid-May this year, however, earnings rose by 4·6 per cent. while retail prices rose by 54 per cent. In other words, earnings lagged behind prices by 0·5 per cent. Last month, I admit, the lag was rather greater, at 1·8 per cent.
  I believe that that explains the current anxiety of the trade unions to return to free collective bargaining. They fared very well—perhaps too well—under that system last year, and that is why they were blamed for the rise in prices. Now, under phase 2, they fear that price rises will erode their wage gains. But they should realise that far worse erosion of their wage gains than the current 0·5 per cent. would have taken place had the present price controls not been in operation.
  I do not believe that the Government intended the ½ per cent. erosion. I am prepared to say that, on the basis of the present evidence, our control of prices might have been a shade firmer during the last six months, but I would go no further than that. I think that we underestimated the growth in demand. I have high hopes of the Price Commission, however, whose summing up of future prospects on page 16 of its report is absolutely right. In particular, the statement that
  "the fact that a price increase can be justified under the Code does not mean that the price ought to be increased"
  is clearly of paramount importance and suggests that the commission will be delving more deeply and taking a firmer line with applicants for price increases. I should not be surprised if, when we look back at the standstill and stage 2 as a whole, wages were ½ per cent. ahead instead of ½ per cent. behind prices as they are at the moment.
  For the future, it is important that the Government should declare unequivocally that their aim is to ensure that earnings maintain their lead over prices. This
  1264
  would, I believe, as my right hon. Friend the Prime Minister said on Wednesday, prevent anxiety about the erosion of wage settlements. It would be a major curb on the inflation psychology. I was glad that my right hon. Friend committed himself to presenting some form of threshold agreement to the trade unions. I hope that we shall explain thoroughly to the public what a threshold agreement means. To my mind, it means a guarantee or an insurance that wages will keep ahead of prices.
  I should like to see a threshold agreement for pensioners and State dependants. I regard that as essential in the interests of fairness to all. I am particularly concerned about those on fixed incomes, of whom there are many in my constituency. The age tax exemption limit should also be related to a threshold arrangement unless the Chancellor feels generous enough and able to exempt the State pension scheme altogether from taxable income.
  Threshold arrangements should be based on the retail price index or on the price movements of the three major items of family expenditure—food, transport and housing, which account for a total of 51·7 per cent. of the average family's expenditure. Those three items taken together rose by 749 per cent. between November and May, compared with a rise of 51 per cent. in the retail price index as a whole.
  Assuming that a guarantee will be Oven that incomes will keep ahead of prices, where is the money to come from to support the guarantee? I shall not try to answer that question in detail, but it is clear that wherever the money comes from it will go into consumption or personal savings; that is, to demand or investment.
  If we may believe the London and Cambridge Economic Bulletin, we need a cutback in domestic demand to improve our balance of payments position. At the same time, we surely want to increase savings and investment. I believe that the guarantee contained in a threshold arrangement will result in a return of confidence in the value of savings and investment and will help to counteract the current decline in savings. Whatever the cost of threshold agreements, it will be a small price to pay for eliminating the

  1265
  fear that so many people have of being overtaken by rising prices.
  The first step towards a fair society is to stabilise the relationship between incomes and prices, and that can be done by extending the threshold agreement concept from wages to pensions, benefits, and fixed incomes, too. The assurance that the Government are determined to keep income increases ahead of price rises would help considerably to eliminate the fear that causes and results from inflation. The Government must pursue this idea despite the cool reaction so far from the trade unions. Within such a system, it would be easier to look hard at the lower levels of income and seek to improve them. We have already begun to do that in stage 2, and we must make further progress in stage 3.
  We have had a considerable argument over the function of the money supply and its relationship to inflation. One tends to get the impression in this debate that the Government increased the money supply in order to cause inflation. We know that that is not the case. The Government increased the money supply in order to fuel the economy, to eliminate unemployment and to achieve growth. I do not see how one can achieve growth except by fuelling the economy, and surely that is precisely what is done by other countries.
  I have general faith in the measures that are being taken by the Government in the shaping of phase 3, which I believe may be as successful as phase 2, and I think that the people of this country share that faith, as was indicated by the ORC poll published in the Sunday Times yesterday when, according to the poll, 68 per cent, of trade unionists and 59 per cent. of the public were for co-operation between the Government, the trade unions and the CBI. I, too, share their feelings and believe that we can raise the standard of living.
  9.0 p.m.
  Mr. Tam Dalyell: I would like to reiterate the doubts of a number of hon. Members of rather different political views ranging from the hon. Member for Oswestry (Mr. Biffen) who, unfortunately, did not catch the eye of the Chair, to those in the Opposition who expressed doubt, when the relevant legislation was being considered
  1266
  in Standing Committee H, about the whole question of hiving off. We were doubtful whether Parliament should hive off these matters to this kind of agency, over which it is now apparent we have very little control.
  I ask a specific question of the Minister. As I understand it, in his opening speech the Secretary of State for Employment said that the first quarterly report on the category 2 firms—that is, those which do not have to pre-notify but have to report price increases—is due by 10th August, and that the Price Commission will not hesitate to roll back prices that rise beyond the code. As one who attended every hour of every sitting of Standing Committee H, I should like to be clear how prices are to be rolled back. I simply do not believe that this can be done under the legislation that we have passed. So the crisp question is: how are prices to be rolled back?
  In Committee there was considerable discussion on the question why the Price Commission and the Pay Board could not be amalgamated into one organisation. It may be within the recollection of my right hon. Friend the Member for East Ham, North (Mr. Prentice) that among a number of us, and between the Treasury and the Department of Employment, there was a distinct and admitted difference of opinion on the merits of having separate organisations. We have had six months since those discussions. May we have some reflections from the Government on the question whether they still think these two agencies should be separate?
  I thank my right hon. Friend the Member for Bristol, South-East (Mr. Benn) for allowing me time to speak before he begins his speech.
  9.2 p.m.
  Mr. Anthony Wedgwood Benn: This is the last major debate we shall have in the House for 12 weeks. It seems to me that the House itself, having had a good debate last week on the economics of inflation, has quite deliberately chosen to make today's debate on the political as well as the industrial and economic approach of the Government, and the debate has to a large extent concentrated on the politics of inflation. Since I have doubts about the

  1267
  value of an exchange of selective statistics about economic matters across the Floor of the House, for my own part 1 am rather glad that the debate has taken this form.
  What interests me about the present situation is that the faster the rate of inflation goes the more cheerful Ministers become I was much impressed by their weekend articles and broadcasts. The Prime Minister was beaming with complacency in the Sunday Express. The Chancellor of the Exchequer was patting himself relentlessly on the back in the Sunday Telegraph. The Minister for Trade and Consumer Affairs himself was on "World at One". The right hon. and learned Gentleman is like a parking meter which has been built but is still hooded: we know the mechanism has been tested but we also know it has not yet been put into operation. He was saying that we must look "on the bright side". and that there had been "a big improvement". The Secretary of State for Trade and Industry, in a speech to the internal combustion engineers at the Cafe Royal. a few weeks ago—on 5th July—said he welcomed the rise in world raw material prices because it transferred purchasing power to potential customers, and even welcomed the fall in the value of the pound because it made exports more profitable. The Secretary of State for Employment today. in so far as a man who looks so sad can manage it. was very cheerful.
  Why are all those Ministers so cheerful when they consider what, we are officially told, is a great crisis? This is the first political question. and the answer is very easy to find by looking at these two reports. First, let us look at the report of the Pay Board. There is only one paragraph-4.2, I believe—worth reading. It says that 1,704 notifications of pay settlements involving 4 million workers have all gone through, and have all gone through under the £1 plus 4 per cent. That is all there is to say about the pay policy. It has worked. I calculate that the six members sitting for eight weeks, five days a week, have polished off 40 settlements per working day in the period, each, on average, involving 2,000 workers. The Government's first ground for satisfaction is that the pay policy as distinct from the prices
  1268
  policy has worked. No one has got through the pay policy during the period from the beginning of the freeze to stage 2.
  If, by contrast, we consider not the Pay Board's report but the Price Commission's report we find a totally different story. My hon. Friend the Member for Bedwellty (Mr. Kinnock) has rightly said that it is one long apology for failure. The commission makes it clear, and asks us to understand, that it is not responsible for whether the price increase is reasonable. It is not allowed to take account of social and economic factors. The burden of justification is on the firm itself. It talks about sales resistance being the ultimate weapon against a rise in prices. It talks about the realities of life, and the rises in prices to which it refers are realities which include rent increases that have been imposed by the Government of the day.
  The commission points out that there is nothing it can do to stop retail prices from increasing. It points out that there are important and sensitive areas, as it says, that are excluded, and it describes these. But, of course, this all flows from Government policy, and it is Government policy that we are now discussing. It says that some of the less emotive items are excluded, and there is no control over the retail end. Above all, the commission says that it does not wish to obstruct the working of the competitive system.
  Then we come to the point that profit control, on the basis of which the policy was sold, was not even begun to be thought about until mid-July. The plain truth—this explains why Ministers are so cheerful—is that the Price Commission has let through price increases and the Pay Board has been effective in stopping increases on the wages side.
  There is no doubt that the Price Commission is a fiasco. Fresh food is exempted, higher rents are imposed by the Government, but land speculation is almost positively encouraged. Bank lending to property companies has increased from £498 million in November 1971 to £1,498 million in May 1973. So on that side there is almost official encouragement. Steel prices cannot be dealt with because of the Common Market, and the common agricultural policy plays some part at any rate in pushing up food prices.

  1269
  With profits rising rapidly and wages held, the policy is succeeding, and it is a policy designed to do just what the Secretary of State for Employment indicated more tactfully today; namely, to transfer earnings from employment to business profits. It is no good the right hon. Gentleman shaking his head, because if it is not that that he is trying to do, what is the object of the policy? That policy is to get profits up. We had bank profits announced last week with Lloyds Bank 96 per cent. up in a six-month period, the Midland Bank 78 per cent. up and Barclays up from £54 million to £95 million.
  That is what it is all about, as the Government see it. That is why the figures given of what has happened over the last three years between prices and wages are not relevant. It was a two-year experience of that that drove the Government to try to reverse the policy and get it tilted back in the other direction. We said at the time that this policy was a fraud, and experience and a study of the two reports prove it.
  But it would be a great mistake for the House to think that these two agencies are the only means by which this policy is being pursued. The Price Commission is playing its part and the Pay Board is playing its part, but the floating of the £ has also played a part in its effect, its unconnected effect, in redistributing income in our society. It pushes up the cost of living and increases the profits of exporting companies.
  The Budget was used for that effect, deliberately giving £300 million to the richest section of society. Value added tax pushed up the cost of living, and even where cuts were made for sweets and chocolates, they are now restored by the price increases approved by the Price Commission today.
  The Housing Finance Act is a redistribution of wealth between one section and another, and even the rent scrutiny boards are redistributing income against the tenant and broadly in favour of the well-to-do. Land and house prices, which have been rising most sharply of all, are also redistributing wealth and income. So, of course, does the Common Market in its effect on our domestic economy.
  To consider the pattern politically, which is what we are here to do, one
  1270
  must take account of the consequences of these changes of attitudes. We are not a House of economists: we are a House of people elected to represent our constituents in Parliament and to understand the development of thinking of our society as well as simply to calculate what is happening to different sections of the community.
  The first thing that has happened over the past nine months—nobody said it better than the right hon. Member for Wolverhampton, South-West (Mr. Powell) —was that the myth that inflation was induced by wage claims has been totally and finally shattered by the experience of phase 1 and phase 2. I go further and say that another view of what is happening has come forward as a result of some recent revelations about the City. Sir Denys Lowson's decision to give back £5 million may seem generous, but the question is how he got it in the first place. The instance of the right hon. Member for Streatham (Mr. Sandys), whose golden handshake was beyond the dreams of the most rapacious trade unionists, also threw light on the balance of wealth and power. The perquisites of Mr. Tiny Rowlands and revelations of the tax havens indicated to people, just at the time they realised trade unions were not responsible for inflation, that a lot of other people were doing very well out of inflation. That is a very important change in public attitudes.
  One other lesson has been learned in the past nine months, and it is about time it was learned. It is that to defend oneself against rising prices, if one lacks the advantages of the power of the board of Lonrho or that sort of crew, one must have powerful and strong trade unions. The Conservative Party devoted many months and years of political activity to persuading the British people that the trade unions were the cause of inflation. In the last General Election a great part of the campaign was to persuade the women that it was their husbands who were causing inflation.
  But in the past nine months many millions of housewives have come to see in their husbands' trade unions the main defence against the erosion of their living standards. If Ministers wonder why trade unions want to get back to free collective bargaining in phase 3 and reject threshold agreements, it is in part

  1271
  that what their leaders are elected to do can be better done by them than by a pay board and a few civil servants checking through 40 settlements in an afternoon, and partly because they have learned the political lesson of the past nine months. What has happened, therefore, in the last nine months—it is not what the Government expected—is that the basis of consent on which they sought to rest phase 3 has been withdrawn. The honeymoon has come and gone without any desire for permanent cohabitation. It is the withdrawal of consent arising from that experience that is now the main political problem facing the Government as they approach talks with the TUC and the CBI this week.
  What is the Government's answer to all this criticism? It is very simple. Ministers say it again and again. It is that they are, at any rate, getting sustained growth, and that somehow out of this growth—even though they might admit, if one got them in a corner, that it was a bit unequal in its early accretion—will come good things for everyone. The whole of their policy is based on the belief that this growth can be secured and that on the basis of it they are justified in pursuing policies that fly absolutely contrary to everything that they put before the electorate in the 1970 General Election—and, more than that, everything which in their hearts they believe to be true and necessary.
  Is it true that the growth on which they base their policy is as secure as they claim? If that part of their programme —growth—were not to be realised, even their own justification for what they are doing would be removed. I want to invite the House to see how well and soundly based the boom upon which the whole Government policy rests really is. I have no desire to be a prophet of doom, and I shall not go so far as the hon. Member for Walsall, South (Sir H. d'AvigdorGoldsmid), who has already been quoted by my hon. Friend the Member for Liverpool, Walton (Mr. Heller), in his speech in the inflation debate last week. I shall not go as far as he did, but I shall quote his words:
  "Price inflation all over the world in the last 18 months is something which will bring much of the Western world as we know it to an end."—[OFFICIAL REPORT, 11th July 1973; Vol. 861, c. 541.]
  1272
  Words of that gravity used from the Opposition Front Bench could easily be denounced as being a deliberate attempt to destroy confidence. Coming from a banker of distinction, who is a supporter of the Government, they ought now to be looked at seriously. We have a duty in the House, particularly with Parliament adjourning for three months, to examine the basis on which the Government's policy rests. We have a duty to examine the dangers that confront this country, and not just this country but other industrial societies.
  First of all, we are bound to notice that the international monetary situation is dominated by a weak dollar made weaker by a weak United States President. Without seeking at this point—which I am not—to make any point against the Cabinet's handling of affairs, it is possible that the effect of a weak President trying to cope unsuccessfully with the weakness of his currency could well have some serious effects on this country as well.
  The second thing we have to face is a weak pound, which has sunk so low because of the massive balance of payments deficit which has been built up by this Government in the period of their stewardship. We sacrificed a lot to try to bring about a balance of payments surplus. Perhaps our strategy lacked much that it should have had. But one thing is clear: it has all been thrown away now, and the forecasts of a continuing deficit during 1974 are factors that have to be taken into account.
  When one detects also in it that the deficit between this country and its Common Market partners, which was supposed to be narrowed by our entry, has widened from £180 million in 1971 and is now running at a rate of £1,000 million a year in 1973, there are no grounds for the Government to throw their hats in the air and say that all is well. This problem has been recognised, rather vaguely, by the decision to make some public expenditure cuts and to raise the minimum lending rate.
  The third cloud on the horizon is a possible continuation of the rise in world prices, which would be amplified in its domestic impact by a further sinking of the pound, giving a further fresh and dangerous spurt to inflation in this country. There is always the possibility that

  1273
  the Treasury may wish to do more, whether or not influenced by the right hon. Member for Wolverhampton, South-West.
  Against that background one now has to see the virtual certainty that phase 3 will not be acceptable—whatever the hopes of hon. Members individually may be—because of the unfairness of the policy that the Government have pursued.
  All these factors have to be taken into account by a House of Commons that seeks to be responsibly examining the possibilities that lie ahead. I am not forecasting the situation. Certainly no one on either side of the House would wish it to happen this way. But if Ministers refuse to face the realities in all their speeches—this is a serious charge to make, and I make it—and to face up to their responsibilities, the Opposition have a duty to warn.
  If a crisis of this kind develops, it will be no use the Government trying to find some new scapegoat to explain their failures. They have made the unions their scapegoat and abandoned them in favour of world prices. The truth is that were such a situation to develop or to get worse—I do not want to make it sound too dramatic—it would be much more than a crisis of economic management; it would be a political crisis for the British people. If it occurs, and if the situation gets worse, or even if, after phase 3, the Government seek to negotiate some further agreement, it will come at a time when the Government have deliberately divided the nation by the policies that they have pursued.
  I think that it is broadly accepted across the Floor of the House that to have success with any policy, whether it is supposed to be backed by statute or to be voluntary—the Prime Minister recognised this very clearly in his interview by the Sunday Express on Sunday —such a policy must carry the support of the people. There is no better example of a statute that did not carry public consent than the Industrial Relations Act to indicate how quickly such things can wither in the pigeonholes in Whitehall. It is not effective because it is not supported.
  If the Government seek to intensify their present policies, which are unfair, and try to make the working population
  1274
  pay the price in lower living standards, I say candidly that Ministers cannot expect the trade unions or the Labour movement to give them support.
  Nor can the Government expect to rally the nation around them on the basis even of their old Conservative philosophy. My understanding of Conservatism, as an observer from the outside, happily, over the years, is that it is based on three things: patriotism, somewhat dented by the Common Market entry terms; free enterprise—somewhat dented by the Counter-Inflation Act—and the aristocratic values of leadership, somewhat dented by a decision to adopt a managerial style of Government.
  Therefore, I do not believe that the present Cabinet have the reserves of political support, even among their own people, to which they can appeal in the event of a crisis of this kind developing. I very much hope that the Cabinet do not think that they can appeal to the sense of responsibility of the British people at a time when they have systematically stripped the people of this country of the institutions of democracy and self-discipline upon which our society has rested.
  Mr. John Page: Will the right hon. Gentleman give way?
  Mr. Benn: I have a little more to say. I hope that the hon. Gentleman will allow me to complete the point that I am trying to develop.
  The Government have stripped the trade union movement of its legal rights. They have stripped the trade union negotiators of their functions.
  Mr. Page: Rubbish!
  Mr. Benn: The Government have stripped the House of Commons of its supervisory role, as is evident from the debate today. They have stripped the British people of their right of self-determination, and in the vacuum created by these policies the right hon. Member for Wolverhampton, South-West moves forward with his solutions. I listened carefully to his speech. The House filled as it often does to hear his argument. He wins the respect of those who see him as a man ready to come into conflict with his party, which is always a ground for listening with respect.

  1275
  But I do not believe that the right hon. Gentleman's remedy, attractive as it seems, brilliantly presented as it was, offers any answer to the problem confronting this country. However he puts it, whether talking about restraining money supply or about other deflationary measures, he is calling for one thing, unemployment. That is what he wants. He says that any deflationary measure will produce unemployment. This is not a prerogative of his money supply theory. What he is calling for—and it is time it is said clearly so that people understand it—is that unemployment is a remedy for inflation. It is not acceptable.
  Mr. Powell: Everyone who calls for reducing a running rate of inflation of nearly 10 per cent. to anything substantially below that rate is, whether he knows it or not, and whether he says so or not, calling for unemployment.
  Mr. Benn: The right hon. Gentleman has the benefit of opposition to be able to air his theories in a way which sounds more attractive. I remember an earlier speech of his about musical chairs. That was the way he described the lame duck policy, saying that as resources are reorganised it is not always possible to have a chair for everyone.
  If there were unemployment on the scale which, I believe, the right hon. Gentleman contemplates, it would have other effects on the fabric of our society. There might be some people who said that the unemployment was due to immigrants There may be secondary and tertiary effects. Although I yield to no one in my admiration of the academic ability of the right hon. Gentleman, I believe that he is a bad adviser to the nation on inflation. I hope that people do not accept his advice.
  The more serious the situation becomes, the more it will be necessary to win the support of ordinary working people for the remedies that will be necessary, and that can only be done by policies that redistribute wealth and power in favour of working people. That is the programme we are putting before the nation and which is referred to in our amendment.
  This is a country which is not very fair and has never been very fair. Some people ask why the unfairness has been allowed
  1276
  to continue for so long. What is changing, and this is why the politics of inflation are more important than the economics of inflation, is that people are progressively waking up to the unfairness in their society and are demanding a change. There is a gap not only between rich and poor but between rich and poor regions, between those who are at work and those who are retired, between different classes of pensioner. It is an unfairness to which my right hon. Friend the Deputy Leader of the Opposition referred last week, which begins at school and ends with retired people. It is an unfairness which is widening and not narrowing.
  In the programme we have put before the House and referred to in our amendment, a programme which we have agreed with the TUC, on pensions, rents, subsidies and the repeal of the Industrial Relations Act, on land, wealth, income, and in our public ownership proposals, there is the same connecting theme of the redistribution of power and wealth in favour of working people.
  One of my hon. Friends talked about a society where the whole nature of the economy was beginning to collapse. There are many people who think that when a. society collapses it necessarily collapses in the sense of mass unemployment, as in the past, but what I interpreted the hon. Member for Walsall. South to be saying in his speech about a volcano last week was that the seeds of the destruction of our system may lie not in the pre-war type of unemployment but in the post-war inflation, which will change the political balance in all Western societies.
  We are arguing—and this is the case we are putting before the House—that the experience of the Government's policy makes it clearer that we need greater equality and greater democratic control to check the abuse of power. Because the Government have chosen to ignore this abuse and have opted for a managerial society in the interests of the better-off, they have done much more than betray their trust to the electors; they have misunderstood the temper of the people, who deserve better than they are getting, will demand it and will ultimately get it, if not under this Government then under the next.
  9.30 p.m.
  The Minister for Trade and Consumer Affairs (Sir Geoffrey Howe): The right hon. Member for Bristol, South-East (Mr. Benn) closed his speech, as so often, with a passage of classic over-simplification. He claimed, as always, an absolutely exclusive prerogative to speak for the people, overlooking the fact that we, too, seek to represent the people by whom and on whose behalf we have been elected—and we do so in the name of all the people and not in the divisive way in which he seeks to claim to speak for one or other section of the people.
  The right hon. Gentleman chose, at the beginning of his speech, the rather curious metaphor of comparison with a parking meter. The trouble about him is that he resembles a parking meter which has been unhooded for far too long—a meter whose indicator always stands at "Excess Charge" and which could well be dispensed with.
  My right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), in his analysis, contributed to some extent, no doubt, to an understanding of the problem, but he contributed almost as much to a misunderstanding of it. In his analysis of this and many other problems he seeks always to identify the single cause—to use his own phraseology, to look for the key. He sees others who have considered the same problem as approaching it with equal simplicity. Of the Government, he said that we, in our analysis of the problem of inflation, had identified first one cause and then another, as though we were identifying a single cause and as though we accepted his analysis, which enabled us—again to use his phrase—to identify the "true, unique and indispensable cause" of inflation.
  It is the pursuit of the unique solution —the single, simple key—that leads my right hon. Friend astray from finding the solution. It is over-simplification to say that the cause of inflation is to be found in the management or mismanagement of the money supply. My hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd), my right hon. Friend the Member for Stafford and Stone (Mr. Hugh Fraser) and, from a rather different point of view, the hon. Member for Oldham, West (Mr. Meacher) all agreed—and there is no dissent from this—that the manage-
  1278
  ment of the money supply is an important factor. So does my right hon. Friend the Chancellor of the Exchequer.
  The Government do not accept that the underlying cause of the recent inflation is to be found in monetary factors, but we recognise that too rapid a growth in money and credit could exacerbate inflationary pressures and greatly complicate the problems of economic management. It is for exactly that reason that over the past year we have taken steps to keep the rate of monetary expansion in check. It is exactly for that reason that there have been several calls for special deposits from the banks and financial houses and an appreciable upward trend in the general level of interest rates.
  My right hon. Friend does not accept —nor, I suspect, does the House the analysis of my right hon. Friend the Member for Wolverhampton, South-West that this is the unique cause of inflation. Especially if we are pursuing economic growth, as my hon. Friend the Member for Langstone pointed out, surely in the words of the OECD Report that he quoted, it is right to look for a complementary set of policies with which to approach the problem of inflation.
  It is wrong to dismiss as wholly irrelevant to the argument, as my right hon. Friend the Member for Wolverhampton, South-West does, the impact of world prices. As I understood him, my right hon. Friend acknowledged the impact of world prices on many of the commodities that have been in recent shortage around the world; and surely he must do that, because in that sense the effect of market forces on commodities which are in short supply is to raise the price which we have got to pay for them. So it is wrong to dismiss altogether, as though it was of no account, the impact of world prices.
  Equally, I suggest that it is wrong to dismiss, or to believe that the Government have dismissed in their recent analysis of the problem, the impact on inflation of inflationary pay settlements. My right hon. Friend the Member for Wolverhampton, South-West sought to caricature the analysis that the Government have made by suggesting that last year we were identifying a unique and single cause of inflation in the form of inflationary pay settlements but this year we are seeking to identify another

  1279
  inflationary cause. The fact is that in the autumn of last year average pay settlements were running at about 17 per cent. above the level of the previous year. They could not continue at that level. The effect of those settlements was contributing to inflationary pressures, and has been, and still is, continuing to do so. The effect of many settlements reached immediately before the standstill could not be passed on during the standstill, and they come into the reckoning even at this moment as allowable cost increases. In addition, pay settlements are being made now under stage 2 limitations. Labour costs have contributed significantly to rising inflation and continue to do so, although on a limited basis.
  It is for that reason that it is critical to keep the pay side of pay and income factors under control. As my right hon. Friend the Prime Minister said on 18th July, we should not blind ourselves to the fact that
  "wages and salaries are still twice as important as imports in the make-up of costs and prices." —[OFFICIAL. REPORT, 18th July, 1973; Vol. 860, c. 525.]
  and that it is entirely within our hands to moderate the impact on prices of what we pay ourselves.
  My right hon. Friend the Member for Wolverhampton, South-West sought to suggest also that at this stage in the counter-inflationary policy the rate of inflation was accelerating. That also is not a true analysis of the situation. If the House casts its mind back to the figures announced with the Index of Retail Prices last Friday it will recall that they represented the smallest increase in the all-items index since November of last year. They also represent the smallest increase in the food index since October of last year. They represent a substantial drop of 2·2 per cent. in the seasonal food index and a slight reduction —not an increase—in the year-on-year rise in the all-item index.
  To take the other point made by right hon. Members opposite, the year-on-year advance in wages of 15·4 per cent. and of earnings at 14·2 per cent. is well ahead of the rise in prices. Even the rise in earnings since October, at 6·3 per cent., is ahead of the 6 per cent. rise in prices
  1280
  since that date. The rise in earnings since phase 2 started, at 1·9 per cent., is also ahead of the rise in prices since that date.
  The truth about the analysis of the causes of inflation is not as simple as my right hon. Friend sought to suggest. I do not—I say this in fairness to him—say "as easy" as he sought to suggest because, as the right hon. Member for Bristol, South-East has pointed out, my right hon. Friend does not suggest that the solution to inflation is an easy one. He acknowledged the growth of unemployment as an inevitable consequence of the policy which he propounded—-
  Mr. Powell: No.
  Sir G. Howe: I take my right hon. Friend's further point. [Laughter.] I appreciate that my right hon. Friend went on to argue that any policy that achieves a significant reduction in the rate of inflation must contribute to a rise—and, on his analysis. a substantial rise—in unemployment. I do not believe that that simple causal chain can be allowed to drive us to accept his simple policy. I have, incidentally, little respect for those Labour Members who, by implication or by their silence, support the analysis of my right hon. Friend—as, to be fair to the right hon. Member for Bristol, South-East, he did—but would be the first to repudiate the implications of that policy.
  The solution depends, as my hon. Friend the Member for Langstone said, on complementary policies. It depends. first, on policies for the regulation—either controlled or voluntary—of the consequences of collective bargaining. Collective bargaining is. in fact, an argument about the distribution of the resources of a complicated modern society. In the conduct of collective bargaining it is possible no one can gainsay this—for the powerful, by ruthless combination, to increase their share to the disadvantage of the weaker members of society.
  It is an essential element—as the right hon. Member for East Ham, North (Mr. Prentice) clearly acknowledged—in civilised society for us to find and make work a civilised way of resolving these conflicts about the distribution of the resources of society.
  Mr. Heifer: The right hon. and learned Gentleman refers to collective bargaining. I hope that he will now answer some of the debate by referring to the question of labour-only sub-contracting—the lump—which I raised in this debate, which has nothing whatever to do with collective bargaining and which means that some workers are earning about £100 a week while those who use collective bargaining are getting only the basic rate. Will the Minister, on behalf of the Government, answer that point and start doing something about it?
  Sir G. Howe: I am indeed answering the debate. I am answering at this point a section of the debate which was not attended by the hon. Gentleman. I am willing to acknowledge that the rela tionship—[Interruption.] I am sorry that I missed the hon. Gentleman's speech, since I normally listen to him closely. I am, of course, ready to acknowledge that the consequence of the lump is one of the elements to be resolved in this kind of discussion. It is clear in any analysis of the distribution of the resources of productive industry that the relationship between those who are paid on the lump and those paid through traditional collective bargaining must be discussed.
  All that I am asserting—this is surely accepted now by the entire country—is that it is necessary for us to have in one form or another, by agreement or by consent of this House, a policy for the regulation of the consequences of collective bargaining. It is one of the policies that we have essentially—[An HON. MEMBER: "What does that mean?"] A policy of the kind that the right hon. Member for East Ham, North himself claimed was contained in the latest Labour Party policy document
  Mr. Prentice Mr. Prentice indicated assent.
  Sir G. Howe: I see that the right hon. Gentleman nods in agreement.
  I mean a policy for society to decide the best way, in one way or another, to distribute the fruits of productive industry.
  Mr. J. Grimond Mr. J. Grimond (Orkney and Shetland) rose—
  Mr. Dalyell: You were not here.
  Mr. Grimond: I certainly was here.
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  Since the Minister is explaining the Government's view, will he say why they put forward the opposite view at the election, telling us that a prices and incomes policy of the sort that they are now imposing would not work, could not work and never bad worked?
  Sir G. Howe: We have never sought to contend that society can do without machinery—there are many ways of approaching it—for resolving this kind of problem. We need to have a policy for prices as well. I agree with my hon. Friend the Member for Langstone that the price system is the pillar of a free society and that the pricing mechanism provides the signals of an economic system. We do not, and certainly would not, seek to destroy the working of that system. But in certain circumstances and in certain ways——-again, this is common ground—a price mechanism can be operated unfairly or in a way that works to the disadvantage of society.
  In a period of rising world prices, and in a period when inflation has been fed by wage settlements it is important to demonstrate the fairness of the way in which the price system works. The role of the Price Commission is to ensure that price rises are as small as possible and that price increases are justified and can be justified by reference to the code. The commission operates in that way in relation to retail prices by reference to gross margins in the same way as it operates in relation to the prices of manufacturing industry.
  The House must acknowledge, as the report discloses, that the average price increases granted were 5–6 per cent. compared with the 6–7 per cent. applied for. The comparable figure for the 35 manufactured food applications was 4·2 per cent. against the 6 per cent. applied for. If the price increases are related to the total turnover of pre-notifying firms of controlled products, they amount to per cent. It is important to recognise that the commission does not seek to replace the market mechanism or price mechanism. It supports the role of competition in helping to regulate prices.
  Mr. Kinnock: If the right hon. and learned Gentleman takes comfort from those figures, his opinion is not echoed by the Price Commission, which, in its

  1283
  report, recounted continual failures. Does he propose to introduce more stringent powers for the commission? What the commission has said repeatedly in its report is that the loopholes are so big that unless it is given extra powers it will not be able to provide in future the kind of control that it has provided in the past. Will the right hon. and learned Gentleman give it extra powers?
  Sir G. Howe: The commission does not argue in that way. The hon. Gentleman said that the commission will not he able to provide in future the kind of control that it has provided in the past. He thereby acknowledges the extent to which it has provided control in the past.
  The code has been having the effect which I have described. The pattern and detail of the code is, as my right hon. Friend the Secretary of State made clear, always a matter for discussion. The commission is operating to contain the rate at which prices are rising, and it is doing so in a way which supports rather than conflicts with the role of competition. Competition is an equally important part of the Government's approach to the whole policy. It is in that context that we see the role of the Monopolies Commission.
  The hon. Member for Oldham, West suggested that one of the matters which had to be kept under review was the extent to which corporate power was becoming increasingly monopolistic and increasingly capable of adversely affecting the price level. That is why competition remains at the heart of our approach to the problem of prices. That is why we have made, and will continue to make, references to the Monopolies Commission of any sectors of industry which appear to justify it.
  The other element in the complementary policies which we must have is a policy for profits. It is important for the House to understand the extent to which profits are similarly under control by virtue of the code. Control is in fact being exercised. Profits are controlled by comparison with the reference levels, and the control will continue to be so exercised. Already—and there is no doubt about this—the control by reference to profits is beginning to bite.
  Mr. Bend: Will the right hon. and learned Gentleman deal with paragraph 6 of the Price Commission's report, which points out that the first reports on prices and profits are not required to be made until mid-July at the earliest? In what sense is the control biting? Profits are rising as fast as prices.
  Sir G. Howe: The right hon. Gentleman should have the patience to wait for my next sentence. The Price Commission looks at profit limitation in examining applications for price increases. Of 12 applications for price increases refused so far, three have been turned down expressly because they would break the profit limit. The main effect lies ahead. From the middle of July onwards the profit control will begin to bite increasingly.
  The hon. Member for West Lothian (Mr. Dalyell) asked what was the meaning of the phrase "roll back" used by my right hon. Friend the Secretary of State. If it is apparent that the profit margin is being exceeded the Price Commission will be able to reduce prices sufficiently to bring them down to the reference level; in other words, reduce the level of profitability to the reference level.
  Mr. Dalyell: By what mechanism will this be done?
  Sir G. Howe: By the service of a notice under Section 6 of the Act after the figures have been analysed. The Price Commission will be able to reduce the price which is being charged to a figure sufficient to eliminate the excess of profits above the reference level.
  Mrs. Renee Short: Will the right hon. and learned Gentleman tell us how it is that further colossal price increases, some as much as 91 per cent., are being allowed to firms that are already making large profits year after year?
  Sir G. Howe: Because it is no part of our prices policy to eliminate or drive out of existence the very concept of profit. Profit control is calculated by reference to a profit limit related to the average of the best two years of the last five. Of course, profits merit surveillance, control and limitation during a period when a balanced policy is being pursued. At the same time, new investment has to be financed to achieve the required level

  1285
  of investment for the growth that lies ahead, and some recovery of profits is essential, particularly after a period of exceptionally low profits. Net trading profit on the proportion of total domestic income fell from 13·1 per cent. in 1960 to 7 per cent. in 1970. It is only sensible to expect some increase in profits within the limits laid down. The House will remember that without profits there will be no investment, without investment there will be no growth, and without growth there can be no rising standard of living. Profits have a vital rôole to play in a free society.
  The hon. Member for Wolverhampton, North-East (Mrs. Renée Short) referred to profits of Eastwoods, which she described as excessive. In that case, by way of example, it is as well to remember that the firm is recovering from exceptionally low levels of profit in 1970 and 1971 and that the profits of the firm now as a percentage of sales are still well below the levels enjoyed by that company during the late 1960s under the Labour Government.
  Several points on the code were raised by my hon. Friends. I hope to be able to respond shortly to the point made by my hon. Friend the Member for Bridgwater (Mr. Tom King) but he will appreciate that a statutory instrument would be required.
  My hon. Friend the Member for Harrow, West (Mr. John Page) raised several matters on the code, and those also will receive detailed consideration. He, too, discussed the effect of the pay code on labour mobility and the importance of relativities. That is one of the many questions raised by the right hon. Member for East Ham, North and echoed later. He wanted to know whether the object of stage 3 was to secure a reduction in real living standards because of the fall in the proportion of wages compared with profits. I emphasise that that is certainly not the object of the policy. The object is sustained economic growth.
  It is right to remember, when we consider rising living standards, the time scale in which they should be considered. It is right to remember that over the last three years since June 1970 there has been a rise of 13 per cent. in real living standards of our people and that there have been matching improvements for
  1286
  pensioners and others on social benefits. We are glad to discuss with the TUC and the CBI how better to work for the achievement of economic growth to that end, but it is not the object of the policy to produce a cut in real living standards.
  Mr. Prentice: If someone is not allowed a rise of income until 12 months after the previous rise, if that rise is confined to a statutory limit which amounts to less than 8 per cent. and if the cost of living is going up faster, surely that will mean a drop in living standards?
  Sir G. Howe: I have already dealt with that point in the figures I gave, when I explained that average earnings last month were 14 per cent. up on the average level 12 months ago. That is certainly the fact and it is not the object of stage 3 to produce a reduction in living standards.
  The right hon. Gentleman asked how well stage 3 was designed to help the lower-paid. Helping the lower-paid remains an agreed objective of the policy. It was an objective in the £2 limit which we discussed at Chequers a year ago. It remained the objective of the £1 plus 4 per cent., which is at the heart of stage 2.
  The right hon. Gentleman also asked what proportion of settlements reported under paragraph 26 of the Pay Board report were weighted to the advantage of the low paid. I cannot tell him the number of settlements, but I can tell him that settlements involving 1½ million workers out of a total of 7 million workers were particularly weighted to the advantage of the lower-paid. Once again, on that point we are glad to discuss how the policies can better help the low-paid in stage 3.
  Next, the right hon. Gentleman asked how far the policies in stage 3 involve consideration of productivity deals and bargaining. This is a matter that is being closely examined. We are fully aware that the next stage of the policy should allow for a measure of flexibility in that respect. But we must make sure that whatever flexibility is introduced is properly justified and controlled. Both sides of industry recognise the extent to which such agreements can be collusive and cloak "phoney" productivity deals which do not exist.

  1287
  The right hon. Gentleman asked about the importance of comparability and relativity. Certain reports which are being produced by the Pay Board are important in respect of those two subjects. We shall gladly discuss those as well.
  The right hon. Gentleman then asked whether we attach importance to the restoration of arbitration. As a means of pre-empting other discussions it would be difficult to accept arbitration, but as a means of resolving grievances and of solving disputes we shall be glad to discuss the matter. But this is relevant to the central problem, which we invite the trade unions to discuss. I refer to the question how to reconcile the pursuit of free collective bargaining with the achievement of a fair and expanding economy.
  The right hon. Gentleman and I part company sharply when he accuses the Government, in their other policies, of causing, contributing to or deliberately creating inflation. He called for the
  reversal of some of those policies on which we were elected and which contribute to the creation of a freer and fairer society. The fair rents legislation, for example, was designed deliberately to help people who need greater help and was designed—contrary to what the right hon. Gentleman said—to achieve a redistribution in favour of those who need help and away from those who do not need it. Similarly, there was another policy which he called upon us to change. He said, astonishingly, that it was no longer sufficient for us to be willing to discuss the Industrial Relations Act, and he called for its repeal or drastic amendment. That is a central policy for the achievement of a fairer, more just and more reasonable society. We stand on those policies, but we are willing to discuss the pattern of stage 3 throughout the next period.
  Question put, That the amendment be made :—
  The House divided: Ayes 267, Noes 298.

  Jones, T. Alec (Rhondda, W.)

  Mitchell, R. C.(S'hampton, lichen)

  Silkin, Hn. S. C. (Dulwich)

  Judd, Frank

  Morgan, Elystan (Cardiganshire)

  Sillars, James

  Kaufman, Gerald

  Morris, Alfred (Wythenshawe)

  Silverman, Julius

  Kelley, Richard

  Morris, Charles R. (Openshaw)

  Skinner, Dennis

  Kerr, Russell

  Morris, Rt. Hn. John (Aberavon)

  Small, William

  Kinnock, Neil

  Moyle, Roland

  Smith, John (Lanarkshire. N.)

  Lambie, David

  Mulley, Rt. Hn. Frederick

  Spearing, Nigel

  Lamborn, Harry

  Murray, Ronald King

  Spriggs, Leslie

  Lamond, James

  Oakes, Gordon

  Stallard, A. W.

  Latham, Arthur

  Ogden, Eric

  Steel, David

  Lawson, George

  O'Halloran, Michael

  Stewart, Rt. Hn. Michael (Fulham)

  Leadbitter, Ted

  O'Malley, Brian

  Stonehouse, Rt. Hn. John

  Lee, Rt. Hn. Frederick

  Oram, Bert

  Stott, Roger (Westhoughton)

  Leonard, Dick

  Orbach, Maurice

  Strang, Gavin

  Lestor, Miss Joan

  Orme, Stanley

  Strauss, Rt. Hn. G. R.

  Lewis, Arthur (W. Ham, N.)

  Owen, Dr. David (Plymouth, Sutton)

  Summerskill, Hn. Dr. Shirley

  Lewis, Ron (Carlisle)

  Padley, Walter

  Swain, Thomas

  Lipton, Marcus

  Paget, R. T.

  Thomas, Rt. Hn. George (Cardiff, W.)

  Lomas, Kenneth

  Palmer, Arthur

  Thomas, Jeffrey (Abertillery)

  Loughlin, Charles

  Pannell, Rt. Hn. Charles

  Tinn, James

  Lyon, Alexander W. (York)

  Parker, John (Dagenham)

  Tomney, Frank

  Lyons, Edward (Bradford, E.)

  Parry, Robert (Liverpool, Exchange)

  Tope, Graham

  Mabon, Dr. J. Dickson

  Pavitt, Laurie

  Torney, Tom

  McBride, Neil

  Pendry, Tom

  Tuck, Raphael

  McCartney, Hugh

  Perry, Ernest G.

  Urwin, T. W.

  McElhone, Frank

  Prentice, Rt. Hn. Reg

  Varley, Eric G.

  McGuire, Michael

  Price, William (Rugby)

  Wainwright, Edwin

  Machin, George

  Probert, Arthur

  Walden, Brian (B'm'ham, All Saints)

  Mackenzie, Gregor

  Radice, Giles

  Walker, Harold (Doncaster)

  Mackintosh, John P.

  Reed, D. (Sedgefield)

  Wallace, George

  Maclennan, Robert

  Rees, Merlyn (Leeds, S.)

  Watkins, David

  McMillan, Tom (Glasgow, C.)

  Rhodes, Geoffrey

  Weitzman, David

  McNamara, J. Kevin

  Richard, Ivor

  Wells, William (Walsall, N.)

  Mahon, Simon (Bootle)

  Roberts, Albert (Normanton)

  White, James (Glasgow. Pollok)

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

  Roberts,Rt.Hn.Goronwy(Caernarvon)

  Whitehead, Phillip

  Marks, Kenneth

  Robertson, John (Paisley)

  Whitlock, William

  Marquand, David

  Roderick, Caerwyn E. (Brc'n&R'dnor)

  Willey, Rt. Hn. Frederick

  Marsden, F.

  Rodgers. William (Stockton-on-Tees)

  Williams, Alan (Swansea, W.)

  Marshall, Dr. Edmund

  Roper, John

  Williams, Mrs. Shirley (Hitchin)

  Mason, Rt. Hn Roy

  Rose, Paul B.

  Williams, W. T. (Warrington)

  Mayhew, Christopher

  Ross, Rt. Hn. William (Kilmarnock)

  Wilson, Alexander (Hamilton)

  Meacher, Michael

  Rowlands, Ted

  Wilson, Rt. Hn. Harold (Huyton)

  Mellish, Rt. Hn. Robert

  Sandelson, Neville

  Wilson, William (Coventry, S.) Woof, Robert

  Mendelson, John

  Sheldon, Robert (Ashton-under-Lyne)

  TELLERS FOR THE AYES:

  Mikardo, Ian

  Shore, Rt. Hn. Peter (Stepney)

  Mr. James A. Dunn and

  Millan, Bruce

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

  Mr. John Golding.

  Miller, Dr. M. S.

  Short, Mrs. Renée (W'hampton,N.E.)

  Milne, Edward

  Silkin, Rt. Hn. John (Deptford)

  Division No. 208.]

  AYES

  [10.0 p.m.

  Abse, Leo

  Crawshaw, Richard

  Freeson, Reginald

  Allaun, Frank (Salford, E.)

  Cronin, John

  Galpern, Sir Myer

  Archer, Peter (Rowley Regis)

  Crosland, Rt. Hn. Anthony

  Garrett, W. E.

  Armstrong, Ernest

  Crossman, Rt. Hn. Richard

  Gilbert, Dr. John

  Ashley, Jack

  Cunningham, G. (Islington, S.W.)

  Ginsburg, David (Dewsbury)

  Atkinson, Norman

  Dalyell, Tam

  Gourlay, Harry

  Bagier, Gordon A. T.

  Darling, Rt. Hn. George

  Grant, George (Morpeth)

  Barnes, Michael

  Davidson, Arthur

  Grant, John D. (Islington, E.)

  Barnett, Guy (Greenwich)

  Davies, Denzil (Llanelly)

  Griffiths, Eddie (Brightside)

  Barnett, Joel (Heywood and Royton)

  Davies, G. Elfed (Rhondda, E.)

  Grimond, Rt. Hn. J.

  Baxter, William

  Davies, Ifor (Gower)

  Hamilton, James (Bothwell)

  Benn, Rt. Hn. Anthony Wedgwood

  Davis, Clinton (Hackney, C.)

  Hamilton, William (Fife, W.)

  Bennett, James(Glasgow, Bridgeton)

  Davis, Terry (Bromsgrove)

  Hamling, William

  Bidwell, Sydney

  Deakins, Eric

  Hannan, William (G'gow, Maryhill)

  Bishop, E. S.

  de Freitas, Rt. Hn. Sir Geoffrey

  Hardy, Peter

  Blenkinsop, Arthur

  Delargy, Hugh

  Harrison, Walter (Wakefield)

  Boardman, H. (Leigh)

  Dell, Rt. Hn. Edmund

  Hattersley, Roy

  Booth, Albert

  Dempsey, James

  Hatton, F.

  Boothroyd, Miss B. (West Brom.)

  Doig, Peter

  Heffer, Eric S.

  Bottomley, Rt. Hn. Arthur

  Dormand, J. D.

  Hllton, W. S.

  Boyden, James (Bishop Auckland)

  Douglas, Dick (Stirlingshire, E.)

  Horam, John

  Bradley, Tom

  Douglas-Mann, Bruce

  Houghton, Rt. Hn. Douglas

  Broughton, Sir Alfred

  Driberg, Tom

  Howell, Denis (Small Heath)

  Brown, Robert C. (N'c'tle-u-Tyne,W.)

  Duffy, A. E. P.

  Huckfield, Leslie

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

  Dunnett, Jack

  Hughes, Rt. Hn. Cledwyn (Anglesey)

  Brown, Ronald (Shoreditch & F'bury)

  Eadie, Alex

  Hughes, Mark (Durham)

  Buchan, Norman

  Edelman, Maurice

  Hughes, Robert (Aberdeen, N.)

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

  Edwards, Robert (Bilston)

  Hughes, Roy (Newport)

  Butler, Mrs. Joyce (Wood Green)

  Edwards, William (Merioneth)

  Hunter, Adam

  Campbell, I. (Dunbarlonshire. W.)

  Ellis, Tom

  Irvine, Rt. Hn. Sir Arthur (Edge Hill)

  Cant, R. B.

  English, Michael

  Janner, Greville

  Carmichael, Neil

  Evans, Fred

  Jay, Rt. Hn. Douglas

  Carter, Ray (Birmingh'm, Northfield)

  Ewing, Harry

  Jeger, Mrs. Lena

  Carter-Jones, Lewis (Eccles)

  Faulds, Andrew

  Jenkins, Hugh (Putney)

  Castle, Rt. Hn. Barbara

  Fernyhough, Rt. Hn. E.

  Jenkins, Rt. Hn. Roy (Stechford)

  Clark, David (Colne Valley)

  Fitch, Alan (Wigan)

  John, Brynmor

  Cohen, Stanley

  Fitt. Gerard (Belfast, W.)

  Johnson, Carol (Lewisham, S.)

  Coleman, Donald

  Fletcher, Raymand (Ilkeston)

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

  Concannon, J. D.

  Fletcher, Ted (Darlington)

  Johnson, Walter (Derby, S.)

  Conlan, Bernard

  Foot, Michael

  Jones, Barry (Flint, E.)

  Corbet, Mrs. Freda

  Forrester, John

  Jones, Dan (Burnley)

  Cox, Thomas (Wandsworth, C.)

  Fraser, John (Norwood)

  Jones, Rt. Hn.SirElwyn (W.Ham,S.)

  Jones, Gwynoro (Carmarthen)

  NOES

  Adley, Robert

  Burden, F. A.

  Dykes, Hugh

  Alison, Michael (Barkston Ash)

  Butler, Adam (Bosworth)

  Eden, Rt. Hn. Sir John

  Allason, James (Hemel Hempstead)

  Carlisle, Mark

  Edwards, Nicholas (Pembroke)

  Archer, Jeffrey (Louth)

  Cary, Sir Robert

  Elliot, Capt. Walter (Carshalton)

  Astor, John

  Channon, Paul

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

  Atkins, Humphrey

  Chapman, Sydney

  Emery, Peter

  Awdry, Daniel

  Chataway, Rt. Hn. Christopher

  Eyre, Reginald

  Baker, Kenneth (St. Marylebone)

  Chichester-Clark, R.

  Farr, John

  Baker, W. H. K. (Banff)

  Churchill, W. S.

  Fell, Anthony

  Balniel, Rt. Hn. Lord

  Clark, William (Surrey, E.)

  Fenner, Mrs. Peggy

  Batsford, Brian

  Clarke, Kenneth (Rushcliffe)

  Fidler, Michael

  Beamish, Col. Sir Tufton

  Cockeram, Eric

  Finsberg, Geoffrey (Hampstead)

  Bennett, Sir Frederic (Torquay)

  Cooke, Robert

  Fisher, Nigel (Surbiton)

  Bennett, Dr. Reginald (Gosport)

  Coombs, Derek

  Fletcher-Cooke, Charles

  Benyon, W.

  Cooper, A. E.

  Fookes, Miss Janet

  Berry, Hn. Anthony

  Cordle, John

  Fortescue, Tim

  Biffen, John

  Corfield, Rt. Hn. Sir Frederick

  Foster, Sir John

  Biggs-Davison, John

  Cormack, Patrick

  Fowler, Norman

  Blaker, Peter

  Costain, A. P.

  Fox, Marcus

  Boardman, Tom (Leicester, S.W.)

  Critchley, Julian

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

  Boscawen, Hn. Robert

  Crouch, David

  Fry, Peter

  Bossom, Sir Clive

  Crowder, F. P.

  Galbraith, Hn. T. G. D.

  Bowden, Andrew

  Dalkeith, Earl of

  Gardner, Edward

  Braine, Sir Bernard

  d'Avigdor-Goldsmid, Sir Henry

  Gibson-Watt, David

  Bray, Ronald

  d'Avigdor-Goldsmid,Maj.-Gen.Jack

  Gilmour, Sir John (Fife, E.)

  Brewis, John

  Dean, Paul

  Godber, Rt. Hn. J. B.

  Brinton, Sir Tatton

  Deedes, Rt. Hn. W. F.

  Goodhew, Victor

  Brocklebank-Fowler, Christopher

  Digby, Simon Wingfield

  Gorst, John

  Brown, Sir Edward (Bath)

  Dixon, Piers

  Gower, Raymond

  Bruce-Gardyne, J.

  Dodds-Parker, Sir Douglas

  Grant, Anthony (Harrow, C.)

  Bryan, Sir Paul

  Drayson, G. B.

  Gray, Hamish

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

  du Cann, Rt. Hn. Edward

  Green, Alan

  Bullus, Sir Eric

  Grieve, Percy

  Griffiths, Eldon (Bury St. Edmunds)

  McNair-Wilson Michael

  Russell, Sir Ronald

  Grylls, Michael

  Madel, David

  McNair-Wilson, Patrick (New Forest)

  Gummer, J. Selwyn

  Maginnis, John E.

  Maddan, Martin

  Gurden, Harold

  Marples, Rt. Hn. Ernest

  St. John-Stevas, Norman

  Hall, Sir John (Wycombe)

  Marten, Neil

  Sandys, Rt. Hn. D.

  Hall-Davis, A. G. F.

  Mather, Carol

  Scott, Nicholas

  Hamilton, Michael (Salisbury)

  Maude, Angus

  Scott-Hopkins, James

  Hannam, John (Exeter)

  Maudling, Rt. Hn. Reginald

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

  Harrison, Brian (Maldon)

  Mawby, Ray

  Shelton, William (Clapham)

  Harrison, Col. Sir Harwood (Eye)

  Meyer, Sir Anthony

  Shersby, Michael

  Haselhurst, Alan

  Mills, Peter (Torrington)

  Simeons, Charles

  Hastings, Stephen

  Miscampbell, Norman

  Sinclair, Sir George

  Havers, Sir Michael

  Mitchell,Lt-Col.C.(Aberdeenshire,W)

  Skeet, T. H. H.

  Hawkins, Paul

  Mitchell, David (Basingstoke)

  Smith, Cyril (Rochdale)

  Hay, John

  Moate, Roger

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

  Hayhoe, Barney

  Molyneaux, James

  Soref, Harold

  Heseltine, Michael

  Money, Ernie

  Speed, Keith

  Hicks, Robert

  Monks, Mrs. Connie

  Spence, John

  Higgins, Terence L.

  Monro, Hector

  Sproat, lain

  Hiley, Joseph

  Montgomery, Fergus

  Stainlon, Keith

  Hill, John E. B. (Norfolk, S.)

  More, Jasper

  Stanbrook, Ivor

  Hill, S. James A. (South'pton, Test)

  Morgan, Geraint (Denbigh)

  Stewart-Smith, Geoffrey (Belper)

  Holland, Philip

  Morrison, Charles

  Stodart, Anthony (Edinburgh, W.)

  Holt, Miss Mary

  Mudd, David

  Stokes, John

  Hordern, Peter

  Murton, Oscar

  Stuttaford, Dr. Tom

  Hornby, Richard

  Nabarro, Sir Gerald

  Sutcliffe. John

  Hornsby-Smith,Rt.Hn.Dame Patricia

  Neave, Airey

  Tapsell, Peter

  Howe, Rt. Hn. Sir Geoffrey

  Nicholls, Sir Harmer

  Taylor, Sir Charles (Eastbourne)

  Howell, Ralph (Norfolk, N.)

  Noble, Rt. Hn. Michael

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

  Hunt, John

  Normanton, Tom

  Taylor, Frank (Moss Side)

  Hutchison, Michael Clark

  Nott, John

  Taylor, Robert (Croydon, N W.)

  Iremonger, T. L.

  Onslow, Cranley

  Tebbitt, Norman

  Irvine, Bryant Godman (Rye)

  Oppenheim, Mrs. Sally

  Temple, John M.

  James, David

  Orr, Capt. L. P. S.

  Thatcher, Rt. Hn. Mrs. Margaret

  Jenkin, Patrick (Woodford)

  Osborn, John

  Thomas, John Stradling (Monmouth)

  Jennings, J. C. (Burton)

  Owen, Idris (Stockport, N.)

  Thomas, Rt. Hn. Peter (Hendon, S.)

  Jessel, Toby

  Page, Rt. Hn. Graham (Crosby)

  Thompson, Sir Richard (Croydon. S.)

  Johnson Smith, G. (E. Grinstead)

  Page, John (Harrow, W.)

  Tilney, Sir John

  Jones, Arthur (Northants, S.)

  Parkinson, Cecil

  Trafford, Dr. Anthony

  Jopling, Michael

  Peel, Sir John

  Trew, Peter

  Joseph, Rt. Hn. Sir Keith

  Percival, Ian

  Tugendhat, Christopher

  Kaberry, Sir Donald

  Peyton, Rt Hn. John

  Turton, Rt. Hn. Sir Robin

  Kellett-Bowman, Mrs. Elaine

  Pike, Miss Mervyn

  Vaughan, Dr. Gerard

  Kilfedder, James

  Pink, R. Bonner

  Vickers, Dame Joan

  Kimball, Marcus

  Pounder, Rafton

  Waddington, David

  King, Evelyn (Dorset, S.)

  Price, David (Eastleigh)

  Walder, David (Clitheroe)

  King, Tom (Bridgwater)

  Prior, Rt. Hn J. M. L.

  Walker, Rt. Hn. Peter (Worcester)

  Kinsey, J. R.

  Proudfoot, Wilfred

  Walker-Smith, Rt. Hn. Sir Derek

  Kirk, Peter

  Pym, Rt. Hn. Francis

  Wall, Patrick

  Kitson, Timothy

  Quennell, Miss J. M.

  Walters, Dennis

  Knight, Mrs. Jill

  Raison, Timothy

  Ward, Dame Irene

  Knox, David

  Ramsden, Rt. Hn. James

  Warren, Kenneth

  Lamont, Norman

  Rawlinson, Rt. Hn. Sir Peter

  Wells, John (Maidstone)

  Lane, David

  Redmond, Robert

  White. Roger (Gravesend)

  Langford-Holt, Sir John

  Reed, Laurance (Bolton, E.)

  Wiggin, Jerry

  Le Merchant, Spencer

  Rees, Peter (Dover)

  Wilkinson, John

  Lewis, Kenneth (Rutland)

  Rees-Davies, W. R.

  Winterton, Nicholas

  Lloyd,Rt.Hn.Geoffrey(Sut'nC'field)

  Renton, Rt. Hn. Sir David

  Woirige-Gordon, Patrick

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

  Rhys Williams, Sir Brandon

  Woodhouse, Hn. Christopher

  Longden, Sir Gilbert

  Ridley, Hn. Nicholas

  Woodnutt. Mark

  Loveridge, John

  Ridsdale, Julian

  Worsley. Marcus

  Luce, R. N.

  Rippon, Rt. Hn. Geoffrey

  Wylie, Rt. Hn. N. R.

  McAdden, Sir Stephen

  Roberts, Michael (Cardiff, N.)

  Younger, Hn. George

  MacArthur, Ian

  Roberts, Wyn (Conway)

  TELLERS FOR THE NOES:

  McCrindle, R. A.

  Rodgers, Sir John (Sevenoaks)

  Mr. Walter Clean and

  McLaren, Martin

  Rossi, Hugh (Hornsey)

  Mr. Bernard Weatherill.

  Maclean, Sir Fitzroy

  Rost, Peter

  McMaster, Stanley

  Royle. Anthony

  Macmillan,Rt.Hn.Maurice(Farnham)

  Question accordingly negatived.
  Main Question put and agreed to.
  Resolved,
  That this House takes note of the Reports
  of the Pay Board and the Price Commission
  (House of Commons Papers Nos. 363 and 374).

  BUSINESS OF THE HOUSE
  Ordered,
  That, at this day's Sitting, the Motion relating to Vehicle Driving Licences may be proceeded with, though opposed, until half-past Eleven o'clock; and the Government Trading Funds Bill, the Nature Conservancy Bill [Lords] and the Prescription and Limitation (Scotland) Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Kenneth Clarke.]

  VEHICLE DRIVING LICENCES
  10.15 p.m.
  The Minister for Transport Industries (Mr. John Peyton): I beg to move,
  That this House takes note of the Draft Directive of the Commission of the European Communities (No. C/119/1 dated 16th November 1972 in the Official Journal of the Communities) relating to vehicle driving licences.
  Mr. Speaker: I have selected the amendment, in the name of the hon. Member for Banbury (Mr. Marten), at end add
  "but nevertheless declares that the present minimum age of 17 years for both motorcycle and car licences should be maintained and that the proposed medical examination should not be accepted."
  Mr. Peyton: The directive of the European Commission to which this motion refers is really quite an ancient document which, I think, first saw the light of day nearly a year ago; news of it had been heard a great deal earlier. I have endeavoured before to make quite clear in the House that a great deal of it is unwelcome and unacceptable, but that is not to say that we should refuse to discuss it with our European partners, because it would be unrealistic if we were to expect them to listen to the arguments which we have to deploy if on every occasion we made clear that our own position was pre-judged.
  Perhaps it would be most convenient to the House—although I would, of course, defer to the right hon. Gentleman the Member for Sheffield, Park (Mr. Mulley)—if I were to cut my own remarks now and endeavour to reply as fully as I can to the points made in the debate.
  Mr. Frederick Mulley: I think that would be a very convenient
  1294
  course. We look forward to the right hon. Gentleman's giving us as full a reply as possible to the many points which I am sure will be raised from both sides of the House.
  Mr. Peyton: I know the right hon. Gentleman realises that I would not be in any way reluctant to do that. Perhaps I should just remind the House of my own view, having said what I have just said.
  On driving licences, 1 see no reason why we should change from 17 to 18. On the question of motor cycle licences, I think it would be a wrong and retrograde step if we were to go back to making the more dangerous vehicle available earlier in life than the motor car.
  On the question of medical tests, 1 think repeated medical tests would be a source of very great expense, would be difficult to administer, and would be unrewarding from a road safety point of view.
  There are other matters as well which are not covered by the amendment, and which also I should find unacceptable. So I think that the final thing I would now say is that if my hon. Friend the Member for Banbury (Mr. Marten) and those who support him with his amendment wish to express their view in this way, it is not contrary to my own opinions, and it is certainly not one on which I would wish to advise the House to divide.
  10.18 p.m.
  Mr. Neil Marten: I beg to move, at the end of the Question to add:
  "but nevertheless declares that the present minimum age of 17 years for both motorcycle and car licences should be maintained and that the proposed medical examination should not be accepted".
  I am very grateful that the motion has been proposed for debate. This matter has somewhat of a long history. The original draft directive from the Community was in August 1972. That was when it was launched by the Commission. Then there was a long delay while it was translated, as my right hon. Friend indicated. It was translated only in April or May this year, which was a very odd thing. Meantime, some of us on this side of the House put down an early-day motion saying that we objected to the draft directive. Since then many

  1295
  of us have frequently requested a debate on the directive and we were promised it by the Leader of the House, and I am very glad indeed that he has kept his promise, albeit at the last minute before the House rises for the recess.
  I should like to ask my right hon. Friend one or two questions about the draft directive itself in order to get confirmation of the views many of us hold about it.
  Article 1 gives the operative date as 1st January 1974, and I imagine that there is clearly every hope that it will be realised that that date is far too early to allow of proper discussions with everyone, and particularly in the House.
  Article 2 says that we must have photographs on our driving licences. How will that work out if, as I understand, we are to have lifetime licences? If one must have a photograph at 18 it will look rather pointless by the time one is 65.
  Article 5 says that the starting age for car drivers is to be raised from 17 to 18 and reduced from 17 to 16 for motorcyclists. Can we have the clear view of the Government on both these ages? I feel that it is quite wrong for us in this country to raise the minimum car-driving age from 17 to 18, because there is just no need for it. It may be necessary for the somewhat hot-blooded French to raise their starting age to 18 but not for the level-headed British to do such a thing. I have had from the Minister himself figures of accidents. The rate in Belgium is 7·47 drivers killed per 10,000 vehicles; Germany, 6·07 and France 6·36. The relevant figure for Great Britain is 2·63, so there seems to be no good reason at all why our young people should have to suffer in this way because of the temperament of our colleagues in the European Community. To do this would he invidious, and I call it uniformity for its own sake.
  I should like to have the Government's view on the starting age for driving invalid carriages not going up to 18 but remaining at the present 16 years of age.
  If we were to have the medical tests laid down in Article 6 it would mean our having 5 million medical tests a year in this country—a figure quoted in the European Assembly by one of my hon. Friends—and I do not see that there is
  1296
  any evidence that all these medical tests would improve the accident rate here. On the other hand, they would create excessive administrative difficulties for an already very overburdened medical profession, together with increased cost of licences.
  The draft directive states that there should be an examination of the dynamic behaviour of vehicles. I should like an explanation of that provision. Then we are told that there should also be a psychological examination. This presents certain problems for the medical profession, because the psychology in Southern Italy is somewhat different from that in Scotland. I am not quite sure what criteria would be laid down for the examination.
  Article 10 raises a serious legal question. It deals with information about any conviction for a motoring offence, and I assume that the offence would be that of dangerous driving and other offences more serious. Such convictions would be put on a central register, and if someone committed an offence in this country and was then charged with an offence in, say, France, that information could be passed to France for the purposes of the trial. With recent memory of the Cartland case I should not like to feel that convictions here were notified to the French courts, because the courts there could use that evidence before arriving at a verdict, whereas in Britain such evidence is not available until after a verdict has been reached and is taken into account only when the sentence is being considered.
  Mr. Clinton Davis: Why does the hon. Gentleman say that it seems to him that it relates to offences of dangerous driving or above that category? There does not seem to be any such limitation in Article 10.
  Mr. Marten: I was on that occasion giving the benefit of the doubt to the Eurocrats because I do not believe that even the Eurocrats would want parking offences put on a central computer and referred to every time. I was being fair, as I always am, about the Community. Those are the points which I should like my right hon. Friend to clear up about the specific draft directive.
  On 20th June, reported in a copy of HANSARD which has not yet been printed, at Question Time I invited my right hon.

  1297
  Friend to express an opinion on this draft directive, and he repeated his own opinion of it tonight, that he does not think very much of it. But tonight I am asking him to be more specific, and I am asking the House to express a view on the draft directive.
  As I understand it, although I cannot ascertain from the European Assembly report, because the reports come in a jerky fashion and it is difficult to trace it, the European Assembly has discussed this question. If the House tonight accepts this amendment-and I understood from my right hon. Friend that he will accept it-this will, of course, form an instruction to our Minister that when he goes to the Council of Ministers to talk about this he will not agree to the points which are covered in our amendment. This raises an interesting question, because we have already in this House expressed our view on a draft directive dealing with heavy lorries. We are not going to have heavier lorries in this country. Here we are expressing a view that we are not going to have our licensing interfered with.
  The other day we decided in this House that we would stop the export of live animals, which, according to my hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, is an offence against the Treaty of Rome. [Interruption.] A right hon. Friend of mine says that it is not. Perhaps he will look at this letter from the Parliamentary Secretary, which says that such a ban would offend against the Treaty of Rome. I have it here. However, we will leave that aside for the moment.
  What I am pleased about is that, before the Foster Committee has reported on how we should handle European legislation, this House is about to take its third decision on draft directives from the European Community. We have already established that we have done something against the Treaty of Rome on the matter of the export of live animals. We have already established that we can debate, and we are now debating, a draft directive, and if this amendment is accepted, as I hope it will he, that will form an instruction to our Minister that he may not go beyond the bounds which this
  1298
  House of Commons has set. The Government, of course, will not like that.
  I turn to the OFFICIAL REPORT of 3rd April. The Chancellor of the Duchy of Lancaster on that day was dealing with this point on an Opposition motion to do with prices, and he attacked the Opposition saying:
  "The motion deliberately seeks to pinion the Minister—to prick him on a pin"—
  presumably like a butterfly—
  "so that he cannot move, and his wings are clipped."—[OFFICIAL REPORT, 3rd April, 1973: Vol. 854, c. 291.]
  In other words, the Chancellor of the Duchy of Lancaster does not like this House giving instructions to our Minister. I think that is precisely what this House should do. It is very much in line with what the Danish Parliament does. It gives its Minister instructions to go forward and negotiate, and if he wishes to go beyond the instructions which Parliament has given him he has to go back and seek further instructions.
  The danger is that if we do not give the Minister instructions he may compromise in the Council of Ministers, and in this context the compromise might be that we would get more lorry permits if we gave in on the driving licences. That is a poor way to run a country, by mixing up two quite separate factors. It worries me because a compromise means that the draft regulation or draft directive becomes the law of the land immediately without Parliament being able to do anything about it.
  All this law-making procedure in the Council of Ministers is done in secret. One of the most odious features of the Common Market is that there is no HANSARD for the Council of Ministers to see how the decisions are arrived at.
  Mr. James Scott-Hopkins: Like the Cabinet.
  Mr. Marten: My hon. Friend obviously does not understand how the Community works, although he is a member of our delegation. It is not like the Cabinet at all. I am surprised that he should have made that remark. I shall explain to him later how the Community works. The Council of Ministers is the law-making organisation of the Common Market, and it should be in public—as, indeed, should the committees of the European Assembly be in public—so that we may see what it

  1299
  is that these delegates from the Conservative Party, for example, are saying in Europe.
  Sir Derek Walker-Smith: I do not know whether my hon. Friend was able to check in the rather spasmodic arrival of the European Parliament's HANSARD the speech I made a month ago, when I suggested that the legislative processes of the Council of Ministers should be carried on in public in order that they should be sensitive to the views of ordinary citizens in influencing the member States there represented. This is something which I have always also commended in this House to Ministers to put forward in the Council of Ministers.
  Mr. Marten: I am grateful to my right hon. and learned Friend. I had not noticed his speech, and I am delighted to know about it. If he will kindly send me a copy, I shall be happy to read it. I, too, have said the same thing to Ministers, who have rather brushed it aside. They do not seem to mind that legislation is made in secret, but I mind passionately.
  I do not like this draft directive. I do not believe that my right hon. Friend the Minister for Transport Industries likes it. The House does not want it, and tonight we shall give the Minister instructions that he may not agree to it outside the terms of the amendment.
  10.34 p.m.
  Mr. Frederick Mulley: We all congratulate the hon. Member for Banbury (Mr. Marten) on the persistence that has brought about this debate. I am not sure whether I should congratulate him on the moderation of his amendment, or question whether he should not have gone a little wider in his condemnation of the various aspects of these Common Market proposals. But I think the whole House will welcome generally this opportunity of expressing itself on a subject which touches almost all our people, and expressing its opinion before hard and fast decisions have been taken. It is against this background that we must consider the proposals contained in the draft directive.
  1300
  The directive is aimed at improving road safety. We all subscribe to road safety. If we were persuaded that this would make a material difference to road safety, we would probably be willing to suffer a number of inconveniences which we otherwise would not be prepared to accept. I wonder why these proposals have been made. Probably on a legal interpretation of Title IV, Article 75(1)(c) of the Treaty of Rome, which speaks about "appropriate provisions", the Commission is acting ultra vires in bringing forward these proposals. The Commission takes this step under a vague provision which is concerned solely with international transport and the operation of transport services.
  I am fortified in my views about the possible ultra vires character of the proposal by the Commission's phrase in the explanatory memorandum to another set of proposals couched in terms of road safety, namely, those for a uniform system of vehicle inspections—
  "The recognition of this situation"—
  that is, road safety—
  "should override all objections based on too limited a legal interpretation of Title IV of the Treaty and its definition of the content of the common transport policy."
  I am not one who is particularly anxious always to take a narrow and rigid view of a treaty, but I have no enthusiasm for extending, even less enthusiasm for the Commission itself extending, the Commission's powers in present circumstances. The Government will no doubt have sought the Attorney-General's views on the question of the vires of the proposals, and no doubt they will tell us the result.
  A second interesting point arises from Article 83 of the treaty, which provides:
  "An Advisory Committee consisting of experts designated by the Governments of Member States, shall be attached to the Commission The Commission, whenever it considers it desirable, shall consult the Committee on transport matters without prejudice to the powers of the transport section of the Economic and Social Committee."
  Has that advisory committee been consulted in this case? The experts designated by Governments, in view of the real administrative problems here involved, must have asked the commission whether it has checked up on how many psychologists there are, how many new driving licences are required,

  1301
  whether it thinks that psychological departments of universities and hospitals should be concerned with examining people about driving licences, and whether it would make much difference if they did. I cannot believe that the experts designated by Governments would have let the document go through in this form.
  In principle, we are not against having more severe driving tests. A body of opinion is forming, for example, to the effect that a rather more severe sight test than the vague and general one in the present test might be appropriate. We have an open mind about additions to the test, provided that they are related to a real improvement in road safety terms.
  We all agree about the great convenience of the reciprocal recognition by member States of licences and drivers of other States. In fact, this is working pretty well in regard to holidays and international transport drivers, without their having to have all this mass of new documentation. Whether it is ultra vires or not, there is no need for the Commission to propose so detailed a scheme as it does in these documents to apply to every member.
  What is particularly incomprehensible to me is that, in the context of a common transport policy, this draft should be mainly directed at motor cyclists and drivers of private cars, and that the Commission does not propose, as we have done in our own legislation, particular tests for the drivers of commercial vehicles, which surely, especially in the context of Article 75, would appear to be the main road ingredient of any such common policy.
  I will not detain the House at length to go over our objections, but to me the age provision is only one of the objections. I will not press the point terribly far. I was not persuaded that the Minister was right to raise the age for motor cyclists to 17, but I see no reason—
  Mr. Peyton: May I get this clear? Would the right hon. Gentleman put the age back to 16?
  Mr. Mulley: I am not at all sure what I should do in a particular set of circumstances, but I was not persuaded of the Minister's case. What I was even
  1302
  less persuaded about was the timing—just before Christmas, with the maximum inconvenience to everyone concerned and at great cost to the Treasury in large sums of compensation. I can assure the right hon. Gentleman that I should certainly not have done it in that way.
  As for the minimum age for car drivers, I see no reason why we should change our age provision. I do not understand what is meant by a test of "the mechanics and dynamic behaviour" of a car. There may be merit in this. Most driving schools try to show how driving in a certain way can be bad for the car, but this is not so much a question of road safety as of a person preserving a rather expensive consumer durable asset.
  On the medical examination, there may be some marginal benefit in this, particularly for older people, but, again, we cannot accept the cost and the cumbersome character of the proposal. The psychological examination in the earlier draft is now a psychometric examination in the latest draft. This is about the only substantial change between the early drafts and the draft of November which is before us.
  Mr. Marten: It is a psychometric examination covering "the candidate's psychological fitness", so it is really the same thing.
  Mr. Mulley: I was going on to say that I was not sure what was meant by this form of words. Certainly, I do not think that this House or anyone else should be asked to buy a pig in a poke. The significant thing about this draft is that, while enormous detail and diagrams are included about what should go on a driving licence, we are not told what criteria will be applied in the test. In fact, the draft provides that the Commission should make its proposals for this kind of test at a later stage. That is an extraordinary proposition. I hope that the Minister will tell us how many psychologists we have in this country who would be qualified and available for this type of work and relate that to the numbers they might have to test.
  Most hon. Members drive or are driven many miles in the course of a year. While accepting completely that the human factor is most important in road accidents, I wonder how many of

  1303
  the weaknesses of drivers would be shown up in either a medical or a stiffer driving test or in any kind of psychological examination. In many cases the person is tired and makes mistakes that he would not otherwise make. Sometimes a normally careful driver is held up in traffic or by an unforeseen factor and takes chances to try to catch up. He may be an hon. Member coming here for a Division or someone with another kind of important engagement. I do not see how any examination would deal with such factors.
  Mr. Kenneth Lewis: The right hon. Gentleman is on a very good point. Some of us think that the members of the Commission who thought this up must need a psychologist themselves. Who will do the tests on the psychologists — another psychologist? What happens about women who from time to time go through difficult periods? If they went to a psychologist at those times they would probably be told that they must stop driving. It is ridiculous.
  Mr. Mulley: The hon. Gentleman should not tempt me to follow him in those thoughts. No doubt his views will have been noted by his right hon. Friend.
  Above everything else, I ask the Minister what the proposals will cost. What will it cost the individual to go through the set of tests? What will it cost the Exchequer? I expect that one of the first things the right hon. Gentleman did was to have the proposals costed. I hope that he will say what is involved.
  I was subjected to some criticism when, because of the rising cost over many years, I had to authorise an increase in the charge for the basic driving test. It was not very popular, but it was chicken-feed compared with what must be the cost if the whole gamut of proposed tests must be performed. I suspect that a substantial cost would fall also on the Exchequer.
  What is extraordinary is that there is no provision for provisional licences. There is no way to license someone to go on a road to acquire the skills with which he could pass the test. There is provision for beginners. As I understand the definition, these are people who have already acquired a licence, no doubt by passing all the tests.
  1304
  There are restrictions to be imposed on them for a year after they have passed the tests, but there is no provision on how people get on the road—whether they should be accompanied by a qualified driver and all the rest of the restrictions we rightly lay down.
  It would be a serious breach of road safety to abandon the idea of a provisional licence, so that anybody could go on the roads and say "I am practising for my test. I cannot get a licence because until I have had a chance to practise I cannot hope to qualify for the tests."
  I hope that the Minister will not think that the objections of the House are confined to the moderate objections in the amendment, although the hon. Gentleman himself voiced many others. I am concerned about the register to which he drew our attention. It is wrong that we should accept all the proposals when key information, such as the character of the psychological test and the power of an individual country to suspend licences. is to be produced by the Commission and the Council at a later date. It is conceivable that they would tell us later that we must give up our present totting-up procedure. whereby magistrates may take away licences. and our breath alyser test, with a mandatory withdrawl of licence from drivers whose alcohol level exceeds the limit. If so, there would be an enormous loss in road safety terms.
  Mr. J. Enoch Powell: The right hon. Gentleman suggested that the subordinate legislation to fill in the details of the directive would be prepared by the Commission and the Council of Ministers. Is he sure that it would not be done purely by Commission regulation and not by the Council at all?
  Mr. Mulley: That is possible, but I cannot believe that the Ministers would be so irresponsible as to allow that to happen. Article 6, paragraph 5, states:
  "The Council shall, before … and on a proposal from the Commission, adopt common provisions regarding the medical standards required for the various levels of physical fitness and the criteria for the psychometric examination."
  A similar provision applies also for the conditions under which a licence can be

  1305
  taken away. The Council comes into the picture.
  This whole collection of proposals is remote from reality, and I am sure that the Minister would not wish to recommend them to the House. I do not know whether the Council of Ministers has the form of procedure—not, I regret to say, used in this House—known as referring back a report. That is what is needed here. If there is a case—and I am not persuaded that there is—for laying down detailed uniform procedure. it is reasonable that there should be a reciprocal system. If licence holders of other countries are permitted to drive here, steps should be taken to ensure that they are qualified to drive, but we do not need to have exactly the same tests and conditions for the issue of a licence. I hope that this reference back procedure, if it does not exist, will be invented to enable the report to be sent back.
  I am glad the Minister has accepted the extremely moderate amendment. He probably thanks his lucky stars that it is not wider in scope. Had he not accepted the amendment, it would have been my duty to advise my right hon. and hon. Friends to support it. These proposals should be debated by the House so that the Minister can go back fortified in his opposition by the knowledge that he has the backing of the House.
  I hope that the Minister will not think, because the amendment goes through unopposed, that it is of less importance than if there had been a Division. An unopposed decision of the House is stronger, if anything, than is a decision by a Division carried by a few votes. I hope that the Minister will feel that the debate has been worth while in enabling him to express these views with the unanimous support of the House.
  10.53 p.m.
  Mr. S. James A. Hill: I welcome the debate because it is sometimes difficult for the delegates whom the House sends to Europe to get the views of the European committees debated on the Floor of the House. I am Chairman of the Regional Policy and Transport Committee, and I shall briefly state the background to the Commission directive and the draft report PE 31/414/ revised.
  A paper submitted in 1972 by Mr. Albert Coppé the then Commissioner for
  1306
  Transport, called for a harmonisation of legislation on driving licences. In his general comments in the paper he points out that the growing collective cost of road accidents can be evaluated overall on the basis of current national estimates. It amounts to more than 4,000 million units of account, corresponding at that time, with six member States, to 1.15 per cent. of the Community gross national product. If the human element is added to this economic balance sheet-50,000 persons killed on the roads in the six member States and 1,200,000 injured annually, together with the material damage—we realise that the cost is doubled. In other words, it involves 8,000 million units of account or 2·5 per cent. of the Community's gross national product.
  Mr. Coppé further pointed out that the development of trade between member States together with the progressive integration of the various national markets and the continued increase in tourism lead one to forecast a serious increase in traffic problems. He felt it essential that a certain number of measures be enacted within the framework of common transport policy whose sole intention would be to improve traffic conditions. Mr. Coppé felt strongly that among these measures harmonisation of the issue of driving licences should take an important place. Indeed, he went further and said "at the highest possible level". There are inequalities between the nine member States at this time—and indeed Belgium introduced driving licences only on 1st January 1967—but no serious disparities in regard to basic driving laws. However, a detailed analysis of these laws shows that there are important differences between various national laws on the subject of minimum age, driving standards, the nature of driving tests, apprenticeship conditions, the use of driving schools and the validity of licences.
  Mr. Coppó went on to say that he felt it of great importance that member States should issue driving licences under uniform conditions which guarantee the highest levels of fitness, training and apprenticeship. We thought that these were laudable sentiments, but easier in theory than in practice.
  Mr. Adam Butler: Did Mr. Coppe undertake an analysis of deaths

  1307
  and other accidents on the roads? If he did, it must have shown that motorcyclists aged 16 had comparatively few accidents compared with 17-year-old car drivers. That does not make sense.
  Mr. Hill: It has been calculated that the aggregate cost of road accidents in the Community as a whole amounts to 4,000 million units of account. Correspondingly, in the analysis those concerned arrived at a figure of 16 for motorcyclists and 18 for motor car drivers.
  Mr. Butler: Did he analyse accidents by age and type of vehicle?
  Mr. Hill: Not by type of vehicle.
  The Transport Committee in 1972 appointed a Mr. Couste as rapporteur to bring forward a draft report—as my right hon. Friend said, the directive is 12 months out of date—not only on the directive on the harmonisation of legislation on driving licences for road vehicles, but linking in the same draft report another directive for the approximation of member States' legislation on technical inspection of motor vehicles and trailers. Therefore, tonight we are discussing this one draft report which contains many items.
  Mr. Marten: We are not discussing a draft report. We are discussing the draft directive.
  Mr. Hill: The draft directive has continued into a draft report. It is virtually the same thing, except that it instructs the committee to give an opinion on the directive, so that the opinion on the directive then becomes a draft report.
  Mr. Marten: This has no legal standing at all. As we know, the European Assembly to which my hon. Friend the Member for Southampton, Test (Mr. S. James A. Hill) belongs is purely advisory. What we are discussing in this House is the draft directive. We are not discussing any committee reports.
  Mr. Hill: No, but I am trying to give to the House the information, as I know it, on the Commission's directive and the stage it has reached so far.
  The committee of the six member States then discussed these important matters. This draft report was completed to the satisfaction of the rapporteur on
  1308
  17th January 1973, only a few days after we joined the Community. In March of this year, after I was appointed chairman, this draft report was on the agenda once again for discussion, mainly to obtain the views of the three new member States. Unfortunately, by this time Mr. Cousté had been released from the committee and been replaced by Mr. Bousquet, who ably explained his colleague's views to the committee.
  We have had several questions raised in this House about Resolution 5 of the draft report which recommended psycho-technical examinations—that is the latest translation—and character aptitude tests. Hon. Members will be delighted to hear that the committee threw both psycho-technical examinations and character aptitude tests out of the draft report. Consequently, I do not think that we need worry about pregnant mothers or anyone else being subjected to these tests. The medical tests at the time—
  Mr. Mulley: The hon. Gentleman is making a very important point. Is he now saying that the European Parliament has power to change the proposals between the Commission and the Council? If so, why is the Commission issuing, as it is already, a number of documents addressed to the Council described as "draft directives" and employing such phrases as
  "Having regard to the opinion of the European Parliament….?"
  Are we to take it that the European Parliament has these powers? If it has, why has not it thrown out the lot?
  Mr. Hill: What has happened is that the Commission, naturally, is looking to the European Parliament for an opinion on its directive. This is as far as it has got. The draft report has still not yet been fully discussed in the committee of the European Parliament.
  One of the most important items was that the Commission in the beginning wanted a medical test every five years, a quite severe test, and a test every year once the age of 60 had been reached—
  Mr. Robert C. Brown (Newcastle-upon-Tyne, West): On a point of order, Mr. Deputy Speaker. As I understand it, the committees of the European Parliament have no power as regards the directive that we are discussing. Might I ask you

  1309
  to rule whether it is in order for an hon. Member to be pontificating on the deliberations of a committee which has no power in this House?
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): As far as I am concerned, it is in order. I have no power over these committees. But nothing that the hon. Member for Southampton, Test (Mr. S. James A. Hill) has said so far is out of order. However, I hope that the hon. Gentleman will remember that time is very short.
  Mr. Hill: I am sorry for taking so long, but I am trying to bring this House up to date about this small committee working in Europe on this very directive. If hon. Members do not want the information, I shall be only too pleased to resume my seat. If they want it, perhaps I might be allowed to continue.
  The committee rejected the proposal for a medical examination every five years. The committee felt that it would impose a terrific strain on the medical professions of all member States and that such a large programme of simple medical examinations should start only at the age of 65 and take place thereafter every two years. That would seem to be more in keeping with the feeling of the right hon. Member for Sheffield, Park (Mr. Mulley).
  I am sorry to say that the discussions proved very difficult, as there were neither English nor Danish translations available. For that reason, I felt that my committee should be able to discuss it again when full translations became available. In the meantime, written amendments will be tabled by the British members of the committee which reflect the views of this House, and when the report is presented finally to the European Parliament in plenary session further and final amendments can be tabled and voted upon if necessary.
  I advise hon. Members that the draft report, in its 15 resolutions, 15 articles and 9-page explanatory statement, goes further than whether a boy or girl of 17 should be able to drive a car throughout the nine member States of Europe. In particular, I mention the age for tractor drivers. The Commission wanted the age to be 21, which, of course, would be quite ridiculous from the point of view of our farming community.
  1310
  My own view—this is my personal view—is that the member States should continue their own individual driving licence legislation, and if those wishing to drive through the Community and the associated States want a once-for-all-time Euro-licence, facilities should be available for such an examination. I find agreement with the idea of a simple medical examination for the elderly driver over 65, to include day and night vision, hearing, and conditions liable to cause loss of consciousness or major restrictions of movement. No one need be debarred from driving if these imperfections can be adjusted for and treated, but, with the ever-increasing traffic on our roads, such shortcomings in others can be a cause of death to innocent fellow travellers.
  For existing drivers, article 9 of the report calls for the mutual recognition of existing driving licences. This is most important for the public. The date suggested for the changeover was 1st January 1974 for the issue of new licences and 1st January 1976 for the replacement of existing licences. These dates are just not realistic. My own view this depends on the committee's approval—is that the dates should be put forward at least five years; in other words, 1979 for new licences and 1981 for existing licences.
  In the meantime, negotiations will continue in the committee with a view to presenting the document to the plenary session in November or December, and I hope that the draft report will cover all the many queries which I have heard here tonight and all the queries of the nine member States.
  11.7 p.m.
  Sir Geoffrey de Freitas: I listened with interest to what the hon. Member for Southampton, Test (Mr. S. James A. Hill) had to say, but I remain puzzled. We have before us tonight a draft directive of the Council—
  Mr. Marten: Of the Commission.
  Sir G. de Freitas: A draft directive of the Council. It is put by the Commission to the Council as a draft which it might like to consider. I cannot see the relevance of the reports which may or may not have been debated in the European Parliament. I am in favour of the European Parliament—I wish that my

  1311
  party were there—but I do not see how its reports are relevant to what we are discussing tonight, which is a particular draft directive.
  I say at the outset to save time that I support the amendment moved by the hon. Member for Banbury (Mr. Marten) and the points he made about the age and medical examinations. In fact, I signed his amendment. Also, with my right hon. Friend the Member for Sheffield, Park (Mr. Mulley), I have doubt as to whether this is ultra vires. I should like some study to be made as to whether the Commission has been wasting its time in drafting such a directive for the Council.
  I am concerned about the practicality of this whole plan, in view of the duties sought to be imposed on the medical profession. It is a fantastic notion, when doctors should be going about the business of curing the sick, that they should be driven more and more into the sort of paper work which would be involved here. I shall not make the easy joke about how we could test how many people are licensed psychometrically to examine others to decide whether they are psychologically capable of driving. I wish instead to raise an important matter of principle, and I come to it at once in order to allow others time to speak.
  What is the Commission doing wasting its time on this? Surely, it is not the role of the Commission to do something of this sort. I am in favour of our entry into the European Community. Unlike many hon. Members, I want the power of the Commission to be increased. I see the Commission as an embryo executive, one day, I hope, elected. I see the Council of Ministers as an embryo Senate, one day, I hope, elected, but already representing by a different system, each of the States, which is why I believe that its "Hansard" should be published. I see the European Parliament as an embryo House of Representatives elected on the basis of population.
  The key to such development is what the embryo executive should do when countries are coming together. The United States has been used as an analogy. America has been going as a federal country for 200 years, for 50 of which it has had the motor car. At one time or another I have visited 49 of the
  1312
  50 States and I have spoken to many people about modern problems such as that of the automobile. I have never heard anyone suggest that the Federal Government should seek to legislate about the conditions of driving licences in all those 50 States. It has always been agreed to be the sort of subject that should be left to the individual States.
  I believe that it is in this spirit that we should develop the Community. We should tell the Commisison tonight that it has more than enough to do without fussing around in this way.
  11.11 p.m.
  Mr. John Farr: I support what was said by my hon. hon. Friend the Member for Banbury (Mr. Marten). I was lucky enough to sign his amendment some months ago, but something that happened in my constituency a short time ago has made we wonder whether there is some good in the draft directive that we are considering.
  In Leicestershire fairly recently a large juggernaut lorry was involved in an accident with a car. The juggernaut was barely marked, but the car was severely damaged, though the family were all right. The owners of the car are faced with a repair bill of £170 or £190, and it has been found that there is no way in an English court by which they can get the money from the owners of the juggernaut. The Continental driver freely admitted that he was to blame for the accident, and the police confirmed that. My constituents have been advised that the only way in which they can gain redress —and this is a bit dicey—is to engage a French lawyer and proceed with the case in a French court.
  I thought that the House ought to know about that case because, if there is a set-up such as this, eventually articles 10 and 11 will come into play. Article 10 would set up a register, or index, of offenders, and article 11 would provide for the suspension of licences in member States. Such a system might be coupled with a form of damages which the culprit could be compelled to pay at the time of the suspension of his driving licence.
  Sir David Renton: What is also needed is a reciprocal system of compulsory third-party insurance.
  Mr. Farr: That is another facet that should be considered. If juggernauts

  1313
  and other foreign vehicles are to be driven into this country by people from the other eight nations, there must be not only a recognised system of offences throughout the nine but a system under which insurances and damages apply throughout all the countries.
  I agree with what was said by my hon. Friend the Member for Banbury, but he did not mention one matter. It is ludicrous that Group F means that someone cannot drive an agricultural tractor until he is 21, because in the agriculture industry in this country men aged 20 are agricultural craftsmen and sometimes foremen in their trades. One can only imagine that perhaps this rule has been established because parts of the eight other countries have only very recently left the horse and cart age.
  That being said, I fully support my hon. Friend, and congratulate him on what he may have achieved this evening.
  11.15 p.m.
  Mr. Robert C. Brown (Newcastle-upon-Tyne, West): I am grateful to the Minister for affording me just a moment or two in which to speak, but I must say that I feel cheated and deprived. This is the second time the Government have deprived the House of the democratic right to defeat them on a vote—and there is no doubt that they would have been defeated on this directive tonight.
  Since in the main the directive is supposed to be in aid of road safety, it makes nonsense that under it once one has obtained a licence to drive a car one can proceed to drive the largest of motor cycles. To me, that does not smack of road safety. On the subject of the many medical examinations, I would ask how many medical men or spouses are directly involved in the Commission or the Council of Ministers.
  11.16 p.m.
  Mr. Peyton: The answer to the hon. Gentleman's question about the number of medical men or spouses involved is that I do not have the slightest idea. As to his first words, I am grateful to him for his appreciation of my having given him the opportunity to say what he had to say. I am terribly sorry to have deprived him of the pleasure of voting this evening, because I realise that it is a bitter thing for him. But there it is:
  1314
  I hope that he will learn to live with his disappointment, and to contain it.
  I feel that the best way to sum up is to say that when the next decade or so of history is written the Commission will look back on this directive and consider with becoming modesty that it was not perhaps its very finest piece of work. In fact, I feel very tempted to agree with the right hon. Member for Kettering (Sir G. de Freitas), who said for the second time in this House—he has said it on an earlier occasion—that the Commission should not be wasting time on this kind of thing. That is one comment with which most of us would not wish to quarrel.
  My hon. Friend the Member for Ban. bury (Mr. Marten), whose enthusiasm for things European does from time to time run away with him, has made clear that he objects to this draft directive. My own view is that we have all tended to beat the gun on this matter and that our excitement and frenzy about it is somewhat premature. The matter has not really got anywhere near the Council of Ministers, which would have to deal with it before it achieved the dignity of law
  Mr. Robert C. Brown: It has been before the European Parliament.
  Mr. Peyton: The hon. Gentleman really must not go on making speeches. I did my best for him, but I do not think he was a beneficiary of it—but never mind.
  This directive, which first saw the light of day in, I think, August of last year—and a great deal of rumour about it had gone about beforehand—has not made very rapid progress since. It is not even in the neighbourhood, or in the area, of becoming law. So I do not think that anyone in the House or outside the House should imagine there is any immediate prospect of its being accepted or decided on.
  On the point which my hon. Friend the Member for Banbury raised about an operative date, as the matter has not been discussed by the Council of Ministers it certainly has no operative date.
  Mr. Marten: It is in it.
  Mr. Peyton: It does not matter what is in it. My hon. Friend is rather good at these sedentary interruptions. It does not matter what is in the directive; it has not been discussed, let alone agreed to by the Council of Ministers, and it has nothing like the force of law.
  Sir D. Renton: Would my right hon. Friend tell us this, because I think it is very important? Granted that this directive has not, and will not for some time have, the force of law, once it has been approved by the Council of Ministers what opportunity shall we have of discussing or challenging it before it does have the force of law in our country?
  Mr. Peyton: The whole of my remarks tonight are based on the premise that it is most unlikely—virtually certain, in fact—that this directive will ever have the force of law, for reasons to which I referred briefly in my opening remarks. If my right hon. and learned Friend will allow me to develop some of the particular points, I think he will understand what I mean.
  First, as to the photograph on a driving licence, I think this is a matter the merits of which have nothing to do with this directive. Perhaps it is something which we might consider at some time, although it suffers from the objection which my hon. Friend the Member for Banbury mentioned, that we all change a bit from time to time, and not all of us for the better, if I may say so.
  On the matter of the age at which somebody is eligible to hold a licence to drive a car for the first time, the age here is 17 years, and personally I would need a great deal of persuading that there is any compelling reason why we should raise that age to 18. I certainly think it would be a retrograde step from the point of view of road safety—the right hon. Member for Sheffield, Park (Mr. Mulley) seemed uncertain about this—if we were to differentiate between the ages at which one may drive a motor car and a motor cycle for the first time.
  Mr. Mulley Mr. Mulley rose—
  Mr. Peyton: I am sorry, but I have not got much time.
  On the subject of invalid carriages, I am certainly proposing no change. In answer to my hon. Friend, I believe that
  1316
  it would be a retrograde step if we were to do so. I believe also that an elaborate system of medical tests would be a very expensive affair administratively, very difficult, and certainly very unrewarding from a road safety point of view. I confess that when it comes to the dynamic behaviour of vehicles I am slightly puzzled as to what this means. The meaning of it would certainly have to be ironed out in discussions before the proposals made any further advance.
  On the question of psychological examinations, although I recognise that perhaps there is a need for these things here and there, the difficulties of deploying sufficient psychologists capable of carrying out such elaborate tests on so many people would present almost insuperable difficulties. The short answer is that I do not require any instruction on this matter, although I recognise and appreciate the generosity of my hon. Friend the Member for Banbury in the matter of giving instructions. He declared with a certain relish, I thought, that "the Government will not like that." He claimed always to be very fair to the Community. Well, I suppose that may be so.
  However, I should like to touch seriously on this point. I think it would be dangerous if the House of Commons were always to seek to put Ministers in a position where they literally could not discuss matters, because we have a lot to gain in Europe by putting our point of view, and if it is always made clear to our European partners that we have prejudged issues and are not free to discuss them it is hardly likely that our views will be listened to with the care that we should expect.
  The last point made by my hon. Friend the Member for Banbury concerned whether the Press should be admitted to meetings of the Council of Ministers. I do not think that either an admirer or an opponent of that body would claim that the results of its proceedings were particularly secret.
  The right hon. Member for Sheffield, Park (Mr. Mulley) was let down by his memory when he referred to the question of the cost of the driving test. It was an issue that was left to me to settle as soon as I followed him into office. It was an odious duty left to me to increase the cost.

  1317
  The right hon. Gentleman asked whether my Department had been charged with the heavy duty of costing this directive of the Council of Ministers. The answer is "No-emphatically not." As the right hon. Gentleman will be the first to realise, there is not such a large surplus of civil servants that their time can be devoted to an exercise that would prove to be rather a barren one-or not particularly fruitful.
  My hon. Friend the Member for Southampton, Test (Mr. S. James A. Hill) made the same point as the right hon. Gentleman did when he referred to the fact that there were some important differences between both our driving standards and our tests. That is the great objection to seeking any uniformity in our licensing system. My hon. Friend, who does useful work in the European Parliament—I take this opportunity of acknowledging that—made a charming and delightful comment about innocent fellow travellers. I did not think that there were such things, but I take it from my hon. Friend.
  I conclude by saying that the Government welcome the opportunity of hearing the views of the House of Commons on issues which. admittedly, have caused much anxiety among people, and take due note of what has been said tonight.
  On the particular issue, I hope that have made it clear—I do not wish to be in any way offensive to the Commission —that this collection of proposals seems to us to be very ill thought out, and hardly to match the situation and the needs of this country. It is one which, in my view, would have little hope of achieving the status of binding law without prolonged discussion in the Council of Ministers. I have absolutely no reason to suppose that it would not find as many opponents there as it has done in this House tonight.
  Amendment agreed to.
  Main Question, as amended, put and agreed to.
  Resolved,
  That this House takes note of the Draft Directive of the Commission of the European Communities (No. C/119/1 dated 16th November 1972 in the Official Journal of the Communities) relating to vehicle driving licences but nevertheless declares that the present minimum age of 17 years for both motorcycle and car licences should be maintained and that the proposed medical examination should not be accepted.

  GOVERNMENT TRADING FUNDS BILL
  Not amended (in the Standing Committee) considered.
  GOVERNMENT TRADING FUNDS BILL

  ESTABLISHMENT OF TRADING FUNDS FOR CERTAIN SERVICES OF THE CROWN
  11.30 p.m.
  Mr. Robert Sheldon: I beg to move Amendment No. 2, in page 1, line 18, leave out paragraph (c).
  I understand, Mr. Deputy Speaker, that it is convenient to take at the same time the following amendments:
  No. 3, in page 1, line 19, leave out paragraph (d).
  No. 1, in page 1, line 20, leave out paragraph (e).
  Do you confirm that?
  Mr. Deputy Speaker (Sir Robert Grant-Ferris): Yes.
  Mr. Sheldon: The reason for this fair number of amendments at this late stage in our discussion is that, as a consequence of industrial action taken by the printers of HANSARD, reports of the Second Reading Committee were not available. This placed the Opposition in considerable difficulty. As a result, certain matters were not known to those who were investigating the progress of the Bill. Although I accept that every assistance was given by the Government in trying to get this information across to the House, it is important that legislation should be examined with a care that is not possible when printing is disrupted.
  The amendments which have been selected fall under three heads, as a consequence of the change in operation of the various Crown services detailed in Clause 1(3). In the amendments we discuss particularly the Ordnance Survey, which is dealt with in paragraph (e) of subsection (3), the Royal Mint, in paragraph (c), and Her Majesty's Stationery Office, in paragraph (d). To all of us who have knowledge of these services, the interesting feature shared by all of them is that they are fairly high in the affection of many of us. Without going into

  1319
  detail, I think most of us would appreciate from our casual investigation of their services that they seem to do their job with satisfactory efficiency. The provision of papers and other documents which they make available to hon. Members certainly puts them very high in our estimation.
  The second matter we wished to raise in the amendments relates to the financing of the services and the possibilities of regulation. The most important question dealt with in the amendments concerns the Ordnance Survey, and the representations which have been made to the Opposition were the prime motive in getting these discussions under way.
  I understand that the Ordnance Survey has a staff of just over 4,000 non-industrial and just over 400 industrial staff, together with a small sprinkling of military officers. My first question to the Minister concerns the future of the staff and his estimate of their future deployment.
  If we look at the financing of the Ordnance Survey, we note that in the year 1969–70 expenditure was £7,811,000 and receipts were just over £2 million, with net expenditure by the Government of £5,438,000. This had grown by 1971–72 to net expenditure of £6,283,000. The questions which have been put to me from a number of different sources relate to the level of future expenditure expected by the Government and how far they will try to reduce some of these services in an attempt to reduce this net expenditure system.
  I understand that a management accounting system has been introduced. Clearly, it is expected that this will help more accurately to cost the various elements of the publications of the Ordnance Survey. What is disturbing a number of people is how far, as a result of this more accurate costing, there will be an attempt to prune these services which may be costing rather more than the Government are prepared to pay. The argument concentrates rather finely on the publication of the 1: 25,000 map series. There are fears that the series, which is of very great value to certain geographers and others, may be limited to a few parts of the country or possibly even discontinued.
  The management accounting system which has been introduced may assess
  1320
  costs in a more precise way, which may result in certain costs being loaded against this series. What assurance is the hon. Gentleman able to give that after the operation of the Bill we shall not see a limitation of this map series, let alone its discontinuation? Furthermore, I hope he can assure us that there will be public discussion before any decision is reached. I am led to believe that an internal committee is looking at this point, which makes the necessity for public discussion even more relevant. Will the report of the committee be published? It is inherent in the Bill that there is to be provision for extra funds. Will they be available on a pattern not dissimilar from that provided hitherto?
  I have a number of questions about the setting up of the trading fund in the Ordnance Survey. What sort of sum do the Government have in mind as the fund for the survey? How do they see the fund growing? How will the fund be determined? How are the assets of the survey to be valued? How are the principles of putting money into the fund to be determined?
  I want to revert for a moment to the importance of the role of the Ordnance Survey as the provider of scientific information for which the Government have hitherto always felt it necessary to make some considerable payment. How far is this role to be continued into the future when it is set up as a Government trading fund?
  I turn now to the question of the Royal Mint. How do the Government intend to handle its financing? According to the various documents made available, there was an expenditure in 1971–72 of £47,673,000 and the appropriation was £16,586,000. Now that we are to have a Government trading fund, how much will that fund be? What other financial details is the hon. Gentleman able to give us concerning the net total of £31,087,775—that is, the net total after allowing for the expenditure and the appropriation?
  A minor matter which intrigues me is that the Trial of Pyx (Amendment) Order 1971—a medieval title—dealt with a not unimportant matter. As I understand it, one cupro-nickel coin in every 10,000 was examined for quality,

  1321
  but this order reduced the number to one in every 3,000. It looks as though there has been a decline in our standards of quality.
  The accounts for the Stationery Office show that the expenditure in 1971–72 was just over £88 million and the appropriation in aid just over £30 million, leaving a net total of just over £57 million. What size fund is expected, and what are the annual payments into the fund likely to be?
  Those detailed points enshrine certain aspects of the more general points. What will the resultant changes be in the management of the funds? If this is a device to ensure that these are units of accountable management left on their own with a greater independence, everybody will agree that this is a useful and worthwhile development. We need to convince ourselves that as a result of this change certain changes detrimental to the valuble work of these bodies will not be introduced without full scrutiny.
  Mr. Nigel Spearing: The Bill has by good fortune come to the notice of a number of hon. Gentlemen who might otherwise have taken notice of it much earlier and possibly volunteered for consideration of the Bill in its earlier stages. I understand that those who examined the Bill earlier did not have much notice of it. The House will understand from the speech of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) that it is far more controversial than at first appears.
  It seems that all the services that my hon. Friend mentioned will be converted from public services into neither more nor less than public businesses. That will have effects on the way in which they serve the public, particularly in terms of prices and the quality of service they can provide for the ordinary citizen. In that respect the Stationery Office and the Ordnance Survey do a great deal of business with private citizens who regard these organs of the State as one of their safeguards, because information which is public is easily available, whether it be in cartographic form or in the form of written manuals and documents which issue from Her Majesty's Stationery Office about official business.
  1322
  The explanatory and financial memorandum contains some double talk. On page ii it says:
  "The introduction of a trading fund for a service will change the method of financing the service, but it will not, of itself, lead to any change in the scale of operation of that service or in the resources devoted to it."
  Those are nice, soothing words.
  "The commercial results of a trading fund, once operating, may however lead to such changes."
  If that is not double talk I do not know what is. It is clear that there will have to be changes in some of these operations, and it will not necessarily mean just greater accountability, which is what the Bill says is one of the objects.
  11.45 p.m.
  I wish to follow particularly what my hon. Friend said about the Ordnance Survey. I understand that the Government are not yet committed to turning the Ordnance Survey first into a commercially feasible proposition and then, if they can, into a profit-making service. If they have spent so long and are still not sure whether or not they want to do this, should it be in the Bill at all? If the Government cannot make up their minds on this and cannot defend the powers in the Bill, they should not be there.
  Since many of the Ordnance Survey publications to the public are sold alongside books and periodicals, those in charge of this service would be encouraged to make a profit and would be told that they are good and faithful servants and might enter into the fortunes of their reward. I understand that that is the intention of the Bill. If that is not so, I hope that the Minister will tell us. If that is the case, however, there will be considerable changes in this ancient and honourable service.
  My hon. Friend said that the rate of return was only a small percentage of the outgoings. In the 1972 report, on the establishment and finance page, we see that the ratio of receipts to expenditure was about 34½ per cent., as compared with 31½ per cent. the previous year. If the Government decide to operate the Ordnance Survey as a trading service—if the Bill goes through, they will have every right—there will be the most colossal shake-up ever in the products of the Ordnance Survey or in the

  1323
  range of products it makes available to the public.
  It may not be known that almost every secondary school child in the land at some stage comes across the Ordnance Survey maps and is prepared for reading them by what I hope are efficient staff in schools. The Ordnance Survey in its present form is the envy of the world. It was started as a public service to prevent the incursions of the Scots and to ensure the laying of the Highland clans. Unfortunately, the army of the day did not know its way round Scotland and needed maps. It was started as a purely public service in defence of the realm and has spread since then.
  Not only is the Ordnance Survey used in schools—I must declare an interest as a professional teacher of map reading, in so far as geographers in schools have that interest—but there is also considerable use commercially in town planning, by estate agents and by the public who wish to have cadastral information which they can plot and which they can get at reasonably short notice from Ordnance Survey agents. There is one not far from the House, in the St. James's Park area, which I use frequently.
  This costs money. One of the map series which is in particular jeopardy was mentioned by my hon. Friend—the 2½ inch series or the 1:25,000. It is a particularly useful map, because it has a great deal of detail and covers a large area, and at the same time is handy and easy to read, particularly for walkers and professional users of maps of every soil. It was first produced after the war, and there are in the first series no fewer than 113 sheets. I take that from the first appendix to the last annual report.
  It was originally intended that that provisional edition should be produced later in more colours as a second series. It has been started. There are no fewer than 113 sheets—not very many—of the series already produced, and the publication started in 1965. There have been worries for some time that this publication of the second series of 21 inch will not go forward. I hope that the Minister will tell us that that is not so. If it is not, I hope he will say by how much the price will rise if the Government use the powers they have sought in the Bill.
  The other important thing about the series is that it can be used in outline form. One can buy maps without colours and use them for a particular purpose, particularly as every field boundary and every boundary of property is shown. The new techniques of town and regional planning require acreages to be measured very accurately and for maps to show every parcel of land over a very wide area.
  Some time ago, in the perhaps better days of the Ordnance Survey, before the new method was introduced, it produced an administrative areas edition in which the whole country was covered by the series with an overprint of many colours showing every administrative boundary in the greatest detail down to the nearest field boundary. It was used for police, waiter authority, local government, parliamentary constituency, and all sorts of statutory boundaries. Anyone who obtained the sheet for his own area could see exactly what was in that area and where the boundaries were.
  I do not think that that edition is available any more. It is one example of the sort of service the Ordnance Survey could provide. I believe that it no longer does, but it will not be able to provide it again if the provision in the Bill is used.
  Mr. Peter Hardy: Does my hon. Friend, as a former geography teacher, agree that that edition of the Ordnance Survey is of most use in schools, not merely for geography but for many other educational activities, and that if education is to be properly equipped it is vital that that series of maps should be produced again, with the detail brought completely up to date?
  Mr. Spearing: I entirely agree with my hon. Friend. If the Government continue to put up the price—possibly to meet the costs, though I question whether that would be the right thing for a public service to do—the cost would be borne by education authorities and would be met by the public purse in another way. The Minister may say that that is proper, but I do not know whether the Secretary of State for Education or the Minister for Local Government and Development, who is sitting beside him and has something to do with

  1325
  the rate support grant, would necessarily agree.
  After all, the net cost of the Ordnance Survey is about £6 million. It is very good value for money. I do not pretend that there may not be some waste and extravagance, and that there could not be better accountability in some respects, but I very much doubt whether the sort of accountability the public and the House would like to see would come about just by saying "We will set this up as a commercial undertaking operating on commercial lines." The public would not wish that to happen.
  I shall not go on to the other services, because other hon. Members want to take part in the debate.
  This is rather a nasty little Bill in the respect of which I have been speaking, and in the others, as I understand them. It is a piece of commercial ideology by the Conservative Party, neither practical nor opportune, certainly with respect to the Ordnance Survey.
  Mr. Arthur Blenkinsop: I want to add to the pleas already made about the possible implications of the Bill for the Ordnance Survey work.
  I declare an interest as an ex-President of the Ramblers Association and having been concerned with the establishment of the Youth Hostels Association. These two bodies could hardly function without the support of the Ordnance Survey, and they have been extremely vocal in expressing anxiety about the possible danger to the 2½-in. map and other services if the Bill goes through without a clear assurance from the Government of their intention to preserve, retain and develop some of the services that have been so valuable in the past and are still needed as much as ever.
  Mr. Sheldon: My hon. Friend may not be unaware that the Ordnance Survey annual report, 1971–72, mentions that for such leisure activities as climbing, hill walking and similar pursuits which require more detailed topographical information a map of the scale of one in 25,000 is particularly suitable.
  Mr. Blenkinsop: Yes, I have on many occasions used maps of that scale, and still do. Young people who are being encouraged to get out into the countryside and embark upon modest adventures
  1326
  need the relative security of knowing how to read maps properly. The 24-in. map is particularly valuable for this kind of expedition. It is of the right size and compactness. It gives additional information about rock formation and so on which is important to the leader of a party of young people, and to a person on his own, as I know well.
  It is right that the Ramblers Association, which is a responsible body, should express strongly its view that this service should be retained and its deep anxiety lest on grounds of expense of production it should be discontinued. I hope the Minister will make clear that our fears are groundless and that, in spite of the changeover to a more commercial system, this service will be retained.
  My hon. Friends have mentioned the range of work done by the Ordnance Survey. We are becoming more and more conscious of the inadequacy of our information about land use. A recent report suggests that the Ordnance Survey might accept responsibility for undertaking regular land surveys. The Ordnance Survey is a most suitable body for undertaking this work, but if narrow commercial values prevail there might be no hope of the Ordnance Survey being able to do it.
  Mr. Spearing: Does my hon. Friend know that the land utilisation survey initiated before the war by Professor Dudley Stamp using 6-in. maps was reactivated after the war by the London School of Economics using 2½-in. maps and volunteer labour?
  12 midnight.
  Mr. Blenkinsop: Yes. I am also well aware that, alas, it has not been possible to complete, or anything like complete, the work, and that, unfortunately, some of it may not be as valuable as one would like. We need to have a much more efficient and effective record of land use —a continuing record and not a once for-all record. Why should we go to great trouble to establish our regular census information about population while not accepting the need for some comparable information about land use? The two should in a sense go together. This sort of work could be undertaken by the Ordnance Survey, but there are extreme anxieties that the new set-up will ruin the chance of that being done.

  1327
  While there may be features of the Bill that we welcome—for example, the carry-over of funds from one year to another and the greater flexibility which may be available under the new system—we must record that there is great concern about the danger to the existing services and to their possible future which seems to many of us to be involved in these proposals.
  Mr. Frank Judd: After the speeches of my hon. Friends the Members for South Shields (Mr. Blenkinsop) and Acton (Mr. Spearing), it may seem superfluous for me to speak because we have heard a level of expertise almost unrivalled about the relevance of the Ordnance Survey and its contribution to our national life. But I must intervene briefly simply to take up specifically something said by the Minister of State in the Second Reading Committee.
  The hon. Gentleman said that, like the Labour Government, the present Government considered that the development of accountable units of management performing executive tasks of government would be both conducive to more efficient government and more satisfying for the public servants operating them. But the relevance of that remark is hardly borne out by the volume of correspondence passed to me by people involved in the Ordnance Survey. Many people are deeply concerned about the allocation of the services under the Bill.
  There is little doubt that, as a service, the Ordnance Survey has achieved the highest standard in the world. There is no similar service anywhere else which can beat the level of performance provided by our Ordnance Survey. The people involved are convinced that they are essentially a service to industry, to the military, to civilian interests, to social and youth organisations and to many individuals, and not a trading operation.
  I, too, have a personal interest because I know that invaluable function which the Ordnance Survey maps can provide for those of us who like to take our relaxation in the country, particularly in the more remote areas. The Minister of State must be able to reassure the professional staff who have provided this indispensable service that the Government recognise what they have been
  1328
  doing for what it is and are committed to seeing that this record shall in no way be undermined as a result of any doctrinaire commitment to Conservative economic policies.
  The Minister of State, Treasury (Mr. John Nott): It will be generally agreed that this further debate is welcome to the House. It is clear that the hon. Member for Portsmouth, West (Mr. Judd) has read the proceedings in the Second Reading Committee. I am not so sure that other hon. Members have done so, as many of the matters which have been raised in this debate were covered fully in the course of the Second Reading Committee's proceedings.
  Tonight's debate has ranged a little wide. For that reason perhaps I ought to repeat what I said in the Second Reading Committee, namely, that the proposals for trading fund finance stem from the recommendations of the Fulton Committee, on which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) served. In its report, the Fulton Committee said:
  "To function efficiently large organisations including Government Departments need a structure in which units and individual members have authority that is clearly defined and responsibilities for which they can be held accountable. There should be a recognised machine for assessing their success in achieving specified objectives."
  Consideration of the Fulton Committee's proposals was started under the Labour Government and was carried forward by the present administration. The White Paper entitled "The Reorganisation of Central Government", which was our publication, developed amongst others the theme of large functional departments containing within them accountable units of management. It set as one of the aims:
  "… to ensure that the Government machine retains and adapts itself to new policies and programmes as these emerge within the broad framework of the main departmental fields of responsibility."
  In every case the adoption of trading fund finance is part of a wider series of management changes in the organisation concerned. These changes are designed to give the management of the organisations more clearly defined tasks and greater freedom as to how they perform them. But among the purposes of this

  1329
  Bill is to hold management more accountable for the freedom which we believe this new organisation would give them.
  I do not wish to go into a Second Reading debate upon the purpose underlying the Bill, but some of the remarks of the hon. Member for Acton (Mr. Spearing) and others would not have been made if hon. Members had read fully the report of the debate in the Second Reading Committee. The fact that the Bill was taken in the Second Reading Committee is some evidence that the Opposition felt that it was not as controversial as the hon. Member for Acton suggested.
  Perhaps I might refer to the specific matters which arose. In doing so, I may well be able to allay many of the fears which have been expressed.
  The Bill is an enabling measure. It provides that orders may be made introducing trading funds for each of the six any other trading services within the Government. The order introducing a trading fund for a given service would be subject to the affirmative resolution procedure. That means that before there could be a trading fund for the Ordnance Survey, the Royal Mint or any of the other organisations mentioned in the Bill there would be a full debate in this House on the basis of an affirmative resolution. It would have been possible to name in the Bill only those services such as the Royal Ordnance factories and the Royal Mint, for which the Government are committed, leaving other services such as the Ordnance Survey to be dealt with under Clause 1(3)(g) if and when a decision were taken in favour of a trading fund.
  No decision has yet been taken that the Ordnance Survey should become a trading fund. If it were to be taken, I doubt that, with the present programme, it would be likely to come before the House in the form of a motion for affirmative resolution, on which the House could vote if it wished, before 1976 or 1977. Therefore, although I am happy that we are having this debate tonight, there will be the fullest opportunity in, say, 1976 to debate and to vote on the proposal if it should be decided that the Ordnance Survey should have trading fund status. The Bill is an enabling Bill and no more.
  1330
  The inclusion of the Ordnance Survey in Clause 1(3)(e) does not imply any decision about turning it into a trading fund. I remind hon. Members that on 19th February my right hon. and learned Friend the Secretary of State for the Environment, in a Written Answer, set out the position of the Ordnance Survey. It is in no way affected by what we are considering here tonight. My right hon. and learned Friend announced that the Government had recently completed a review of the operations of the Ordnance Survey, as a result of which it had been decided that the Ordnance Survey would
  "continue to function as the central survey and mapping organisation in the public sector, with the following aims"—
  and he indicated that further inquiries would be made regarding the future scale of provision of some maps and services and that further work had to be done on the development of accounting systems. He added that
  "A final decision on the appropriate form of financing for the Ordnance Survey will not be taken until further progress has been made."—[OFFICIAL REPORT, 19th February 1973; Vol. 851, c. 32–3.]
  with that work.
  I do not think that the hon. Gentleman will wish me to go into much greater detail on the Ordnance Survey, except to comment on the question of the 21-in. maps. I take this as an example to show how matters might be dealt with, assuming that it were decided in 1976 or 1977 to turn the Ordnance Survey into a trading fund and the affirmative resolution went through the House.
  Mr. Spearing: Will not the hon. Gentleman agree that, from what he has said already about the Government's approaches to accounting systems and so on, and with the rumours concerning the future of the 2½ map, in effect the Government's attitude has begun to change already? Second, will the hon. Gentleman say what outside consumer interests he has consulted and will consult in this matter?
  Mr. Nott: The Government's attitude has not changed. As I say, we are here considering an enabling Bill to change over a period of time the way in which certain organisations within the Government are financed. It is far less controversial than the hon. Gentleman suggests.

  1331
  I hope that this debate—it is one purpose of it—will allay the fears of any members of the staff of the Ordnance Survey who may think that there is likely to be some dramatic change if that should come about.
  I now go on to demonstrate what might happen in the event of a shift from Vote finance to trading fund finance. Should that happen—I emphasise again that it would be many years off anyhow—it would not mean that the Ordnance Survey would become an exclusively commercial undertaking which would produce only maps which paid their way and would cease many of its present activities. If it were the Government's intention to make it fully commercial, that could be better achieved by hiving off the Ordnance Survey, making it into a commercial company, rather than by retaining it as a Government department with a trading fund. We could hive it off altogether if we wanted to make it into the kind of commercial organisation that the hon. Member for South Shields (Mr. Blenkinsop) fears.
  12.15 a.m.
  For example, the switch from Vote financing to trading fund financing would not of itself affect the decision whether the 21-in. map should continue as a national subsidised series. My right hon. and learned Friend the Secretary of State for the Environment and his Department would take the policy decision in the light of the benefits and the costs involved. If they decided that it should be continued they would account to Parliament for the policy decision and the consequent payment. In other words, the work done in the national interest would be specifically identified, costed and funded as such instead of, as at present, being concealed in the overall losses of the Ordnance Survey. If it were decided by my right hon. and learned Friend the Secretary of State for the Environment that it was desirable to carry a loss-making map—let us take this as an example—that could be done on the Vote of the Department of the Environment. I do not think that the fears expressed about the Bill are valid.
  Mr. Spearing: The Minister said that there is no real problem about this. The explanatory and financial memorandum
  1332
  says that it will be a direct responsibility of a Minister
  "who will have the duty of managing the service in such a way that it breaks even and meets any further financial targets laid down for it."
  How can the hon. Gentleman reconcile that with what he has just said?
  Mr. Nott: I shall come to the financial targets of the trading fund in a moment and I shall answer that question then.
  I first deal with the question of staff which was raised by the hon. Member for Ashton-under-Lyne (Mr. Sheldon). The staff of trading fund bodies will remain civil servants and will continue to be employed under Civil Service conditions, including participation in the Civil Service superannuation scheme. They will be eligible for transfer between trading fund bodies and Government Departments as at present. The introduction of a trading fund will not of itself have a significant effect on the number of staff employed. Improvements in commercial operations and increased efficiency may, however, lead to changes in the work that is placed with the organisation or in the demands for its products, and so in the numbers employed, but there is no inherent reason why there should be any change in the number of staff employed as a result of a move from Vote finance to trading fund finance for Ordnance Survey, Royal Mint or any of the other organisations named in the Bill.
  The hon. Member for Ashton-under-Lyne asked a number of questions about what the future level of expenditure would be for the Royal Mint and the Ordnance Survey. As I have explained, this can be debated at great length on the affirmative resolution that establishes the particular fund. This is a complicated question to which I must give a reasonably full reply.
  In the Second Reading Committee on 19th June 1973 I dealt at some length with how the financial targets of the trading funds would be fixed. I said:
  "The process of fixing a financial target will naturally involve making assumptions about the level of prices or charges by the trading fund organisation. In a case where the organisation is a sole supplier to the Government—and most of the organisations are primarily concerned with providing services and goods to the public sector—there will be a direct relationship between the trading fund and Government Departments.

  1333
  "In this case, where we are talking about the fixing of financial targets and prices within the public sector, the principle to be observed will be that the price charged to other Government Departments should reflect the opportunity cost of using the capital. Currently that would mean that the goods sold would be priced in such a way that the organisation would obtain a return of 10 per cent. on the current value of the assets employed."
  Where purchases and sales are going on within the Government, Government Departments would pay a commercial price for the goods that they were buying from the particular trading fund, and that would find its way on to the Vote of the Government Department concerned.
  We have an amendment on the capital side—
  Mr. Sheldon: I read the typescript, which made pretty tedious reading in that form, and I got that point. My concern was sales to the public which might also be affected by decision of the Government.
  Mr. Nott: Perhaps the hon. Gentleman would like me to remind him of what I said, because I spoke at some length on how items might be priced where some goods of a particular trading fund were being sold in the private sector. In the following paragraph I said:
  "In the case of those organisations which are in a market situation—the Royal Ordnance Factories, for example, are competing with outside suppliers—the determination of the financial target will plainly be more complex. In a sense it will be related to a pricing and marketing strategy. Clearly the pricing policy of the competitor will be relevant in that particular case.
  But in general it will have to be consistent with the proposition that the Government will not invest further capital in a trading fund, as in the public sector generally, unless they can obtain at least a 10 per cent. discounted cash flow rate of return in real terms on that investment. That will he the manner in which the pricing of those trading funds which are in competition with outside organisations will be handled, although the discounted cash flow rate of return varies depending on economic circumstances."
  As I have said. in the case of, say, a particular series of maps which the Government may decide it is in the national interest to continue to be printed, that cost will be met from the trading fund organisation but will have to be financed from the Vote of the Department. In the case of the Ordnance Survey, if it was decided that a particular map should
  1334
  continue, the money to be found if the Secretary of State in 1976–77 decided that that was desirable, would be on the Vote of the Department of the Environment.
  Mr. Sheldon: I thank the hon. Gentleman for reminding the House of what was said. The point that many of us had in mind was that, whereas the expenditure of the Ordnance Survey is met on the Vote, in this case there would be a requirement to meet this financial target, and if it were to be subsidised on the sale of maps, for instance, there would have to be a greater return on these other sales unless the Minister himself was to intervene. This presupposes a greater activity on the part of the Minister in such circumstances than exists now.
  Mr. Nott: What it means is that that particular trading fund must be paid, but it can either be paid by the public—. for instance the Ordnance Survey selling maps outside the public sector—or paid on the Vote. Loss making activities, therefore, will require subsidy explicitly rather than implicitly. With the present organisation there can be cross-subsidisation between the public and the private sectors. But here there will be an explicit subsidy rather than the kind of implicit subsidy which is now possible under the present system of Vote finance.
  The next point is the size of the originating debt. What will happen is that when the affirmative resolution is brought forward for a particular fund it will contain details of the originating debt under which that particular fund is established and that, broadly speaking, will be the valuation of the fixed and current assets on a realistic, up-to-date valuation. The originating debt will be the valuation of the assets. In addition, there will be certain borrowing powers which will enable the trading fund to finance its immediate requirements over the forthcoming period and so enable it to trade in the way we should wish. But that affirmative resolution will contain the details of what the likely future borrowing powers of that particular fund will be, and in that way the House will have an opportunity of voting upon it.
  I hope that I have covered most of the detailed points raised by hon. Members opposite. If I have failed to do

  1335
  so, with the permission of the House 1 shall be happy to try to answer further points.
  I do not think this enabling Bill is as controversial as some hon. Members have suggested. A full opportunity will be given of debating the establishment of a trading fund for each and every organisation when an affirmative resolution comes before the House, and at that time if hon. Members feel deeply about the issue they will have an opportunity of registering their points of view.
  Mr. Judd: Does the hon. Gentleman not appreciate that there is grave anxiety amongst the professional staff at the moment, and that it is they who need to be reassured immediately about the future?
  Mr. Nott: It is possible to reassure the staff of the Ordnance Survey because, as I said, there is no likelihood of any decision being taken that this should become a trading fund for a considerable number of years. I have said that so far as we have a target for the Ordnance Survey, it is 1976 or 1977. A whole host of various matters need to be decided and investigated before that Government decision can be taken. I hope that will allay the fears of the staff.
  If the hon. Gentleman wishes to write to me about this, I will gladly answer any further questions which he may wish to put.
  Mr. Sheldon: We agree that this is an enabling Bill and that the orders will be coming before the House for further consideration. This is very clear from a most cursory reading of the Bill. What a number of us are concerned about is that when any Government change the way in which these bodies are managed, it usually presupposes a fresh look at the work of these bodies, and it is this which gives rise to a certain amount of disquiet. As a result of this, we took the opportunity to put a number of questions about Government intentions. It is obvious that they were under scrutiny and under review. On the assumption that there is at the present time no change in the intentions of the Government, I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.

  FINANCE
  Mr. Sheldon: I beg to move Amendment No. 4, in page 3, line 10, leave out '£250 million' and insert '£240 million'.
  This amendment arises from the Standing Committee not having examined this point in quite the detail which perhaps a number of people would have wished. This is not to cast any doubt upon the abilities and work of the Standing Committee, but the House will recall that we were in the middle of a printing dispute and, as a result of this, Order Papers and other documents were not made available as they should have been. In fact, even at this moment we are still under some difficulty because we have only the typescript, that hefty document which I do not think many hon. Members would care to bring into this Chamber.
  The purpose of this amendment is to ask the Government to justify the figure of £250 million. In seeking to justify this, I thought they would have some idea of the net assets involved and some knowledge of the public dividend capital that they will be adding. I hope that the Minister of State will be able to say something about this, too. When he comes to fixing the various funds in excess of the net assets—because they will include the public dividend capital —I should be pleased if he could tell us something about the principles that he now expects to adopt.
  Although these matters were not explored sufficiently in Committee, it would not be unreasonable at this late stage to expect them to be explored now, because of the difficulties that we have been under during the past few weeks.
  12.30 a.m.
  Mr. Judd: I hope it is in order to raise, under this amendment, the question of the situation as it affects the Royal naval dockyards. Some of those hon. Members who have the privilege of representing dockyard constituencies are concerned about the lack of detailed application to the problems of the dockyards and their administration that is evident from the general drafting of the Bill.
  It seems to me, as I consider the general philosophy behind the Bill, that

  1337
  Ministers have formed the impression that all they have to do is to introduce the principles of the new approach to book-keeping for this important service provided to the Royal Navy and things will be well. I believe that the danger of this approach is that it tends to distract attention from the basic restructuring that is necessary.
  I hope that, in answering the points made by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), the Government have taken into account the serious situation with which the yards are confronted because of the imprecise and complex nature of management as it is now. One of the difficulties of every dockyard is that those with immediate responsibility in the front line are aware, when they are trying to grapple with management problems which are their immediate sphere of responsibility, that they are not their own masters. Behind them, stretching back eventually to No. 10 Downing Street, lie Bath, the Ministry of Defence, the Civil Service Department, the Treasury and, indeed, the Prime Minister at No. 10 Downing Street and his general strategy for the economy.
  If the Government are really serious about improving the environmental working conditions for those in the yards—a question that the Minister referred to when I intervened on the last amendment —and if their concern is to increase efficiency in the yards, they must be thinking a good deal more about how to sort out the jungle of management relationships which make life for those on the job very difficult. Not only the management of individual yards finds itself in difficulties; one of the other problems that arise is that workers in the yards are aware that when they have problems they cannot sort them out immediately with the management on the spot.
  The other point to be made in this context concerns the duplication and complication introduced into this situation because of the confusion that exists in the naval dockyards between naval control and civilian control. From time to time we hear that those with responsibility in the yards have been given new jobs. Their responsibilities are theoretically redefined, but when we consider the situation it is always the same—there is a good deal of duplication and confusion
  1338
  arising from this dual management responsibility in the front line.
  If the Government are serious about trying to improve the situation they must give a good deal more evidence than is yet available that they have looked at the practical problems with which the dockyards are confronted and not simply at the theoretical problems, as seen from the high standpoint of the Treasury.
  Dr. David Owen: I rise to speak as a general supporter of the Bill as it affects the Royal dockyards. I know nothing of its impact on the Ordnance Survey. I have considerable reservations, however, and I think that the Minister should explain some of the details of the admittedly enabling legislation as it affects the Government's prime industry, which is the Royal dockyards. It is easily forgotten that the Royal dockyards represent one of the largest single industries in the country. It is the largest industry which comes under the direct responsibility of Ministers. It employs a very large industrial work force and it involves heavy expenditures of public money.
  The first issue I should like to raise under the question of the financial ceiling under which these various entities might be incorporated under a trading fund relates to the target that is likely to be given for the Royal dockyards. I wonder whether the total cost of trading funding for the Royal dockyards could be given by the Minister and whether he could also reveal the date on which he hopes to bring forward the legislation as it affects the Royal dockyards.
  The Minister will be aware that the Defence and External Affairs Sub-Committee of the Expenditure Committee, of which I am a member, took evidence from Sir John Mallabar on the Mallabar Report. At that time the Mallabar Committee recommended April 1974 as the date when the trading fund should come into operation. That recommendation appeared to have been accepted, but it now appears that the fund will not be fully operational until the financial year 1976–77. I should like to have an explanation of this delay. Certainly, the Expenditure Committees view was very similar to that of Sir John Mallabar, that the quicker the fund was introduced the better.

  1339
  Having said that, I come to the question of what degree of managerial freedom will be given to the management of the dockyards. We have heard a good deal about managerial accountability, and that was the basis of some of the Fulton recommendations on which the trading fund was established.
  When I was at the Ministry of Defence, where I was a strong proponent of the trading fund as a way of trying to introduce a form of financial discipline into this very large industry, it seemed to me imperative that, if we were to give managerial accountability, hand in hand with that we had to give managerial freedom. It is not satisfactory to put legislation before the House unless we are to be given an indication of the managerial freedom that goes with it.
  First, we need an assurance from the Minister that the dockyards will henceforth be firmly and clearly under civilian management. The decision made by Ministers in 1969 that the chief executive of the dockyards would be a civilian and that the dockyard management would henceforth be a civilian industrial managerial staffing job should now be the policy of the Government and we should see an end to the recent appointment of an ex-naval officer as the chief executive of the dockyards and, more recently, of ex-naval officers as general managers of the dockyards. Cannot we stress tonight that this industry involves £100 million a year and a very large industrial work force and needs to be put firmly under civilian management?
  My next question to the Minister under the financial heading is to ask what degree of financial freedom will be given to the managers of the dockyards. What is their investment policy? Who will decide it? Within the overall ceiling, will the allocation of expenditure be a decision made by the chief executive of the dockyards? I speak with feeling about this, having had considerable difficulty in persuading the then Civil Service Department to pay an adequate wage for the chief executive of the dockyards. As a result, we lost an industrialist of considerable note and ability.
  Will any Minister—the Minister for the Navy or whoever is responsible for the dockyards—be able to appoint as chief
  1340
  executive for the dockyards a man of proved managerial responsibility? Will that decision be made by him or will he be answerable to the Civil Service Department? Under the new trading fund, what will be the responsibility of the Civil Service Department? Will it continue, as at present, to involve itself in minute managerial details such as the fixing of a productivity deal?
  The Royal dockyards started on a difficult and painful course towards productivity bargaining in 1969. It has run into the sand because of the Treasury's interference with the managerial freedom of the general managers of the dockyards to fix productivity bonuses on the basis of productivity in an individual dockyard. Because of Treasury interference, productivity bargaining inside the Royal dockyards has been gravely imperilled and the whole effort aimed at improving productivity has been impaired.
  The next question relates to construction in the Royal dockyards.
  Mr. George Lawson: Why did my hon. Friend not raise these matters in Committee?
  Dr. Owen: Committee membership is a decision for somebody else. It is late at night, but I assure my hon. Friend the Member for Motherwell (Mr. Lawson) that this affects a considerable number of my constituents.
  Mr. Lawson: On a point of order, Mr. Deputy Speaker. My understanding of a Report stage is that matters are tightly drawn. Is it in order on this amendment to go over the whole issue of dockyard management?
  Mr. Deputy Speaker (Mr. E. L. Mallalieu): There has been nothing out of order so far.
  Dr. Owen: If my hon. Friend will allow me to continue, I would remind the House that this Bill affects 24,000 of my constituents. It is a matter of considerable importance to them that the method of financing and control of the dockyards is changing. They have some right to be heard in this House where they have traditionally had their rights represented.
  Mr. Lawson: But these matters should have been raised in Committee.
  Dr. Owen: Membership of Committees is not decided by me. I would gladly have served on the Committee.
  The question I should like to pose to the Minister relates to new construction in the dockyard. Whose decision is that to be? Is this to be a decision by Miniters, or is it to be delegated to the chief executive in the dockyards? This matter is particularly relevant in view of the Booz-Allen report and the Government's acceptance of it. If the House is to pass legislation to give dockyards a considerable amount of financial freedom, I hope it will give them better managerial accountability and managerial freedom. We should be able to manage the dockyards' resources and expenditures on the basis of decisions between individual dockyards so that they will be able to use their resources with a great deal more freedom than they have been given hitherto. They will be given a financial budget on which they can rely for at least four years ahead and will not be susceptible to a simple year's accounting principle.
  May we be given some idea of the time scale in which enabling legislation will be brought before the House and some assurance as to how the Minister sees the role of the managers in the dockyards? There is a great anxiety among the different levels of management and anxieties have multiplied ceaselessly. The level of the number of industrial staff. the people on the shop floor, has not kept pace with other aspects of the situation. There is an anxiety that they will be over-managed; yet the managers are not given sufficient freedom to make their decisions. I feel sure that if the Minister can give these assurances the Bill will be given more full-hearted acceptance than it has been given hitherto.
  Mr. Nott: I shall deal first with the amendment and then try to answer some of the questions asked by the hon. Member for Plymouth, Sutton (Dr. David Owen).
  The provision of £250 million has been drawn up taking into account the known investment plans of the organisations named in the Bill, and after making some asumptions of the extent to which it would be possible to finance those investment plans from the receipts of the trading fund organisation. The £250 million does not include the originating debt of the trading funds. It does not include
  1342
  the net asset value of the six organisations set out in the Bill. The £250 million is the best estimate we can make—there must be room for considerable error looking ahead this far, but as this is an enabling Bill we thought that we should do our best of the further requirements of these organisations for capital expenditure in future years.
  12.45 a.m.
  Each organisation will require an affirmative resolution, and for each organisation there will be a borrowing power included. There will be within any affirmative resolution we bring forward in respect of the Royal Mint a figure for the borrowing powers of the Royal Mint.
  This is an aggregate power over and above the originating debt of the organisations. In deciding on the limit of £250 million we had in mind that it would be wrong, on the one hand, to have to come to Parliament to raise the limit more than once in the lifetime of any Parliament; yet on the other hand it would be wrong to include such a high limit that Parliament did not have an opportunity, after a reasonable period, to consider the operation of the trading funds as a whole.
  I repeat that this is an enabling Bill. The £250 million is a global, aggregate figure covering all the organisations mentioned.
  Public dividend capital would be part of the originating debt. I do not know that I would describe public dividend capital as a debt as such, but it would be on the other side of the balance sheet to the assets of the trading fund organisation. On Second Reading I set out the criteria to which we would look before deciding that it would be appropriate that a particular trading fund should have any public dividend capital. This is again a matter we can debate when each of the trading funds is considered. I draw the attention of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) to what I said on Second Reading. repeating the point made by my right hon. Friend the Chief Secretary in a debate on public dividend capital on 9th August 1972, that we believe that a particular public enterprise must be viable and must be required to meet specified targets. These are the main criteria we

  1343
  are thinking about before deciding that public dividend capital is suitable.
  I set out two or three other criteria as being desirable in my speech on Second Reading. If hon. Members wish it, I should be happy to go further into the question of public dividend capital.
  The Mallabar Committee recommended a trading fund for the Royal dockyards. This recommendation has been accepted by the Government in principle as an objective for the financing and management of the Royal dockyards. Much remains to be done. We are still considering a great number of the recommendations in the Mallabar Report.
  It would be premature for me to seek to answer in detail some of the questions raised by the hon. Member for Sutton about construction in the dockyards. That falls within the responsibility of the Ministry of Defence. The hon. Gentleman would probably get a much fuller answer from that Department. In many respects he knows this subject much better than any Treasury Minister, in view of his previous experience in the Ministry of Defence. The recommendations of the Mallabar Committee are being considered in depth, and I could not at this time answer all the hon. Gentleman's questions.
  We are considering some of the financial problems which arise in the setting up of a trading fund for the Royal dockyards. There is at present no clear customer-supplier relationship between the fleet and the dockyards. This is one of the things that needs to be established. The dockyards are not separately financed as such but draw their funds from a variety of Votes and sub-heads. It will therefore be necessary to establish how far it is possible and desirable to clarify the customer-supplier relationship and separate the finance and control systems for the dockyards from those for fleet support generally.
  final decision can be taken on the introduction of a trading fund. A trading fund for the Royal dockyards could not, in our opinion, be introduced before 1976. There is a target to do so but no firm decision has yet been taken.
  On managerial freedom and the other matters that were raised, I agree with a
  1344
  great deal of what the hon. Member said. Management accountability as we see it will go hand in hand with a considerable degree of management freedom. Management will be given a financial target, and it will be its function to meet that target, working one year with another. It is my hope and that of the Government that the establishment of a trading fund will help to achieve many of the objectives that the hon. Member outlined. On, for instance, the Royal Mint, which it has already been decided should go into a trading fund, the principle that the hon. Member enunciated, of greater management accountability and freedom within the financial targets that are laid down, is a prime objective that we should pursue. So there is little between the Government and the principles that the hon. Member enunciated.
  Mr. Judd: The Minister speaks of management accountability and freedom. At what level do the Government feel this to be important—all over the dockyard management, from, say, Bath to Whitehall. or at individual dockyard level?
  Mr. Nott: It is far too soon for me to answer a specific question of that sort. It is one which is much more appropriately put to a Minister in the Ministry of Defence. It is not possible at this stage, when we are considering the question of a trading fund in 1976, and are still considering many of the recommendations of the Mallabar Committee, to be drawn into answering that type of question.
  Mr. Sheldon: I beg to ask leave to withdraw the Amendment.
  Amendment, by leave, withdrawn.

  MANAGEMENT AND ACCOUNTING
  Mr. Sheldon: I beg to move Amendment No. 5, in page 4, line 30, leave out '(with Treasury concurrence)'.
  The necessity here for Treasury concurrence seems rather surprising, since the Treasury must always be in on any discussion of the financial objectives. I should like to know why this reference appears in this part of the Bill as well as in other parts.
  Mr. Nott: The financial element is obviously a key element in the proposed trading fund system, and it therefore clearly falls within the category of actions requiring Treasury concurrence.
  Mr. Sheldon: It must do.
  Mr. Nott Mr. Nott That is true, and that is why it is contained in the Bill. We are not indulging in any new departure here.
  It is made clear also in the Bill that, since a financial target will be set, it will be for the Treasury and the Minister responsible, in whatever Department it might be, jointly to fix the financial target. It is right that the Treasury should have a say in this rather than it being self-imposed by the Department concerned. But there is no disagreement between the hon. Gentleman and myself on this; we are merely setting out in an enabling Bill how the financial target would be set and how the arrangement would operate.
  Mr. Sheldon: The only reason for the amendment was that the words seemed superflous. But I beg to ask leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Motion made and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed.

  NATURE CONSERVANCY COUNCIL BILL [Lords]
  As amended (in the Standing Committee), considered.
  NATURE CONSERVANCY COUNCIL BILL [Lords]

  DISCRETION OF THE COUNCIL IN COMMISSIONING RESEARCH
  Nothing in any part of this Bill concerning the commissioning or support of research as described in section 1(1)(a)(iii) or in the initiating and carrying out of research as described in section 1(4)(b) shall be construed as putting the Council under any obligation to have that research carried out by any particular research organisation but shall be left for judgment by the Council on how best and with whom that research should be carried out.—[Mr. Lawson.]
  Brought up, and read the First time.
  12.56 a.m.
  Mr. George Lawson: I beg to move, That the clause be read a Second time.
  No doubt I shall be told immediately by the Minister for Local Government and Development that there is nothing in the Bill that can be construed in the way mentioned in the clause. But much has been said, both before the Bill came to the House and in Committee, that might lead some people to think that the intention was that the Nature Conservancy Council would have little or no choice as to whom it should turn for the commissioning of research.
  The Minister has commended what he described as a letter from Professor Stewart, although, strictly speaking, it came from a group of professors and like excellent people, who described how they saw the new National Institute of Terrestrial Ecology. The organisation is not yet properly set up. In a description to the future staff of how the organisation's research would function, the document says:
  "As outlined in the DOE documents, the NCC"—
  the Nature Conservancy Council—
  "will need a modest Chief Scientists group supported by an advisory committee, possibly with ad hoc sub-committees, to provide its scientific advice for conservation policy and to determine its research requirements—to decide, in effect, how it is going to spend its commissioning money with NERC".
  I draw particular attention to those words.
  In the document there is the figure of £300,000, but we hope that it will become much more. That was seen as the money that the council could use for research purposes. In the document, which is called a letter, that sum is visualised as not much more than a cross-entry, money to be paid to the council and then paid back to the Natural Environment Research Council for the research work it commissioned. It would be considerably helped by people from NERC to decide what form that work should take.
  I do not say this because I have any animosity towards NERC. I have the greatest friendliness towards it, as I shall towards the new ecological organisation when it is set up. We all want to see the closest co-operation between the new Nature Conservancy Council, the NERC and whatever terrestrial research unit it

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  may set up. It is a doubtful basis from which to expect co-operation if one party to the bargain feels from the start that it is being virtually compelled to take a given line. There must be co-operation between equals and no coercion. It must not be said that the money shall be spent in a certain way or by a particular organisation.
  1.0 a.m.
  The Minister no doubt will say that that is what is intended and that the council will utilise the facilities already provided. But it must be made clear that there is no compulsion. This must be done on the basis of what is judged to be best, and it is the judgment of the council that matters.
  I hope and expect that there will be excellent co-operation in the future between equals. I hope that no party will be coerced or put under heavy pressure to behave in a certain way. The purpose of the clause is to ensure that the council is an independent body within the terms of its powers, functions and resources, able to exercise its judgment independently on the matters which are enunciated as its concern. I hope that the Minister will accept the clause and give us those assurances.
  Mr. Ian MacArthur: I hope that the clause is in the nature of a probing clause, if there is such a thing.
  The hon. Member for Motherwell (Mr. Lawson) and I share a certain concern not so much about what is in the Bill but about the interpretation to be placed on it. I hope that my right hon. Friend will put our minds at rest by assuring us that the initiation and carrying out of research by the Nature Conservancy Council will in no way be dominated or eroded by the Bill. The hon. Member for Motherwell put it well when he said that he was confident that there could be total cooperation between the council and the NERC. I am sure that is so. But there has been a certain amount of uncertainty on the point, which was not entirely cleared up in another place.
  I hope my right hon. Friend will be able to put our minds at rest in assuring us that the research work of the new Nature Conservancy Council will be no less than before.
  The Minister for Local Government and Development (Mr. Graham Page): The hon. Member for Motherwell (Mr. Lawson) was right to criticise certain over-enthusiasm in what was otherwise a good letter. The phrases he quoted were over-enthusiasm, and over-salesmanship by the National Environmental Research Council at that stage. He also rightly said that what we want to achieve is co-operation between equals. But perhaps he spoilt that a little by saying that therefore the Nature Conservancy Council's judgment should prevail. I am sure that what he meant was that there should be consultation and co-operation between the two but that there should be a freedom to the Nature Conservancy Council to decide the extent to which it should undertake or commission research.
  The clause would seek to do two things. First, it would seek to give the council complete freedom as to the outside organisations which it would commission to carry out the research relevant to its functions of establishing, maintaining and managing nature reserves, and advising upon nature conservancy itself. But it is quite unnecessary and superfluous for as the Bill stands there are no restrictions on the freedom of choice of the council in this respect. Within the definition given of research in Clause 1(1)(a)(iii), and, of course within the money allotted to it under Clause 4 and the general policy directions under Clause 1(5), there is complete freedom to the council to decide who shall be commissioned to do the work.
  Secondly, the clause would seek to give the council complete freedom as to the research which it will itself carry out—research directly related to its functions of establishing, maintaining and managing nature conservancy resources and which it is appropriate for it to carry out itself. But that again is unnecessary and superfluous. If the research comes within the definition in the Bill, within the money allotted to the council and within the general policy directions, there is no restriction on the council selecting that which it will do itself or what it will commission from some other body.
  But I must be frank on the money aspect. In both cases the situation must necessarily be governed by the overall resources which can be allotted to the

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  council. In Committee I referred to the role of the Secretary of State in the approval of the overall estimates of the council. In that context, the Secretary of State, in deciding on the amount of public funds which can properly be made available to the council, will have to take a view as to the level of resources which it is right to devote to such research.
  The Secretary of State's power to give the council directions cannot be used in relation to individual projects because we have deliberately written into the Bill the proviso that the directions should be of a general character only, and even then I hasten to add that it would be most unusual for the power to be used. It would be used very rarely, if ever.
  My right hon. and learned Friend the Secretary of State has stated the policy that he will adopt in exercising those functions of what might be called the purse strings and the policy directions. Nothing that I said in Committee or am saying tonight affects the force of my right hon. and learned Friend's assurance of his intentions and policy when answering a Question in the House, when he said:
  "I intend that within the resources available to them from time to time the proposed council should themselves decide what research they should initiate and have carried out by their own staff and what research they should corn-mission or support."
  In the light of that assurance, I trust that the House will accept that the Bill gives the council proper freedom of choice in carrying out research which in the opinion of the council is relevant to any of its statutory functions.
  Mr. Lawson: In the light of those assurances, which go a very long way to meet what I seek, I beg to ask leave to withdraw the clause.
  Motion and clause, by leave, withdrawn.

  ALLOCATION OF EXISTING PROPERTIES AND RESOURCES
  Notwithstanding anything said, written or done between the announcement of the intention to replace the former Nature Conservancy with a new Nature Conservancy Council and the establishing of the proposed new Council,
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  no property owned by, or rights vested in, the former Nature Conservancy, shall be deemed as having been disposed of, given away, or put into the possession of any other person or body until arrangements for disposal have been agreed by the proposed new Council when it has been formed.—[Mr. Oakes.]
  Brought up, and read the First time.
  Mr. Gordon Oakes: I beg to move, That the clause be read a Second time.
  A few moments ago, the Minister spoke of what he, my hon. Friend the Member for Motherwell (Mr. Lawson) and the whole House want, namely, co-operation between equals. This clause seeks to make it possible for there to be cooperation between equals.
  In the past, many things have been said and written by the NERC with no Nature Conservancy Council in existence. There cannot be co-operation between equals when there is an existing body which wants some of the resources and another body equally entitled to claim for those resources which does not exist.
  The clause seeks to delay any allocation of the resources and to undo any statements made in the past in a mood of over-enthusiasm, as the Minister euphemistically described it. It provides that resources shall not be allocated until the new council is in existence, able to fight for itself, able to make its own requirements, able to put in objections, and so on.
  The clause is mainly the inspiration of my hon. Friend the Member for Motherwell. If he succeeds in catching your eye, Mr. Deputy Speaker, he can give the House specific instances which probably should go to the new Nature Conservancy Council. I do not seek in my speech to deal with specific allocations of resources.
  The Minister says that he believes in co-operation between equals. I ask him to let at least two equals exist before this kind of allocation is made. If that is not done, the new Nature Conservancy Council will come into existence and find itself presented with a fail accompli.
  1.15 a.m.
  Mr. Lawson: I think that I might not push this matter so far as my hon Friend the Member for Widnes (Mr. Oakes) does. For my

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  part, I would not seek to reopen everything and try to insist that allocations which appear to have been made—I am thinking particularly of research stations —should all be put back in the melting pot. I am sure that my hon. Friend the Member for South Shields (Mr. Blenkinsop) will agree with me there. But, in our judgment, in the bargaining—to call it that—which took place, one side appeared to be substantially weaker than the other.
  There remain, however, two important items which, so far as I know, have not yet been allocated. I refer, first, to the biological record centre. This is not a research centre; it is a centre which accumulates, sorts, classifies and gives out detailed information. It is used by a wide range of bodies, bird watchers and the rest, and it is a necessary part of an organisation one of whose functions will be the giving of advice and the dissemination of knowledge and understanding of conservation matters. The biological record centre is a central organ in the purposes and functions of the new Nature Conservancy Council, and to take it away and vest it in what is essentially a research organisation would be a strange allocation indeed.
  In all friendliness to the Minister, therefore, I put it to him that this is an item which could not be settled when the scales were so heavily weighted against one side in the earlier bargaining. It was described as a grey area yet to be settled, and I hope that it will not be settled, unless settled in the way I am asking for, before the new council comes into existence.
  The other item is the Nature Conservancy library, housed in different parts of the country. This also must be a part of the new Nature Conservancy Council.
  If the allocation for which I am asking is made, I am sure that the new council and its staff will feel that their side has emerged reasonably well and they are not put in a crippling position. It has been my fear all along that what would emerge from these changes would be a crippled Nature Conservancy Council, a council which would not be able to do the effective job that we want it to do.
  If the new council has those two parts, I think the other parts will be seen as all right and the work can happily proceed.
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  I believe that the NERC and the new council can make an ideal partnership, but if one or other of those two parts is denied, there will be a certain grudge carried forward into the future. I do not want there to be any such grudge. If the Minister says tonight that the matter can be settled now and they will definitely be with the Nature Conservancy Council, we shall cheer. We cannot cheer very loudly with such small numbers present, but cheer we shall none the less. If he cannot say that, at the very least let him say that it will not be settled until the new council is soundly established.
  Mr. Graham Page: The hon. Member for Widnes (Mr. Oakes) argued that he wanted these matters held over until the new council came into existence because there was no one on that side of the bargain with whom we could consult as there was no council in existence at that stage. That is not quite true, because we consulted the Nature Conservancy Committee—it is true that the committee is not yet the council itself—we consulted the staff most concerned, and we consulted the NERC. These matters of property and the question of staffing the premises—the several premises concerned—have been fully discussed.
  The new clause would take one right back to pre-1965 and imply that we should not touch any of the property that was brought in by the Nature Conservancy when it became the Nature Conservancy Committee of the NERC. In my opinion, rubbing out and starting over again would not be very profitable. Ever since the White Paper in July 1972, Cmnd. 5046, it has been clear to everybody that the laboratories would remain with NERC, whereas all the nature reserves, the regional offices and so on, would pass to the new NCC. That would leave such laboratories as Monks Wood, Merlewood, Furzebrook, Norwich and Banchory with NERC.
  To deal with the specific items mentioned by the hon. Member for Motherwell (Mr. Lawson), the Biological Record Centre is at Monks Wood and all the main operations there will be in the hands of the NERC if the present intentions are carried through. Those intentions were made clear in July 1972. They have been presented to all concerned in consultation papers since, and there have been very few objections. In fact, what

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  I hear from the staff is that they would like to be able to feel that everything is settled, as set out in the consultation papers, without any more changes being made at this stage. They want to get on with the job and be certain of their position.
  Mr. Lawson: The right hon. Gentleman may not know that I received a letter, which I have sent to his right hon. and learned Friend the Secretary of State, from Dr. F. H. Perring who is in charge of the Biological Record Centre. He says that he and his staff support that centre being part of the Nature Conservancy Council. There must be no doubt in that connection.
  Mr. Page: I indicated that certain individuals had objected, and Dr. Perring is one. There is only a small staff at the Biological Research Centre. It is essentially a computer and data collecting centre. The data is used for the Nature Conservancy Committee, which will become the council in future, but the centre is expanding its work considerably into various other fields and into fields that will not be within the jurisdiction of the NCC. It is desired to expand this data collection service to cover considerable areas of research quite outside the sphere of the NCC, and I think that we were therefore right in leaving it with the NERC. The council will have full use of the computer and data collection services whenever it so requires.
  The library is still being considered by a working party whose report, I hope, we shall receive within a short time. That matter, therefore, is not fully decided as yet.
  May I now state the order in which matters will proceed after the Bill receives Royal Assent. As soon as possible, my right hon. and learned Friend will appoint the council, and that will obviously take place before any order is laid transferring property. This means that the council will have an opportunity of expressing its opinion about the orders that the Secretary of State will lay concerning property, and to some extent concerning functions, although most of those are clear from the Bill itself. It may be that it will also be necessary to make some orders for the protection of staff rights, but I do not envisage that at the moment.
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  I think that that may well be dealt with by means of correspondence. But the council will be appointed long before the orders are laid so that it will be possible for it to comment on their content.
  It would be wrong for me, however, not to make quite clear what the Secretary of State's intentions are at the present time. They are that the laboratories should remain with the NERC, and that the Biological Record Centre, because it lies within the Monks Wood laboratory premises and because it is hoped to expand its work beyond the sphere of the Nature Conservancy Council, should also remain with the NERC. I do not express any opinion on the library at the moment because I await the report of the working party. On the basis of events taking place in that order, this clause is unnecessary.
  Mr. Oakes: I must say at the outset that I quite accept that the wording might well take the position back to pre-1965. That was not our intention. Our intention was to take the position back to before the White Paper.
  I am somewhat disappointed, and I know that my hon. Friend the Member for Motherwell (Mr. Lawson) will also he disappointed, at what the Minister said about the Biological Record Centre. I hope that the Secretary of State will not make up his mind on this small but important issue until the new Nature Conservancy Council is in existence.
  I am considerably encouraged by the fact that the right hon. Gentleman has made it very clear that the council will have been created long before any orders allocating the property are laid, to use the Minister's words. That gives those of us on this side very considerable encouragement. In fact, it goes a great way towards implementing the spirit of the clause. But I ask the right hon. Gentleman to think again about the Biological Record Centre, and in particular to consider the validity of the argument that the library should go to the council. I hope he will ask his right hon. and learned Friend the Secretary of State to listen very carefully to what the council says about the allocation of resources.
  Having said that, I beg to ask leave to withdraw the motion.
  Motion and clause, by leave, withdrawn.

  PROTECTION OF THE ENVIRONMENT IN RELATION TO OIL DRILLING OPERATIONS
  It shall be a responsibility of the council to consult with any company or public corporation which is undertaking operations on land or within United Kingdom territorial waters in connection with the exploitation of the resources of the United Kingdom continental shelf, with the main purpose of conserving the environment when operations are undertaken for the construction of oil drilling rigs and production platforms.—[Mr. Douglas.]
  Brought up, and read the First time.
  Mr. Douglas: I beg to move, That the clause be read a second time.
  I do not claim any great expertise in parliamentary draftsmanship, so that if the Minister in any sense objects to the drafting of the clause I shall not resist that type of argument. Its intention, however, is quite clear.
  The Scottish Under-Secretary of State said in the Second Reading Committee on 3rd July, as reported at column 488 of the OFFICIAL REPORT, that it was his right hon. Friend's intention that the Nature Conservancy Council should be consulted in matters associated with planning considerations on which its advice might be helpful. He said that on a particular line of argument which I was adopting in relation to operations connected with North Sea oil impinging on the environment.
  1.30 a.m.
  This clause goes a little further. It anticipates a situation where a planning application to develop particular sites has been successful. If I restrict my remarks to the situation in Scotland, I intend no disrespect to my English and Welsh friends who may be anticipating similar developments on land or in waters off the coast of Wales or the coast of England. I think it is right that the Secretary of State should consult the Nature Conservancy Council in connection with any planning application. In these planning applications the Nature Conservancy, as it is at present, might be called by the objectors, and it might be shown that a certain site was proposed to be developed with little or no detriment to the environment, or conversely that the environment would suffer considerable detriment. It might be to the detriment of a site of special scienti
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  fic interest, or the flora and fauna might be disturbed. In these situations, although the Nature Conservancy Council would be consulted, it would not have a continuing role to play in conserving the environment if the planning application were granted.
  I do not suggest that the Undet-Secretary should comment on a particular planning application-I am sure he will resist that temptation-but a certain planning application is being heard in Scotland at present. Let us take the situation at Dunnet Bay or Drumbuie. These are sites of particular interest in environmental terms, and I hope that if a planning application is granted severe restrictions will be placed on the developers. But it may be that a planning application will be granted and that these sites will be developed for industrial purposes. As I understand it, there is nothing in the present planning law or in the Bill that places an obligation on the Nature Conservancy Council to enter into a continuing relationship with companies or public corporations seeking to develop that type of site. We know that in Scotland the Secretary of State has given a general indication that there are 28 possible sites for such development.
  It is very difficult for hon. Members who have not seen how these developments impinge on the environment to appreciate the effects. Those of us who have visited the site developed by Highland Developers at Nigg Bay have seen how such a development can impinge on the environment.
  I am not suggesting that the damage done at Nigg Bay is irreparable. I am not suggesting that there is a mass undermining of the environment, but a colossal construction has been created. We should anticipate a proliferation of such developments, using not only iron and steel but concrete. I am talking about sites like Drumbuie, which require deep water and a considerable acreage of land for their production purposes. In the circumstances it is clear that there is a need to seek an assurance from the Government that great attention will be paid to the effect upon the environment of this type of industrial construction.
  I know that in Scotland we are in the early stages of this type of development,

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  and I want the Scottish economy to benefit fully from it, but this is a balancing situation. If I tilt the balance I have to tilt it on the side of conserving the environment. I see the Nature Conservancy Council as having a continuing role. In previous debates I have quoted an instance of writing into the Maplin Development Bill the role of an authority and its inter-relationship with the Nature Conservancy. Here I am seeking a continuing relationship between the Conservancy and these developers.
  Mr. Deputy Speaker (Mr. E. L. Mallalieu): With this new clause we can discuss Amendments Nos. 1 and 2.
  The Under-Secretary of State for Development, Scottish Office (Mr. George Younger): It is all the same to you, Mr. Deputy Speaker, it would be more convenient if those amendments were taken separately, because they cover different points.
  Mr. Deputy Speaker: So be it.
  Mr. Tam Dalyell: My hon. Friend was right to remind us of the sheer size of these developments, both at Nigg and Graythorp, on Teesside, which some of us visited three weeks ago with the Science and Technology Committee. Not until one has seen the scale of this operation does one realise the potential threat to the environment—to use the term in its non-pejorative sense.
  My hon. Friend was unduly modest about his drafting capabilities. Had I not known better and seen him at work on three Finance Bills, I might have thought at first sight that this was a superfluous clause, but a particular event which took place in the past fortnight proved how important consultation is. I refer to the announcement made two weeks ago, on a Sunday, that somehow or another licences have been granted to the Candecca Company, based in Calgary, to explore for oil in four counties —West Lothian, Lanarkshire, Dunbartonshire and Stirlingshire. At twenty minutes to two in the morning I shall resist the temptation to expand on what happened, but I ask the Under-Secretary whether he thinks it is satisfactory from the point of view of good manners and working with people that the convenor and his committee of a county council like West Lothian, together with the
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  officials, should find out from the front page of a Sunday newspaper that licences for oil exploration have been granted in their area.
  I put it to the Government, as I have done to the Secretary of State for Trade and Industry, that this is not the way to conduct the nation's affairs and get the necessary co-operation. Therefore the clause, concentrating as it does on consultation, is far from superfluous; in fact, it is necessary.
  I should like to put a direct question to the Scottish Under-Secretary. It may be unreasonable, because I have not given him notice, but could he find out whether the Department of Trade and Industry ever told the Scottish Office that it would do this? I merely say that it was uncharacteristic. It is not natural for Scottish Office civil servants not to consult local authorities. They have a high standard of manners and, on the whole, people who advise the Minister are people of sensitivity and quality who would not behave in this way. From what I know, I cannot think that this was a Scottish Office decision. It seems to me to bear the trademark of one of these vast conglomerate Departments which, in the opinion of some of us, are quite out of control. T therefore ask this question: was St. Andrew's House told at any time that these licences were to be granted?
  I shall not go over the answers given by the Minister for Industry. To cut a long story short, he seems to believe that this is the proper way to behave. From a parliamentary answer today I also discovered that these licences are exclusive. A fairly direct question asking whether they were put up for public tender was sidestepped.
  It seems to me intolerable that, if one gives exclusive licences for oil exploration in the land area of Central Scotland, it is not done by any kind of public tender. We have the situation that licences are granted to a Canadian company whose name is not known to some of the senior executives of BP. BP may have an interest or it may not. The fact is that the area we are talking about is the heartland of the old Scottish Oil Company, which was one of the ingredients of BP. To behave like this to the established oil company of the area seems to me to be totally incredible.

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  We have the situation that a series of map references have been sent to West Lothian County Council without any explanation of whether drillings should or should not take place. It is far from clear what kind of planning permission is needed. Therefore, although I do not expect the Under-Secretary to have the answers to these questions on the top of his head at a quarter to two in the morning, I ask that he and his colleagues in the Scottish Office ask the Department of Trade and Industry what on earth it thinks it is up to.
  Mr. Lawson: The Minister might say that to accept the clause would impose a heavy responsibility on the new Nature Conservancy. I put it to him, however, that the old Nature Conservancy, or the body which has existed up to now, has begun to act, and quite extensively, on lines such as those described in the clause. That has been welcome action, as I am sure the Under-Secretary will agree. Notably this action has shown itself in the whole of the Moray Firth—Cromarty Firth area and at Nigg Bay, of which my hon. Friend the Member for East Stirlingshire (Mr. Douglas) has spoken.
  The activity of the conservancy has been focused to a considerable extent not on what most people would think of as being the concern of the Nature Conservancy. Most people, I think, when talking of conservation, still think in terms of scenic beauty, whereas what the Nature Conservancy has been principally concerned about in the Moray FirthCromarty Firth area has been the low tide area, the flats, the shallow water, the waters upon which the migratory birds feed to such an extent.
  What the Nature Conservancy has been trying to do in that area, among other things, has been to provoke a hydrological study of the area. There is no proper knowledge of how the shallows build up in one part and not in another. When dredging takes place, for example, it is often done without any knowledge of the effects that dredging of one area will have on the other areas.
  There should be a proper hydrological study of the area and a hydrological model should be made. Certain areas may be dredged without causing any damage at all, but if dredging is carried
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  out in one part rather than another irreparable damage could be done in vital areas. It must be remembered that this is one of the principal areas in Northern Europe for migratory birds. A little extra knowledge might prevent damage being done. I hope that the Under-Secretary will be able to accept the substance of the clause even if he cannot accept it in the form in which it now appears.
  1.45 a.m.
  The Under-Secrtary of State for Development, Scottish Office (Mr. George Younger): I am grateful to the hon. Member for Clackmannan and East Stirlingshire (Mr. Douglas) for presenting the clause and for raising this subject. I agree with the hon. Member for Motherwell (Mr. Lawson) on the importance of this matter. I also agree with the hon. Member for West Lothian (Mr. Dalyell) that one has to appreciate the scale of operations involved in this new development of North Sea oil. It is easy to talk about them, but until one has actually seen them one does not realise what a large-scale operation it is and what a big effect some of these matters can have on parts of the country which are vital to many people.
  I wholeheartedly agree that we want to see the new Nature Conservancy Council brought in at an early stage to give its views on all matters which may affect ecology in relation to oil development. It is desirable that this should be so and we shall do everything we can to ensure that this happens.
  The Nature Conservancy has been increasingly brought into consultation in recent times on development proposals connected with North Sea oil. For example, there is a Scottish Office liaison unit on oil which brings together officers of local authorities, the Countryside Commission, the Nature Conservancy and other interested bodies for impact and appraisal meetings on individual projects. The Nature Conservancy is represented at the Environmental Forum chaired by the Director of the Countryside Commission and consisting of the main conservation bodies which meet regularly to consider the effects of oil and other major developments on the environment.
  The Nature Conservancy is also concerned in a survey of Scottish coasts being carried out by the Scottish

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  Development Department, which has commissioned a landscape architect for the purpose. The aim is to advise local authorities about the possible effects of development of their coastal areas and to take into account development plans and policies. The Nature Conservancy has also been represented at a standing conference on North Sea oil, of which I have taken the chair on three occasions, and it has made a useful contribution at those discussions. I understand that the Nature Conservancy is itself producing guidelines and advice for local authorities on the ecological factors to which they should have regard in considering the development of their areas. I consider that the new Nature Conservancy Council can be expected to carry on this work if it is given a statutory right to advise Ministers on nature conservation, taking into account possible ecological changes. It will have a locus to make its views known either direct to the Minister or, more practically, to the planning authorities to which powers are given under the planning Acts. The Secretary of State remains the final arbiter. I assure the hon. Gentleman that we will take administrative action to ensure that the new Nature Conservancy Council's place in the planning machinery is made known to the planning authorities and to other interests. In this way I believe that the council will be brought into the planning machine, since all proposed development must come to the planning authorities.
  The precise form of the clause is perhaps not the most appropriate way of achieving what we all want to achieve, because the critical point at which one can bring about the proper consideration of all these types of development is at the point where a planning application comes to a planning authority. It is there that it is possible to be sure that everything will be caught in the net. Therefore, rather than put, as the clause suggests, a responsibility on the council to work from the other end and try to keep sufficiently in touch with a multifarious number of different companies which may be involved in North Sea oil, so as to be able to give advice quickly—that is a very laudable objective which I would encourage—it is better to catch the matter at the point where the local authority has a planning application to consider. I
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  therefore assure the House that we shall take steps to ensure that this is brought to the attention of planning authorities and that they will have the obligation to consult the Nature Conservancy Council.
  I am glad that the hon. Gentleman raised this important point. I will draw what the hon. Member for West Lothian has said to the attention of my colleagues in the Department of Trade and Industry and see that he is given an appropriate answer to the point he raised.
  Mr. Dalyell: I do not like issuing a threat. I have not been to the Parliamentary Commissioner for the past three years, but I would welcome some explanation of what is happening. I am tempted prima facie to take what I consider to be the very serious step of referring this matter to the Ombudsman.
  Mr. Younger: I note what the lion. Gentleman says. I will draw his point to the attention of the Ministers concerned and ask them to give him a proper answer.
  I am entirely in sympathy with the object of the clause. It can best be achieved by the method I have described. I suggest to the hon. Member for East Stirlingshire that it would therefore be best for him not to press the clause, though I applaud his aims in tabling it.
  Mr. Douglas: I welcome what the Under-Secretary said. Perhaps I expressed myself inadequately. If I interpret the hon. Gentleman's words correctly he rests his case on the existing planning procedures to catch any ill effects on the· environment. I argued that the clause would be post the granting of planning permission. We therefore need a continuing relationshiup between developers and the Nature Conservancy Council. I hope that what I have said will be noted by the Ministers, particularly Scottish Ministers. I beg to ask leave to withdraw the motion.
  Motion and clause, by leave, withdrawn.

  THE NATURE CONSERVANCY COUNCIL
  Mr. Graham Page: I beg to move Amendment No. 1, in page 1, line 16, at end insert:
  '( ) the provision of advice for the Secretary of State or any other Minister on the development and implementation of policies for or affecting nature conservation in Great Britain;'

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  Perhaps it would be convenient to discuss at the same time Government Amendment No. 2 and a manuscript amendment which is purely consequential on Amendment No. 1.
  Amendment No. 1 fulfils an undertaking which I gave in Committee that I would seek to make it a function of the new council to advise the Secretary of State upon a national policy on nature conservation. The new sub-paragraph must then be included as one of the items which can be the subject of commissioned research.
  Amendment No. 2 fulfils another undertaking I gave in Committee when I accepted the desirability of including a specific reference to the problem of ecological changes in the responsibilities of the Nature Conservancy Council.
  Mr. Oakes: We appreciate the speed with which the Government have implemented the undertaking they gave in Committee to bring in both these amendments, particularly No. 1, about which we are very concerned—the fact that the Nature Conservancy Council will now have a statutory duty to advise the Secretary of State or any other Minister on
  "the development and implementation of policies for or affecting nature conservation in Great Britain".
  We were concerned in Committee with major schemes, like Maplin, the Channel Tunnel and the return of defence lands to private ownership.
  The amendment more than adequately deals with that situation. We welcome the fact that it has been tabled.
  Amendment agreed to.
  Manuscript Amendment made: In page 1, line 22, leave out 'and (ii)' and insert 'to (iii)'.
  Amendment made: No. 2, in page 2, line 23, at end insert:
  '(4A) It shall be the duty of the Council, in the discharge of their functions, to take account, as appropriate, of actual or possible ecological changes.'.—[Mr. Graham Page.]

  GRANTS BY COUNCIL
  Mr, Graham Page: I beg to move Amendment No. 3, in page 3, line 8, leave out 'by virtue of section 1(1)(a) above.'.
  This amendment fulfils another undertaking I gave in Committee, to remove
  1364
  a limitation and to give the council a general power to grant-aid any project of a type that the council can itself carry on.
  Amendment agreed to.

  AMENDMENTS OF ENACTMENTS CONSEQUENTIAL ON TRANSFER OF STATUTORY FUNCTIONS TO THE COUNCIL
  Mr. Graham Page: I beg to move Amendment No. 4, in page 5, line 43, at end insert:
  'Badgers Act 1973
  12. In the following provisions of the Badgers Act 1973, namely—
  (a) section 6(1) (special protection for badgers);
  (b) section 9(2)(a) (licences); and
  (c) paragraph (d) of the definition of "authorised person" in section 11 (interpretation),
  for the words Natural Environment Research Council "there shall be substituted the words" "Nature Conservancy Council".
  Medway Ports Authority Act 1973
  13. In section 93 of the Medway Ports Authority Act 1973 (protection of Nature Conservancy), after the words "Nature Conservancy" there shall be added the word "Council".'.
  As this is a new subject, perhaps I had better put on record what it is about. The Badgers Bill is a Private Member's measure which I think will receive Royal Assent in a day or so—at least, before the recess—and it is right that we should make the necessary amendments here.
  The effect of the alteration of Clause 6(1) of that Bill is that the Nature Conservancy Council will have to be consulted before an order is made declaring an area as one of special protection for badgers. The effect of the alteration of Clause 9(2)(a) is to give the council the licensing authority for purposes such as the taking or killing of badgers for scientific and educational reasons. The effect of the alteration of Clause 11(d) is that the council will be a body which may name persons who may take or kill badgers without being guilty of an offence.
  The Medway Ports Authority Act was a Private Member's Bill which received Royal Assent on the 18th of this month. Section 93 of the Act requires that

  1365
  authority to consult the Nature Conservancy before beginning any development which is permitted by a town and country planning general development order and which is likely to have an adverse effect on any flora or fauna. This carries out broadly the intention of new Clause 3 but in another sphere.
  The effect of the new paragraph 13 is simply to change the reference from "Nature Conservancy" to "Nature Conservancy Council".
  Amendment agreed to.
  2.0 a.m.
  Mr. Graham Page: I beg to move, That the Bill be now read the Third time.
  I want to express gratitude to all those who have made very constructive proposals, suggestions and contributions during the debates on the Bill. We have discussed the purposes for which the new council is to be set up, and the definition of those purposes has been improved during the Bill's passage.
  The Nature Conservancy Committee, as a committee of the NERC, has made great progress over the past few years, both in long-term matters such as the nature conservation review and in many short-term and management projects. But it has been straining at the leash, and as a committee of a research council it has not been able to achieve all that it would wish and all that we now wish it to achieve in the future. The Bill tries to give it the power of such achievement by creating a separate body with a degree of independence, the proposed Nature Conservancy Council, which will be a new body with a different emphasis from that of the present Conservancy Committee.
  It is of course appropriate for arrangements to he made to transfer the staff but perhaps this is the moment at which to seek new administrative leadership of the council, without any reflection upon the success of the past few years—the limited success, through no fault of its own, of the Nature Conservancy as a committee of the NERC. Therefore, we are making it possible for the council to have a wide choice for its administrative leadership. Therefore, we are making it possible for the council to have a wide choice for its administrative leadership, and we shall be putting this out to open competition.
  1366
  Our concern has been to ensure that we provide in the Bill the right framework to enable the relationship between the NERC and the Nature Conservancy Council to flourish. That framework still needs completion. The Bill will enable a number of necessary preparatory steps to be taken before the new council can discharge its functions. My right hon. and learned Friend proposes to appoint the members of the council as soon as practicable after Royal Assent and then to proceed with the necessary orders transferring property and property rights to the council, dealing, so far as may be necessary, with any staff matters, and making an appointed day on which the council will start its work. I hope that that will be 1st November next, if all the arrangements go well.
  All right hon. and hon. Members will wish to join me in wishing success to the new council and its staff in their work. In the years ahead the problems of safeguarding the environment will become greater, and the council have an important rôle to play in ensuring that we take proper account of the importance of nature conservation.
  2.4 a.m.
  Mr. Oakes: I endorse what the Minister said, particularly in relation to the good will which has existed on both sides of the House and the Committee during the passage of the Bill. When the Bill first saw the light of day in another place it was thought that the Nature Conservancy Council would be little more than a management body for nature reserves. Useful work has been done in another place, in this House and in Committee in improving the Bill stage by stage. That improvement has continued until tonight when the Government introduced amendments in accordance with undertakings given in Committee.
  I endorse what the Minister said about the importance of the council's work. 1 am delighted that the council is to be under the Department of the Environment. That is the proper place for it. Back in 1949, had there been a Department of the Environment, that would have been the natural home of the Nature Conservancy instead of the Lord President who was responsible for the work at that time.

  1367
  The importance of conservation and the amount of work involved have increased a hundredfold since 1949 and considerably even since 1965. I am delighted that the importance of nature conservancy and the dissemination of knowledge of ecology and conservation and about our limited resources is far more appreciated than it has ever been before.
  I am sure that all hon. Members wish the new Nature Conservancy Council well in the enormous task ahead of it.
  2.7 a.m.
  Mr. Arthur Blenkinsop: I intervene briefly to say that I entirely share the welcome which has been expressed for the Bill and the changes that have been made in another place and in this House. It was not such a bad arrangement in the old days when the Lord President was responsible. The Nature Conservancy had a real feeling of independence and a knowledge of its resources and how it could plan its work ahead. I hope that feeling will be retained in the future.
  We all hope that the Nature Conservancy Council will be independent and that it will be able to exercise its judgment in a proper manner and continue the exciting work which has led to public education and the stimulation of understanding in ecological processes. I hope that the coming of the council into the rational home of the Department of the Environment will not mean a limitation of its ability to express its independence.
  The value of money is falling and resources are being devalued. This makes it difficult for the council to plan its work coherently. Even the continuation of its existing work will require greater resources than were thought to be required a year ago, so rapidly are money values falling. I hope that very great care will be taken in this matter. The sums of money we are talking about are relatively very small. I hope that the new council will be able to make a real contribution, as it can do if its resources are adequately assured over a period ahead and if its independence is assured at the same time.
  Question put and agreed to.
  Bill accordingly read the Third time and passed, with amendments.

  PRESCRIPTION AND LIMITATION (SCOTLAND) BILL [Lords]
  As amended (in the Standing Committee), considered.
  Motion made, That the Bill be now read the Third time. [Queen's Consent on behalf of the Crown, and Prince of Wales's Consent signified.]
  Question put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.
  Bill accordingly read the Third time and passed, with amendments.

  PARLIAMENTARY QUESTIONS
  Motion made, and Question proposed.
  That it is expedient that the scheme for limiting the number of Questions that may be tabled for oral answer, the operation of which was recommended for an experimental period by the Select Committee on Parliamentary Questions in the last Session of Parliament in paragraph 19 of their Report, to which this House agreed on 18th December last, be continued beyond the end of the present Session.—[Mr. Hawkins.]
  2.11 a.m.
  Mr. Tam Dalyell: I want to object to the motion on two main grounds. First, it gives a great deal of work, and secondly, it again is an erosion
  Mr. Deputy Speaker (Mr. E. L. Mallalieu): Order. It is not necessary for the hon. Gentleman to make a speech. The motion is postponed if there is an objection.
  Debate adjourned; to be resumed this day.

  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]

  MR. ALEX MOUMBARIS
  2.12 a.m.
  Mr. Alexander W. Lyon: I wish to raise the case of Mr. Alex Moumbaris and the theft from his flat in Clapham of certain documents which were used in the course of a trial in

  1369
  South Africa, when he was charged under the Treason Act.
  Mr. Moumbaris is a Greek and became a naturalised Australian citizen some time ago but he has lived in England since 1961. In 1971 he married a French lady, Mrs. Marie-Jose Moumbaris, and they took up residence in a flat at Clapham Common. They lived there until they went to South Africa in June 1972. They claim that they went there in order to have a holiday and they entered the country from Mozambique. On 19th July 1972 they were arrested by the South African authorities and charges were preferred against Mr. Moumbaris, but Mrs. Moumbaris was released after a period in detention, when she was interrogated by the authorities.
  On 5th August, about three weeks after their arrest, a young man, a South African speaking good French, presented himself at the home of Mr. Moumbaris' mother in Paris and gave her a letter which he claimed had been written by Mr. Moumbaris giving him authority to take the key for the flat in Clapham and to use the flat whilst he was in England. She was overcome with delight to have had news of her son, from whom she had not heard since the middle of June, and perhaps because of that she was unfortunately trusting and she allowed the young man to take the key away.
  In the course of the interrogation of Mrs. Moumbaris some photographs and documents were presented to her which could only have come from the flat in Clapham. She put that to her interrogators, but they only laughed. It has been reported in the Press, though of course there cannot be any direct assertion from Mr. Moumbaris, that he has recognised documents which were used in the course of the trial in South Africa also as having come from the flat in Clapham. This was communicated to Mr. Hosey, who is the father of a co-accused in the trial. Mr. Hosey lives in this country.
  It appears, therefore, that by means of this device the South Africans have obtained unlawful access to accommodation in this country and have committed what in respect of our law is a burglary in that flat. They have done it for the purpose of getting information which 'would be useful to them in the trial of a
  1370
  person who was resident in this country though not a citizen of this country, and they have done it without any protest from this country. It is about that that I am concerned.
  The story was first told in January in an article in the Sunday Times. On 31st January 1 wrote to the Home Secretary enclosing a cutting from the Sunday Times and asking for an investigation. In due course I received a reply from the Home Secretary which said that a full inquiry had been carried out by the Commissioner of Police of the Metropolis but that no evidence had been found to support the suggestion in the newspaper report that the flat had been raided by South African agents.
  However, in due course I received from Mr. Hosey a copy of a complaint which had been made that Mr. Moumbaris had recognised documents in the course of the case which had come from the flat. I sent this to the Home Secretary on 27th April of this year asking him to reconsider the matter. Before he replied, I received a copy of a letter which Mrs. Moumbaris had written to the Home Secretary setting out her version of the facts. Therefore I awaited with some expectation a reply from the Home Secretary.
  Unfortunately the right hon. Gentleman was unable to reply. He was away from the office when the reply was sent out on 29th May. It was signed by the Under-Secretary and said that he had examined the case again but that there was nothing to add to the Home Secretary's letter of 31st January. The hon. Gentleman went on to say that there was no evidence that South African representatives in this country had acted illegally and that, even if Mr. Moumbaris was right in claiming that documents produced in South Africa came from his London flat, that would not prove that his flat necessarily had been raided by South African agents.
  It was that last sentence which caused me to raise this matter on the Adjournment. It cannot be claimed, in the light of the affirmative evidence of Mrs. Moumbaris in her letter to the Home Secretary that she positively identified documents produced to her during her interrogation as having come from the flat, that there is no evidence of a break-in by South African agents. There is clearly a link between her assertions and the

  1371
  documents there produced that prima facie there was a burglary.
  The way in which the Under-Secretary tried to avoid that nexus was by saying that it would not necessarily show that the flat had been raided by South African agents. If the young man who presented himself at the flat of Mr. Moumbaris' mother in Paris and obtained the key surreptitiously was not a South African agent, for what purpose did he want to take away those documents and present them to the South African authorities so that they could be used in the course of the trial?
  It is true that the evidence is not incontrovertible, but it calls for an explanation, and it is that explanation which the Government ought to request from the South African embassy. For some years now, there has been increasing concern that the South Africans have been using this country as a place in which they can get evidence of the activities of those who are opposed to the regime, and there has been some evidence in the past that, as a result of information collected here, they have chosen to prosecute people in South Africa.
  Despite a number of complaints by various hon. Members, no hard evidence has ever been produced that this connection is clearly proven. But in this case there is evidence. There is evidence from Mrs. Moumbaris that she saw documents and photographs which came from the flat. Those documents could have been obtained only for the purpose of proceeding against herself or her husband. both of whom were in custody at the time when the flat was entered; and the device which was used could have been used only for the purpose of getting that information.
  This, therefore, is a matter which should be brought to the attention of the South African authorities, and they should be asked for their explanation. I hope that the British embassy in South Africa has had an observer at the trial of Mr. Moumbaris so that we may find out what documents were produced and, possibly, which of them were alleged to have come from the flat. But if we have not, it should not be impossible to obtain a transcript of the evidence to find out which documents were used in that way.
  1372
  What is clear is that there is enough here on which to make a protest to the South African authorities and to ask for an explanation. When we have seen their explanation, it will be possible to evaluate it and see whether it effectively rebuts the prima facie case. But unless we make the protest we shall have no hope of ever impeding the activities of these infiltrators into our country.
  I take the view that we do not in this country pay security forces in order to preserve the security of South Africa. Our security forces are to protect the security of this country, and they should have no truck with the activities of security agents from South Africa who are concerned only to see that offences committed against their odious regime are prosecuted in that country.
  2.23 a.m.
  The Minister of State, Home Office (Mr. Mark Carlisle): The hon. Member for York (Mr. Alexander W. Lyon) has raised, in the context of the individual case of Mr. Moumbaris, a subject which has received a fair degree of attention in Parliament and in the Press over the past few years, namely, the alleged activities in this country of the South African security authorities or of others acting on their behalf. I appreciate that it is a subject on which strong feelings are held, not least, I know, by the hon. Gentleman himself. But when we consider specific allegations which may be made, we must, I suggest, do so objectively, and our views on apartheid should not lead us to deal with allegations of criminal offences which may be raised in this connection by the hon. Gentleman or by others any less strictly or any less critically than we should deal with any other case concerning a possible criminal offence which had no political overtones at all.
  Before coming to the facts of the case of Mr. Moumbaris, let me say, as a general point, that the investigation of alleged criminal offences is in this country a matter for the police. It is the duty of the police to enforce the law and to investigate allegations of offences irrespective of the persons against whom the allegations are made. I have no doubt whatsoever that they do so with impartiality, and suggestions that representatives of the South African authorities, or

  1373
  any persons acting on their behalf, have broken the law in this country are and will be investigated in the same way as any other suggestions of this kind. Anyone—hon. Members or anyone else—with reason to believe that a criminal offence may have been committed is under a duty to inform the police, and I assure the House that the police will take the appropriate action against whomever the allegations may be made.
  Having said that generally, may I turn to the case of Mr. Moumbaris. My understanding of the facts coincides with what the hon. Gentleman said. This is the case of an alleged theft from Mr. Moumbaris' flat in Clapham. As I understand it, the alleged incident took place in 1972. I think it is alleged to have taken place between August and November 1972. It was first reported in the Press in January of this year, and it was following that report that the hon. Gentleman first wrote to my right hon. Friend the Home Secretary.
  I should like to make it clear that that report in the Press in January 1973 of an incident alleged to have occurred some time in the latter half of 1972 was the first time that anything had been said or known about this allegation. The report was to the effect that Mr. Moumbaris' London flat had been ransacked in order to collect evidence for his trial in South Africa. The report mentioned that Mr. Moumbaris' mother claimed that, a fortnight after her son had been arrested, a South African had called upon her and said that he was a friend of her son, produced a letter purporting to be written by him, and asked to borrow the key for the London flat.
  We know that after Mrs. Moumbaris was released from detention she went to stay with her mother-in-law in Paris, and some time in November 1972 Mr. Moumbaris' mother came to London to look at the flat. According to the report, she says that she found it in a mess as if it had been ransacked.
  I must point out to the hon. Gentleman that she made no complaint about the flat. I am not blaming her for that. No complaint was made by Mrs. Amiel —that is Mr. Moumbaris' mother—about the state in which she claims she found the flat, and the first time that the matter
  1374
  came to the attention of the authorities in this country was in the Press report in January of this year. The only contact that Mrs. Amiel made with the authorities was in a letter to the Home Office as recently as May of this year. The moment that the Press report came out the Commissioner of Police carried out an investigation into the alleged affair.
  The position at that stage was that apparently Mr. Moumbaris' mother on her visit here in November had paid up the rent on the flat. The tenancy was apparently at least in abeyance. The flat, I understand, was unoccupied, and Mr. Moumbaris' belongings had been taken by his mother when she visited this country in November and some other domestic items had been put by her into a suitcase which had been left on the premises.
  Therefore, that being the situation, there was no evidence on which the police could act that the flat had been broken into, let alone as to who, if anyone, had committed the break-in, and my right hon. Friend the Home Secretary informed the hon. Member accordingly. In April, following further Press reports, the hon. Gentleman wrote again to my right hon. Friend, but further examination of the case still failed to disclose any evidence that the flat had been raided or by whom any raid, if it took place, had been made.
  There is, I am afraid, nothing that I can now add to that conclusion. Any new information which the hon. Gentleman may have available will naturally be considered, but we must keep in our minds that we are dealing with an allegation of a serious criminal offence and positive evidence is required before the police can take any action. Even if, as the hon. Member says, Mr. Moumbaris is right in claiming that documents produced at his trial in South Africa came from his flat in London, that is not in itself evidence against any particular people of having broken into that flat.
  The hon. Gentleman said that since then there has been evidence from Mrs. Moumbaris that she has seen documents which she claims came from the flat. It is also true that she, too, wrote to the Home Office, I think I am right in saying in May of this year, claiming this to be so. On that, the hon. Gentleman asked why we have not made any protest to

  1375
  the South African embassy. Here again, I suggest, the hon. Gentleman must appreciate that evidence would be needed before any Government could take action of the kind he has in mind. Supposition or inference is not enough. The police have no evidence to show of a raid on Mr. Moumbaris' flat, and certainly no evidence to show that the South African authorities were responsible for any such action. In the absence of such evidence there are no grounds on which action by the Government could be justified.
  Mr. Lyon: Mrs. Moumbaris' letter itself is prima facie evidence of the burglary because it shows that there were documents from her flat produced by her South African interrogators. I accept that we cannot prosecute anyone in this country because we cannot identify who did it, but we certainly have enough evidence to protest to South Africa.
  Mr. Carlisle: With respect, Mrs. Moumbaris' statement that documents shown in South Africa had come from her flat in London, without any other evidence to show that the flat was broken into, or anything like that, is not in my submission
  1376
  evidence on which we could be justified in taking the action for which the hon. Gentleman asks.
  Let me repeat what has been said on many occasions by Ministers in this House: that if evidence is produced we shall follow it up and the necessary action will be taken. As has been said on repeated occasions, however, we have no evidence of illegal activities in the United Kingdom by any South African officials. If we have such evidence, as I say, the appropriate action will be taken. If we have evidence of illegal acts by others on behalf of such agents or officials, we shall not hesitate to prosecute.
  No evidence has so far come to light of South African responsibility for illegal activities, but, due to the strong feelings which have been expressed in this House and in the country as a whole on various occasions, the South African Ambassador has been left in no doubt that if such evidence comes to light the Government will not hesitate to take the appropriate action.
  Question put and agreed to.
  Adjourned accordingly at twenty-four minutes to Three o'clock a.m.

WALES
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  Primary Schools (Class Size)
  Primary Schools (Class Size)
  "Tivoli"(Tate Gallery)
  "Tivoli"(Tate Gallery)
ENVIRONMENT
  Council Housing
  Council Housing
  Kerbs
  Kerbs
  Private Roads
  Private Roads
  Retrospective Legislation
  Retrospective Legislation
  Heavy Goods Vehicle Drivers
  Heavy Goods Vehicle Drivers
  Railways (Private Siding)
  Railways (Private Siding)
  Crash Helmets
  Crash Helmets
  Local Government Finance (Consultation Paper)
  Local Government Finance (Consultation Paper)
  Hertfordshire County Plan
  Hertfordshire County Plan
  Railway Land
  Railway Land
  Bypass (Berwick-on-Tweed)
  Bypass (Berwick-on-Tweed)
  Bypass (Belford)
  Bypass (Belford)
  Improvement Grants
  Improvement Grants
  Operation Eyesore
  Operation Eyesore
  Rent Scrutiny Board (Northamptonshire)
  Rent Scrutiny Board (Northamptonshire)
  Trunk Road Repairs (Broken Windscreens)
  Trunk Road Repairs (Broken Windscreens)
  Audley End
  Audley End
  Rivers (Silting)
  Rivers (Silting)
  A6/A57 (Link Road)
  A6/A57 (Link Road)
  Sheffield-Manchester Motorway
  Sheffield-Manchester Motorway
  Rate Rebates
  Rate Rebates
  Motor Vehicles (EEC Safety Directive)
  Motor Vehicles (EEC Safety Directive)
  Maplin
  Maplin
  National Parks (Quarries)
  National Parks (Quarries)
FOREIGN AND COMMONWEALTH AFFAIRS
  Retrospective Legislation
  Retrospective Legislation
  Hong Kong (Blair-Kerr Commission)
  Hong Kong (Blair-Kerr Commission)
  Parking Offences (Diplomatic Immunity)
  Parking Offences (Diplomatic Immunity)
  Mozambique
  Mozambique
  Falkland Islands
  Falkland Islands
  Portuguese Prime Minister (Visit)
  Portuguese Prime Minister (Visit)
  Disasters (Aid)
  Disasters (Aid)
  EEC Employees (Pay)
  EEC Employees (Pay)
HOUSE OF COMMONS
  Members (Role and Status)
  Members (Role and Status)
  EAST EUROPEAN COUNTRIES (VISITS)
  EAST EUROPEAN COUNTRIES (VISITS)
  HEADS OF GOVERNMENTS (TALKS)
  HEADS OF GOVERNMENTS (TALKS)
SCOTLAND
  Island Ferries
  Island Ferries
  Water Supply (Pipes)
  Water Supply (Pipes)
  Local Government Reorganisation (Ayrshire)
  Local Government Reorganisation (Ayrshire)
  Historic Buildings (Edinburgh)
  Historic Buildings (Edinburgh)
  Inverkip Power Station
  Inverkip Power Station
  Crofts (Redevelopment Applications)
  Crofts (Redevelopment Applications)
  Murder and Manslaughter
  Murder and Manslaughter

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

PRICE COMMISSION AND PROMOTION COSTS
LORD HALE: 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 and, if so, to what extent, the Price Commission takes into account the cost of promotion when considering an application for a price increase on commodities or services.
THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN): My Lords, the costs which the Price Commission can take into account are the allowable costs specified in paragraph 25 of the Price and Pay Code within the restrictions applying to total costs and profit margins. Promotion costs relating to bought-in services are not allowable. Where, however, promotion costs are incurred by an enterprise carrying out this function for itself, a part of the cost is allowable.
LORD HALE: My Lords, have any rules been laid down about what part of the cost, and is any notice taken of the economic situation? For example, so far as petrol is concerned, would any advice be given that on the whole it is not very wise to spend many millions on advertising petrol when we are running short of it and the Government are contemplating possibles measures for rationing? As to various commodities, is there a graduated scale, for example, for detergents—something for that which washes white, more for something that washes whiter and a more substantial percentage for the one that washes whitest?
LORD DRUMALBYN: My Lords, so far as promotion costs are concerned, I could perhaps best answer that question by example. An increase in the cost of
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a company's own sales force would be an allowable cost, subject to the 50 per cent. productivity deduction, but increased expenditure on advertising in newspapers or on television would not qualify, because this is a bought-in service. So far as the interpretation is concerned, this is a matter for the Price Commission.
BARONESS SUMMERSKILL: My Lords, can the Minister say whether, in considering the cost of introducing a proprietory drug, the promotional cost is taken into account and, if it is, what percentage of the cost is regarded as appropriate for promotion?
LORD DRUMALBYN: My Lords, this is rather a different question. I think my main Answer covers the point to some extent: if it was an entirely new product then there would be no comparison with the costs that have gone before. If it is an existing product then the rules would apply.
LORD HALE: My Lords, can the noble Lord say whether account has been taken of the possibility of giving advice to advertisers? Now that advertisers have adopted the system of having enforced warning notices on cigarette packets—though I am not sure whether I agree with censorship for advertising —could the noble Lord comment on whether we might have a little advice on Rowntree's chocolate to say that gambling is dangerous, or that there should be a notice on Benson & Hedges cigarettes to say, "Don't walk behind the bowler's arm: this offence is on the increase"?
LORD DRUMALBYN: My Lords, it is essentially a matter for the individual advertiser to decide, on commercial grounds, the appropriate level of costs. What we are dealing with in the Question is allowable costs for the purpose of price increases.
LORD DOUGLASS GP CLEVELAND: My Lords, can the Minister say whether trading stamps are an allowable cost in this connection?
LORD DRUMALBYN: My Lords, I am not aware that the cost of trading stamps has increased. I am not sure that the question arises.
BARONESS SUMMERSKILL: My Lords, may I ask the noble Lord whether

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he would look again at his earlier answer to me?—because there are so many more proprietary drugs coming on to the market that his answer is made irrelevant. You cannot compare the cost of a new drug with that of another drug; it is an entirely new drug.
LORD DRUMALBYN: My Lords, I think the new drug would be treated separately, because there would be nothing that had gone before with which to compare what was being spent on the promotion of the new drug. It would thus be outside the terms of reference of the Price Commission. If it is an old drug, then of course the rules apply.
LORD SLATER: My Lords, can the Minister justify the reason for the setting up of this Price Commission, in view of price increases that have taken place since it came into existence—and particularly with regard to baby foods?
LORD DRUMALBYN: My Lords, I am afraid I have not looked particularly into the cost of baby foods; but the whole purpose of the setting up of the Price Commission—it is stated as the first general principle—is to limit the extent to which prices may be increased on account of increased costs.
LORD WYNNE-JONES: My Lords, if I understood the noble Lord correctly, he said that he was not aware that the price of trading stamps had increased. May I ask him whether it is not true that the price of trading stamps is the price of the goods supplied against the trading stamps? If that is so, have not the trading stamps necessarily increased with the increase in prices?
LORD DRUMALBYN: My Lords, I think that is rather a complicated question. What we are dealing with here are the applications for permission to increase prices because of the increases in costs. What I was saying was that I was not aware that there had been an increase in the cost of trading stamps.

HEAVY COMMERCIAL VEHICLES: ROUTE CONTROL
2.42 p.m.
LORD DE CLIFFORD: 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, in view of the continuing accidents and damage to property involving heavy commercial vehicles through ports in the South-East of England, whether they will, in consultation with the councils affected, obtain agreed maximum weight and size limits for existing roads and villages and prohibit entry and departure of any vehicles exceeding these limits through these ports until such time as suitable roads and by-passes have been constructed.
LORD MOWBRAY AND STOURTON: My Lords, ail vehicles entering this country must comply with British regulations on maximum weight and size. Local authorities have power to ban heavy commercial vehicles from local roads where there are suitable alternative routes, and a circular has recently been issued giving them guidance on the use of these powers, which will be strengthened by the Heavy Commercial Vehicles (Controls and Regulations) Bill which your Lordships have recently considered. High priority is given to improving the routes to ports, and pending their completion safety measures on the existing routes are provided wherever possible.
LORD DE CLIFFORD: My Lords, while thanking my noble friend for his reply, may I ask him whether he is aware that there are continual protests about the damage which is being done? I think I am correct—no doubt he will tell me if I am not—in saying that, even though a council makes an order, the Minister can override it. Will the noble Lord ensure that there will be consultation with councils so that a correct assessment can be made of the weights and sizes of vehicles which are now going through the villages?
LORD MOWBRAY AND STOURTON: My Lords, I can give the assurance that the Department of the Environment are more than happy to consult with local

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authorities to try to get any amelioration possible.
LORD SHINWELL: My Lords, may I ask the noble Lord whether, in view of previous Questions that I have ventured to ask on this matter, he will agree that the relevant part of the Question is the matter of consultation? In view of the statement made only this morning by Mr. Rippon, regarding the roads connecting with the Maplin project, that people are to be consulted, will the noble Lord give an assurance that in this important matter affecting the convenience of many people in the South-East and elsewhere there will be adequate consultation?
LORD MOWBRAY AND STOURTON: Yes, my Lords. "Consultation" is an "in" word and it is being practised more and more. What we have to consider also is not only the convenience of people on these routes, but the livelihood of the nation as a whole.
LORD BOOTHBY: My Lords, is the noble Lord aware that unless something is done fairly soon, about heavy commercial vehicles not only in the ports but in the centres of the cities in our country, traffic in this country will become absolutely chaotic?
LORD MOWBRAY AND STOURTON: My Lords, that is one of the objects of the national strategic route network which we are pushing ahead.
LORD DE CLIFFORD: My Lords, would my noble friend give the House an assurance that where cuts in road construction are planned they will be minimised in certain areas to give relief to the small towns and villages which are suffering at this moment?
LORD MOWBRAY AND STOURTON: My Lord, I think I have already indicated, and I confirm this to my noble friend, that where villages on main routes are badly affected, we shall give every priority to road construction.
LORD CHAMPION: My Lords, as circulars to local authorities are often just shelved, will the Department of the Environment make sure that they follow up the circular to see what action is being taken by local authorities?
LORD MOWBRAY AND STOURTON: My Lords, our local inspectors are in
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touch with their colleagues in local authorities.

BRITISH AIRWAYS CHECK-IN FACILITIES
BARONESS BURTON OF COVENTRY: 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 will make a further Statement concerning check-in facilities in 1974 for travellers at the B.O.A.C. Air Terminal in Buckingham Palace Road and at the B.E.A. West London Air Terminal.
LORD DRUMALBYN: My Lords, as previously announced, check-in facilities will continue at B.O.A.C. Air Terminal in Buckingham Palace Road. I under-stand that the Group Managing Director of the British Airways Board has told the noble Baroness that the British Airways Board are making a study of the possibility of amalgamating the two terminals but that it will take some time to complete. In the circumstances I have nothing to add to what my noble friend Lord Ferrers and I have said in reply to the noble Baroness's previous Questions, but I hope to be able to make a further statement about consultation arrangements in reply to the noble Baroness's Question on Wednesday.
BARONESS BURTON OF COVENTRY: My Lords, one always lives in hope! May I ask the Minister whether he is aware that although I did not want them I have had two letters from the Group Managing Director of the British Airways Board since my last Question? Is he further aware that the two pages I received on Saturday referred to only half of my Question and not the half which the Managing Director did not wish to answer? May I amplify that by asking the Minister whether he is aware that the matter dealt with was the part-suggestion that the check-in facilities might be amalgamated at Buckingham Palace Road (where I gather there is not sufficient space), but no mention was made of the suggestion that they should be amalgamated where they are now at the West London Air Terminal, where there is plenty of space? Does the noble

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Lord think that the Group Managing Director could let me have an answer before Wednesday so that I can tell the noble Lord about it in the House?
LORD DRUMALBYN: My Lords, the Group Managing Director was kind enough to send me a copy of the letter to the noble Baroness and I took the same point that she has done. However, the fact that he has said that a study of the possibility of amalgamating the two terminals is being made indicates—because, as he has made plain, there is not sufficient accommodation at Buckingham Palace Road—that any such amalgamation could take place only at the West London Air Terminal. I hope, therefore, that the noble Baroness will be content to await the further reply that I hope to give her on Wednesday.
BARONESS BURTON OF COVENTRY: My Lords, the noble Lord will obviously miss these exchanges during the Recess. I am sure he will be glad about that. Is he aware that he takes a slightly more charitable view than I about West London Air Terminal not being mentioned? From his reply just now, may we hope that on Wednesday some comment will be made on the suggestion that these facilities should be amalgamated at the West London Air Terminal?
LORD DRUMALBYN: My Lords, to be perfectly frank, I am not certain that that would be in order on the Question that the noble Baroness has put down. The Question of the noble Baroness deals with consultation services and she will see clearly the implications of that.
LORD SHEPHERD: My Lords, would the noble Lord say whether the British Airways Board are having consultations with the airport authorities in the light of the severe congestion that there is at Heathrow and the complete inadequacy of the porter and trolley services, which has caused great hardship to families seeking to travel?
LORD DRUMALBYN: Yes, my Lords; I believe that that is so. Certain improvements are contemplated in the New Year.
LORD MAYBRAY-KING: My Lords, is the noble Lord aware that nobody in Britain, apart from the heads of British
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Airways, wishes the check-in facilities at the West London Air Terminal to be taken away, and that the campaign which the noble Baroness, Lady Burton, is carrying out has the support of all who use B.E.A.?
LORD DRUMALBYN: My Lords, I have been made keenly aware that in your Lordships' House many of your Lordships, if not all, are in sympathy with the wish for the retention of the check-in services. I should like to make it clear that the removal of the check-in services does not mean the removal of the bus service from the West London Air Terminal.
LORD BOOTHBY: My Lords, can the noble Lord tell us what is the point of amalgamating these two air terminals and making one, when the need is for live?
LORD DRUMALBYN: My Lords, I imagine that that is exactly the sort of question that the British Airways Board are looking into.
LORD DOUGLAS OF BARLOCH: My Lords, would the noble Lord consider what he said just now about the bus services continuing as before, even if the check-in facilities are withdrawn? What reason would anybody have to go by the bus services when it has already been announced that in those circumstances there is no guarantee that the bus service will deliver the passenger in time to get on the plane that he wishes to travel by? Is not the consequence of that that more and more individual traffic will be thrown on the road between London and the Airport and therefore the congestion upon that route will be enormously increased?
LORD DRUMALBYN: Well, my Lords, that of course is a factor, but the main reason for people using the bus services is in order to reach the Airport, and I am afraid that with the new arrangement it will be left to them to decide how much time to allow in order to get there.
BARONESS BURTON or COVENTRY: My Lords, is the Minister aware that, having been lulled into a sense of acquiescence, I really cannot put up with that reply?
SEVERAL NOBLE LORDS: Oh!
BARONESS BURTON OF COVENTRY: No, I mean it. And is he aware that people who use the bus service go there because their luggage has been checked in, they are guaranteed their plane and they have no further worry?
LORD DRUMALBYN: My Lords, these are just the kind of questions and the arguments on either side that will perhaps come under the kind of consultative arrangement that I hope to deal with on Wednesday.
LORD STRANGE: My Lords, would the noble Lord not agree that we are bewitched by the Common Market and we agree that everything they run is run better than we run things? Would he not further agree that we have only to land a few times in Brussels to realise that Cromwell Road is superior to anything that is in the Common Market?
LORD DRUMALBYN: My Lords, I am obliged to the noble Lord for that compliment to Cromwell Road, which I am quite certain will be much welcomed by British European Airways. He has in his question made the point that it is unique so far as European services are concerned.
BARONESS ELLES: My Lords, may I remind the noble Lord that those of us who use all the Common Market airports—
SEVERAL NOBLE LORDS: Question!

INDONESIA: DEFENCE SECRETARY'S VISIT
2.52 p.m.
LORD AVEBURY: 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 Secretary of State for Defence, during, his visit to Indonesia in April, publicly commended the Government of that country on their rapid achievement on domestic security.
THE SECRETARY or STATE FOR DEFENCE (LORD CARRINGTON): My Lords, I made no comment on domestic security in Indonesia during my visit to that country, which was in February.
LORD AVEBURY: My Lords, is the noble Lord aware that he was reported as having made the comment on these lines in The Times and I believe in several other newspapers as well; that those remarks were promulgated by a news agency in Indonesia, and that, so far as I am aware, no attempt was made by the Press officer at the Ministry of Defence to deny them? But, in any case, does the noble Lord not agree that it would be inappropriate to make remarks commending the Government of Indonesia on the attainment of domestic security at a time when there are no fewer than 55,000 people in detention in that country without trial, many of them having been in detention for as long as eight years, since the coup of 1965? And, since Indonesia is the country which receives the largest amount of British aid outside the Commonwealth does he not consider that it would be appropriate to make representations to the Government of that country that they should either bring people to trial within a reasonable period of time or release them to join their friends and families in the community?
LORD CARRINGTON: My Lords, it is awfully difficult to deny, to recant on a statement one did not make, but I have exactly the words that I used. I said I had been much impressed and in particular with the very evident resilience and economic progress of Indonesia. And if anybody had been, as I have been, in Indonesia during the days of President Soekarno he would have been very impressed with the economic progress and the resilience of Indonesia. With regard to the other question which the noble Lord asked me, it is perfectly true that there are a large number of people detained in Indonesia. I am told that the figure given by the Indonesian Government is 18,000, and the Indonesian Government are aware of Her Majesty's Government's views en that subject.
LORD CONESFORD: My Lords, do the Liberals believe everything they see in the papers?
LORD AVEBURY: My Lords, I do not think the noble Lord, Lord Carrington, has satisfactorily answered my question. May I repeat the first part of my question? Does he not think that when remarks are attributed to him in an

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authoritative newspaper such as The Times—
NOBLE LORDS: Oh!
LORD AVEBURY: Perhaps noble Lords opposite may choose to disbelieve what they read in The Times just at the moment because it does not suit them. But is the noble Lord not aware that this statement attributed to him on the rapid attainment of domestic security, not of economic progress, was also issued by a domestic Indonesian news agency during the course of his visit there? Does he not think that in the circumstances it would have been appropriate to correct those erroneous reports and say that what he was talking about was economic progress?
LORD CARRINGTON: My Lords, I must confess that, since I was in Indonesia, I did not see The Times and I do not suppose that my Department in London knew exactly what I had said. I do not know what The Times said that I had said, but if it said that I had said what the noble Lord said that I had said, I did not.

HARRIER AIRCRAFT: MARITIME VERSION
2.55 p.m.
LORD CARRINGTON: My Lords, may I have the leave of your Lordships to make a Statement about the progress that the Government have made in their consideration of the project for a maritime version of the Harrier aircraft.
The evaluation of the results of the project definititon studies has now been completed, with technically satisfactory results. There still remains, however, the question of the priority to be accorded to the project in comparison with other important projects which compete for Defence budget resources. The usual annual review of the forward Defence programme in relation to public expenditure as a whole is in progress, and meanwhile it would be premature to authorise full development of the aircraft. Pending a final decision, the present design effort work at the firm will continue to be supported.
LORD WINTER BOTTOM: My Lords, I am sure the whole House will thank the Secretary of State for his Statement on this very important project, and I am certain also that the House is glad to know that the project definition studies have shown that the project is technically satisfactory. However, may I ask three questions? First of all, is the cost of the maritime Harrier significantly higher than that of the standard Harrier as supplied to the Royal Air Force and the United States Marines? Secondly, two questions regarding the time scale. Are we likely to have some kind of indication as to the probability of the maritime Harrier's being put into production in the next Defence Estimates which we will receive in due course, and will the decision be reached in time to continue the production lines flowing without a break?
LORD CARRINGTON: My Lords, with regard to the cost of the aircraft, of course the main increase in cost will be the development work and the research which has been necessary to convert what was a ground attack fighter into an all-weather aircraft. Probably the version which the Navy will need will be a little more expensive because of the extra equipment which will be needed. But the cost has not risen from the earlier estimates which were given when we were considering this project. With regard to the time scale, I hope very much that I shall be able to announce the final decision within the next two or three months, and I anticipate that there will be no difficulty about the time scale.
LORD AVEBURY: My Lords, may I ask the noble Lord, hoping that my present question will not make him quite so angry as the previous one did, whether it is not correct that the Ministry of Defence has authorised the construction of a ship which would be suitable for the use of this maritime version of the Harrier, and what contingency plans have been made for other uses of that vessel if the development of the maritime version does not go ahead?
LORD CARRINGTON: My Lords, the ship was in point of fact not designed for the purpose of operating the maritime Harrier; it was designed for the purposes of anti-submarine warfare and operating Sea Kings, being a Command ship, and also helping in the air defence of the

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Fleet with the Sea Dart missile; and the use of the maritime Harrier would be an additional bonus. I hope very much that it may be possible to do this, but I think we must look at our priorities. I hope the noble Lord will never see me when I am amused.
LORD ORR-EWING: My Lords, would my noble friend say whether the success of the U.S. Marine Corps in operating the present Harrier and their continued interest in the developed Harrier continue; and has their interest been taken into account when considering the priorities which should be given to the future development of this aircraft? Is it not a fact that the most expensive portion of the development cost will be the uprating of the engine from the present rate to 24,000 lb. thrust? Further, has consideration been given to sharing the cost, perhaps with Pratt and Whitney, or some other interested person with whom production might also be shared at a later date?
LORD CARRINGTON: My Lords, my noble friend is now speaking about a different version of the aircraft. He is speaking about the Pegasus 15 version, which we are considering at the moment with our friends across the Atlantic. The Harrier has been most successful with the United States Marine Corps, but they are using it as a ground attack fighter and in that sense it is not strictly comparable with what we want for the Royal Navy; but I think there could be uses in the United States Navy and other navies for the maritime version.
LORD SHACKLETON: My Lords, as one who very much welcomes this Statement and who believes that the Harrier is a very remarkable aircraft, may I ask the noble Lord whether these trials have shown a fairly wide range of operation in terms of different types of ship? It has never occurred to me that it would be confined to the through-deck cruiser which, as the noble Lord pointed out, was not intended specifically for this purpose. Do the tests suggest that quite a range of different ships might be able to carry the Harrier, and could he say anything more about the export possibilities which in the past have been much underrated but which have been shown to be of very high potential?
LORD CARRINGTON: My Lords, with regard to the export possibilities, these are very much in the mind of the Government. We want to do everything we can to see that this aircraft is successfully exploited since it is the only VSTOL aircraft in service in the world. The tests we did were primarily to judge whether or not the aircraft could be used off the through-deck cruiser, and I am afraid I cannot say without notice whether or not those tests have shown whether the aircraft could be used off smaller ships, but I will certainly find out and let the noble Lord know.
LORD MERRIVALE: My Lords, can my noble friend say whether any of our Western European allies are interested in this aircraft? I know the noble Lord said that the export potential was not very great, but I wonder whether any interest has been shown?
LORD CARRINGTON: Not so far, my Lords; but there is to-morrow a large Royal Navy-Royal Air Force exercise in the Firth of Forth when I shall have the opportunity of talking to my opposite numbers in the NATO countries and I shall certainly bring the success of these trials to their attention.
LORD SLATER: My Lords, when does the noble Lord expect to be in a position to enlarge upon the possible estimate that will be involved in regard to this new form of development?
LORD CARRINGTON: My Lords, does the noble Lord mean a cost estimate?
LORD SLATER: Yes, my Lords.
LORD CARRINGTON: My Lords, at this stage I do not think it is ever customary to make an estimate of costs, but certainly it is within the limits that we thought it would be when we first launched the project.
LORD WINTERBOTTOM: My Lords, can the Secretary of State tell us whether this is an all-weather version and therefore that it could be used on land as well as at sea? And would not an all-weather version of the Harrier possibly be more interesting to the Swiss than the existing version because of the peculiar situation in which it would have to operate?
LORD CARRINGTON: My Lords, I think that again is something that one

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ought to look into, but of course there are penalties for turning the aircraft into an all-weather version and no doubt one would have to weigh those up to see which was the most suitable version.

GREATER LONDON COUNCIL (MONEY) BILL
Read 3ª, with the Amendments, and passed, and returned to the Commons.
TRENT RIVER AUTHORITY BILL
Read 3ª, with the Amendments, and passed, and returned to the Commons.

ZETLAND COUNTY COUNCIL BILL
3.5 p.m.
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, the Motion which stands in my name on the Order Paper results from a Motion agreed to in another place last week with which this House was acquainted by a Message on Thursday. Its purpose is simply to enable this Zetland County Council Bill to continue its passage through Parliament in the next Session. I beg to move.
Moved, That this House do concur with the Commons in their message of Thursday last, that they have made the following Orders relating to the Bill vizt.:—
That the Promoters of the Zetland County Council Bill shall have leave to suspend Proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further Proceedings and that all fees due on the Bill up to that date be paid.
That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House.
That there shall be deposited with the Bill a Declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill
1514
presented to this House in the present Session.
That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and shall be committed to the Chairman of Ways and Means, who shall make only such Amendments thereto as have been made by the Committee in the present Session, and shall report the Bill, as amended, to the House, forthwith, and the Bill, so amended, shall be ordered to lie upon the Table.
That no further Fees shall be charged in respect of any Proceedings on the Bill in respect of which Fees have already been incurred during the present Session.
That these Orders be Standing Orders of the House.—(The Earl of Listowel.
On Question, Motion agreed to.

BUSINESS OF THE HOUSE
THE LORD PRIVY SEAL (LORD WINDLESHAM): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That leave be given to the Lord Polwarth to advance the Report stage of the Local Government (Scotland) Bill from Tuesday the 16th to Monday the 15th of October next.—(Lord Windlesham.)
On Question, Motion agreed to.

DUNDEE CORPORATION (BROKERS &c.) ORDER CONFIRMATION BILL
Considered on Report.
Then, Standing Order No. 44 having been suspended (pursuant to the Resolution of July 12), Bill read 3ª, and passed.

INTERNATIONAL COCOA AGREEMENT BILL
3.7 p.m.
EARL FERRERS: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3ª.—(Earl Ferrers.)
LORD HOY: My Lords, I want to raise one specific question on this Bill because, while it has had the complete agreement of the whole House, in the course of its proceedings certain things have happened with regard to cocoa and I am sure your Lordships will want some assurance from the Minister. We are all agreed on the purpose of this Bill, which is in fact to give a reasonable standard of living to those who produce cocoa and at the same time to sell at prices which are reasonable to the consumer. But while we all agree on this, in between the various stages we were faced with a new situation in the City, where apparently people gambled to a large extent on this commodity. I am sure your Lordships would not like to think that the purpose of this Bill might in fact be defeated because of these particular deals which resulted in losses amounting to no less than £20 million. I am certain that the larger firm concerned will want to take steps to see that they are not landed in that mess again, but what I should like to have from the noble Earl, Lord Ferrers, is an assurance that this sort of thing will not be allowed to interfere with the purpose of this Bill, which has met with the unanimous agreement of your Lordships' House.
EARL FERRERS: My Lords, I think I can give the noble Lord the assurance that he requires in regard to this matter. The purpose of this Bill is to try to help to put a degree of reasonableness into the bottom of the cocoa market and in so doing to enable developing countries to try to increase their production in line with the increasing demands of cocoa. Of course the noble Lord, Lord Hoy, is quite right in saying that there have been two particular matters which have been of great concern in regard to cocoa. I think it would be wrong to suggest that these particular dealings have an effect upon the Bill which is before your Lordships at the moment.
The conduct of the terminal market in cocoa is the responsibility of the London Cocoa Terminal Market Association, who have regulated its operations successfully for many years. The Association is not, of course, responsible for the trading policy of the two companies recently in-
1516
volved in losses, and these losses have been borne entirely by the two companies themselves. The International Commodities Clearing House Limited, which operates within rules agreed with the Association, took steps some weeks ago to deal with the exceptional market situation resulting from the current world use of cocoa. This action took the form of doubling the deposits required. In addition, in the light of recent events, the Association is keeping a close watch on the operation of the market. The noble Lord, Lord Hoy, said there was speculation as a result of this. It is true that there has been, and always is, some element of speculation in commodity markets. I suggest to the noble Lord that they could not manage effectively without it. But it is important that the speculation should not get out of hand, and to this end the Bank of England keeps a close watch on all major commodity markets. I assure the noble Lord there is no evidence that the cocoa market itself has been disturbed or distorted by speculation.
My Lords, the major factor in the cocoa market to-day is the relative shortage of cocoa, with production in the current year estimated to be a record of 200,000 tons, or some 13½ per cent. below the estimated demand. The companies that have been involved in this particular transaction have themselves been responsible for the losses, and this has not upset the cocoa market itself. I hope that the House will approve this Bill, which is a distinct effort and a distinct move forward which has taken some 15 years to come to fruition, in order to try and put some form of regulation and bottom into an otherwise oscillating market.
On Question, Bill read 3ª, and passed.

STATUTE LAW REVISION (NORTHERN IRELAND) BILL [H.L.]
3.12 p.m.
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLEBONE): My Lords, I beg to move that the Order of Recommitment be discharged. Before the House is asked to come to a decision I would remind the House that this is a Statute Law Revision Bill and that it is confined to the repeal of 235 obsolete,

1517
spent, unnecessary or superseded enactments, or parts of enactments. The Joint Committee has sat on the Bill and made two small amendments of a technical character in the Schedule and reported there was no point to which the attention of Parliament should be drawn. I understand no further Amendments have been set down, and no noble Lord has indicated a wish to move a manuscript Amendment or to speak in Committee. Unless any noble Lord objects, I beg to move that the Order of Recommitment be discharged.
Moved, That the Order of Recommitment be discharged—[The Lord Chancellor.)
On Question, Motion agreed to.
Then, Standing Order No. 44 having been suspended (pursuant to the Resolution of July 12), Bill read 3ª, and passed, and sent to the Commons.

NORTHERN IRELAND (EMERGENCY PROVISIONS) BILL
3.14 p.m.
THE LORD CHANCELLOR: My Lords, I rise to move that this Bill be now read a third time, First of all, may I apologise both to the House and to the noble and learned Lord, Lord Gardiner, who speaks for the Opposition on this matter, as I very nearly deprived him of his chance to raise his Amendment again. This was not due to any excess of original sin on my part, but to a mal entendu of which I think he is probably aware. I will not therefore talk about the Amendment which is going to be moved in a moment, if the House gives the Bill its Third Reading, but I must deal with the two points I promised to deal with on Committee stage, the point of the noble and learned Lord, Lord Stow Hill and the noble Lord, Lord Shepherd.
The noble and learned Lord, Lord Stow Hill, asked what the position of a defendant would be if a count for a nonscheduled offence was included in an indictment for a scheduled offence and then disregarded by the court by virtue of Clause 2 subsection (3) of the Bill. I should like to explain shortly again why this subsection is drafted in the way it is. It makes clear first of all that there is no purpose in including a non-scheduled count in an indictment for a scheduled
1518
offence, since to do so would simply oblige the court to disregard the nonscheduled count. It would therefore be a mistake if, as the noble Lord suggested, a non-scheduled count were included in an indictment of this kind. In Northern Ireland prosecutions for these serious offences are, in practice, instituted by the Director of Public Prosecutions; that is, of course, the Director of Public Prosecutions for Northern Ireland. The House may well conclude that it would be most unlikely for the Director to make a mistake and include in an indictment for a scheduled offence a count for a non-scheduled offence. If, none the less, he did make that mistake, it would be equally unlikely that the Director would be so bold thereafter as to proceed against the defendant separately for the non-scheduled offence.
The reason why the subsection is drafted in the way it is is to ensure that if, in error, a non-scheduled count is included in the indictment for a scheduled offence, the validity of the indictment itself should not be called in question on that score. The drafting achieves this by providing simply that in that event the non-scheduled count should be disregarded. Although I think it accurately set forth the intention of the Government in the Committee stage, perhaps I should add this, since my recollection is that the words that I used might not have made clear a rather sophisticated point which I am now about to disclose to the noble Lord and to the House
Let us imagine an entirely imaginary case. Suppose that a man takes and drives away a motor vehicle without the consent of the owner, and subsequently uses it to commit a serious offence such as the planting of a bomb or an indiscriminate shooting attack. He would then, of course, subsequently be charged with the explosives or firearms offence, both of which are scheduled under Schedule 4 to the Bill. Because of Clause 2 subsection (3) no count for the offence of taking and driving away a motor vehicle would then be included in the indictment, although there would, of course, be evidence to justify prosecution for such an offence. If the defendant were thereafter acquitted of the explosives or firearms offence, I could not undertake on behalf of the Northern Ireland authorities that he

1519
would not subsequently be prosecuted for driving and taking away a motor vehicle without the consent of the owner, and if I did convey that impression on Committee I certainly should have been misleading the Committee, but I do not think any body at the time was considering that kind of possibility. I hope the noble Lord will feel that I have dealt with his point satisfactorily. At any rate, I have taken the trouble to find out the answer to his question.
The second point was raised by the noble Lord, Lord Shepherd, when he asked on Committee stage why the age limit of 14 had been provided for in the clause dealing with restrictions on bail, Clause 3 subsection (5). I think I can tell the House that in practice, although children under 14 may become involved in disorders in Northern Ireland, as alas! we all know from evidence on our television screens, it is most unusual for anyone so young to be charged with the very serious offences listed in Schedule 4 to the Bill. This indeed was the conclusion of the Diplock Commission, which pointed out in Chapter 9 of their Report (and particularly in paragraph 104) that it was boys aged 14 to 16 who were used to carry out serious acts of terrorism. The Government have no wish for the provisions of the Bill to extend more widely than is strictly required by the situation. The restrictions on bail, therefore, do not extend to children aged under 14. I was grateful to the noble Lord for raising the point that it might encourage the I.R.A. to use such young children more than they do already, but I doubt whether this is sufficient reason for increasing now the possibility that children under 14 would be remanded in custody, and I did in fact give to the noble Lord that reason when he asked me on Committee.
Lastly the noble Lord, Lord Brockway, said that if an Order were made under the urgency procedure provided for under Clause 29 (3), the fact that it had been made ought to be announced and the House should be able to debate it. Subsection (4) of the clause indeed requires that any Order made under the urgency procedure should be laid before Parliament after being made and must be approved by both Houses of Parliament within 40 days for it to continue in effect.
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It is necessary for the subsection to provide that if Parliament does not approve such an Order anything done under it before that date shall not be affected, because otherwise there would be no point in having a procedure for urgent cases. Things done under the Order before it was dealt with in Parliament must not be capable of being challenged as to their legality if the Order then fails to win Parliamentary approval. I thought at the Committee stage that it was clear, but I now confirm that it is clear that despite the urgency procedure the Order must get Parliamentary approval within 40 days. With that I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3ª.—(The Lord Chancellor.)
LORD STOW HILL: My Lords, I rise only to thank the noble and learned Lord for the explanation he has given of the point I raised. It makes the matter perfectly clear to me, and I am grateful to him.
On Question, Bill read 3ª, with the Amendments.
Schedule 1 [Detention of terrorists]:
3.32 p.m.
LORD GARDINER LORD GARDINER moved the following Amendment:
Page 25, line 11, at end insert ("but with a right to appeal within twenty-one days of his recall to the Tribunal referred to in Part III of this Schedule against his recall.")
The noble and learned Lord said: My Lords, at the Committee stage of the Bill I moved an Amendment with two objects. The first was to provide that if a man against whom a detention order had been made had been released by the Secretary of State, either on conditions or without conditions, and was then recalled, he should have a right of appeal to the appeal tribunal. Secondly, that if he had not already appealed to the tribunal against the detention order he should have the same right of appeal as if the detention order had been made on the date of his recall. On the second part of the Amendment, I naturally accepted an undertaking that the noble and learned Lord, the Lord Chancellor, gave on behalf of the Secretary of State, and therefore I was unable to press the Amendment to a Division, but intimated that I would return to it at a later stage

1521
of the Bill. By what I of course accept was a mere misunderstanding, we proceeded to the Report stage, and therefore I take it that there is no objection to my moving this Amendment on Third Reading instead of on Report.
The point is a relatively simple one. I agree with my noble friend Lord Brockway that trial by jury is one of the pillars of civil liberties in this country. On the other hand, as I have said throughout, I am persuaded by the Diplock Report that there are classes of cases in which this is simply not practicable in the conditions which exist in Northern Ireland. What we have done in substance is to substitute for the executive decision on interment an executive detention, subject, however, to a right of appeal to an appeal tribunal. The basic reason, I apprehend, for giving that right of appeal to an appeal tribunal is that the basic civil liberty of all is the difference between being free and being put in prison when it has not been proved that you have committed a criminal offence. Broadly speaking, I am in agreement with the somewhat stringent views of the Diplock Commission in these matters, having regard to the position which actually exists in Northern Ireland.
But there is a separate case which will now arise for the first time, which has not arisen before, in which a man who is free is suddenly put in prison. This derives from the provision contained in paragraph 36 of Schedule 1 to the Bill, that if a man is detained under a detention order the Secretary of State may release him, with or without conditions, and may subsequently recall him. At the time of his recall he is living in freedom. He is now put into prison. I cannot see why he is not to have an opportunity of going to the appeal tribunal. I agree that we do not find it, on either side, too easy to envisage exactly what the circumstances will be. This is, of course, because no such order has yet been made. I have had particularly in mind the cases in which the Secretary of State may release a man on conditions. He may then be informed by information, which may be accurate or inaccurate, that the man has broken his conditions, and therefore he recalls him. But there are many people with grudges to pay off in Northern Ireland, on one side or the other, and it would seem in no way incon-
1522
sistent with the main purpose of the Bill that a man so recalled should have some opportunity before some sort of body of proving that he was not in fact in breach of his conditions.
When I raised this point at the Committee stage the noble and learned Lord the Lord Chancellor said:
"What the noble and learned Lord seeks to do is to interpose the commissioner again in order to determine the question of fact as to whether the breach had taken place. This, I think, is the purpose of the Amendment."— [OFFICIAL REPORT, 19/7/73, col. 1457.]
As I pointed out in reply, I had not suggested that the matter should go to the commissioner. That suggestion was made in the other place, but the Secretary of State thought that that was not the appropriate body to which it should be referred. The superior body is the appeal tribunal, primarily a body of lawyers, and therefore not, I hope, in any way reflecting on the position of the Secretary of State, because the Bill does provide, when a detention order is made, for appeals to this appeal tribunal. There ought, I think, to be some body to whom a person who is recalled from freedom can go. As I have said, it is a short point. I may be wrong, but I thought the noble and learned Lord the Lord Chancellor was somewhat sympathetic to it, but found himself somewhat bound by the views of the Secretary of State. I hope the Secretary of State may have had the opportunity to consider the point further since the Committee stage of the Bill, because I cannot see what possible harm this Amendment would do to anyone. I beg to move.
THE LORD CHANCELLOR: My Lords, I did, of course refer this point back to my right honourable friend, but he still does not feel able to give the noble and learned Lord comfort in this matter. I think there is a point of principle involved; indeed, it is probably the point of principle that I understand and the point of practice that I do not understand quite so well. As emerged on Committee, we are really talking about a very refined point as well as a short one, and one which requires a certain amount of elucidation, although the noble and learned Lord has made the case plain from his own point of view. The point which emerges is this. The Secretary of State has only a very limited right under the Bill to put a person inside without

1523
trial, and that is limited by time to, I think, 28 days. The next stage in his confinement will be when his case comes up, as it must, in front of the commissioner provided for by the Bill, and the Commissioner will say whether or not he is to stay inside.
The criteria which the Secretary of State must apply to the original detention for 28 days and the commissioner must apply to the permanent detention confirming the Secretary of State's view in the matter (if he does confirm it), is, first, whether or not the proposed detainee has been concerned with terrorism, and secondly that his detention would be necessary in order to protect the public. Those are the two conditions in the Bill which have to be satisfied, in the first place by the Secretary of State and in the second by the commissioner.
If the commissioner decides against the detainee and he then has to stay inside, he still has several chances, but an immediate chance is to go to the Appeal Tribunal, which is the Appeal Tribunal here in Part III composed by Sir Gordon Willmer and two English Q.Cs, and which either confirms or rejects the commissioner's report. They apply the same criteria. I think that I was told that something like a quarter of the cases which actually go to the Tribunal on appeal—that is to say, not a quarter of the cases which are decided but a quarter of the number who take the trouble to make the appeal, which they have to do within 21 days—are actually allowed, so it is no mere formality by any means.
Having gone to the Appeal Tribunal the man has to stay inside, but with three further qualifications. The first qualification is that if the Secretary of State feels any qualms about the case at any time he can refer it again to the commissioner; that is to say, if new evidence comes to him, or he feels that the man may have changed his outlook on life, he can refer the case against to the commissioner at any time; and he must do so at the end of a year, and after that year he has to do so every six months.
This Amendment only arises if none of those things happen. What we must postulate for this purpose is that the Secretary of State has decided first that the proposed detainee is a terrorist, and
1524
secondly that his detention is necessary for the protection of the public, and that the Commissioner has decided to the same effect, and then that either the Appeal Tribunal has decided to the same effect or the man has not exercised his right of appeal. Under the Bill the Secretary of State can allow a man out on condition, and it is only to that situation that the Amendment applies. As the noble and learned Lord told the House, and I told the Committee, this is a power which has never yet been exercised, so that to some extent one is speculating as to the kind of situation in which could be envisaged what the noble and learned Lord has in mind. The only case that I have been given in which there is any probability of the conditional release taking place—although, of course, the words of the Statute are perfectly general —would be if the man concerned gave an undertaking, which was believed, that he would leave the Province altogether either to go abroad or to work in other parts of the United Kingdom where it was thought no longer necessary that he should be detained in the interests of the public.
The noble and learned Lord said—and this is the nub of his Amendment—supposing he is released on condition and then recalled by the Secretary of State (as the clause provides that the Secretary of State may do if he thinks that the condition has been broken), he should have a further right of appeal to the Appeal Tribunal even if he has not exercised his right of appeal in the first place during the first 21 days. If the Amendment is accepted, he can apply within 21 days to the Appeal Tribunal. What he may then refer to the Appeal Tribunal is a question as to whether or not in fact the condition has been broken. In other words, supposing he says, "True, you released me on conditions, and true you have recalled me on the basis that the conditions have been broken. I deny that they have been broken, and therefore I want to appeal to the Tribunal to challenge whether you are right in saying that they have been broken."
As I say, that is a rather sophisticated point, because if the condition—and it is the only condition which has been put before me, and therefore it is the only condition that I have been able to put before the House—were that he had

1525
promised to leave the Province and he had not, and had promised to get employment either abroad or in another part of the United Kingdom and had not, I do not think that it is likely that this could ever become a disputed question of fact, because the Secretary of State could only recall him if he was still in the Province, as that is the only way that he could put his finger on him. It is a somewhat unreal point but I would put it in this way, as I ventured to put it before the Committee—and I think that there is a question of principle involved—that you are foreseeing the case here where the Secretary of State, the Commissioner, and, I would say, by implication or actually the Appeal Tribunal, have already decided that the man is a terrorist and ought to be inside. The view which the Secretary of State still adheres to after having studied the Report of this House is that there is a reason of principle why the Secretary of State's recall, at that stage, after the decision has been made not once but twice (and perhaps not twice but three times), that the man was a terrorist and his detention was necessary for the protection of the public, should be an executive act and not a judicial one. The noble and learned Lord has moved his Amendment with his customary moderation, and I hope that I have replied in the same way; and I kept my bargain that the matter should be referred back, but I am afraid that on behalf of the Government I cannot accept the Amendment.
LORD GARDINER: My Lords, I am sorry to hear what the noble and learned Lord the Lord Chancellor says. Obviously this new power of release and then recall
must have been put in with the intention of using it at some time or other. I quite accept that this is likely to arise at a later stage. A detention order is made, and a man may appeal to the Appeal Tribunal, which may uphold the order. A time then passes, and maybe quite a long time, and the moment arrives when the Secretary of State decides that it is now safe to release the man, either with or without conditions. Obviously, he must have some good reason for doing that. Equally obviously, the man is not going to be recalled unless something has happened since his release which leads the Secretary of State to change his mind. I suppose that normally this would be a breach of conditions. One can well imagine a case in which the Secretary of State may make art order for release provided that the man does not enter Belfast, or with some such proviso.
It cannot be right in principle that, while a right of appeal is given to a man who is first put into prison, here, where the effect of the recall is to take a man who is at liberty and put him in prison again because of something he has done since the date of his release, or something that the Secretary of State believes he has done, the matter should not be subject to exactly the same super-vision by the Appeal Tribunal as the Secretary of State accepts in the case of the original detention order. For those reasons, I respectfully ask the House to determine this point.
3.40 p.m.
On Question, Whether the said Amendment shall be agreed to?
Their Lordships divided: Contents, 64; Not-Contents, 65.

CONTENTS

Airedale, L.

Champion, L.

Hacking, L.

Amherst, E.

Chorley, L.

Henderson, L.

Amulree, L.

Clwyd, L.

Hoy, L. [Teller.]

Archibald, L.

Collison, L.

Jacques, L.

Arwyn, L.

Crook, L.

Janner, L.

Avebury, L.

Diamond, L.

Kennet, L.

Bernstein, L.

Donaldson of Kingsbridge, L.

Kilbracken, L.

Beswick, L.

Douglas of Barloch, L.

Leatherland, L.

Birk, B.

Douglass of Cleveland, L.

Loudoun, C.

Boothby, L.

Evans of Hungershall, L.

McLeavy, L.

Brayley, L.

Faringdon, L.

Ogmore, L.

Brockway, L.

Fiske, L.

Pargiter, L.

Brown, L.

Gaitskell, B.

Peddie, L.

Buckinghamshire, E.

Gardmer, L.

Piatt, L.

Burton of Coventry, B.

Gamsworthy, L.

Royle, L.

Camoys, L.

Geddes of Epsom, L.

Sainsbury, L.

Samuel, V.

Stow Hill, L.

Williamson, L.

Shackleton, L.

Strabolgi, L. [Teller.]

Wootton of Abinger, B.

Shepherd, L.

Summerskill, B.

Wright of Ashton under Lyne, L.

Shinwell, L.

Taylor of Mansfield, L.

Slater, L.

Wade, L.

Wynne-Jones, L.

Somers, L.

White, B.

NOT-CONTENTS

Aberdare, L.

Erskine of Rerrick, L.

Nugent of Guildford, L.

Alport, L.

Ferrers, E.

O'Neill of the Maine, L.

Amory, V.

Fraser of Lonsdale, L.

Porritt, L.

Arran, E.

Goschen, V.

Ruthven of Freeland, Ly.

Atholl, D.

Greenway, L.

St. Aldwyn, E. [Teller.]

Balfour, E.

Grenfell, L.

St. Helens, L.

Belhaven and Stenton, L.

Grimston of Westbury, L.

Saint Oswald, L.

Belstead, L.

Hailsham of Saint Marylebone, L. (L. Chancellor.)

Sandford, L.

Brooke of Cumnor, L.

Sempill, Ly.

Brooke of Ystradfellte, B.

Hylton-Foster, B.

Shannon, E.

Cole, L.

Inchyra, L.

Strange, L.

Conesford, L.

Lauderdale, E.

Strathcarron, L.

Craigavon, V.

Leicester, Bp.

Strathclyde, L.

Crathorne, L.

Limerick, E.

Strathcona and Mount Royal, L.

Daventry, V.

Long, V.

de Clifford, L.

Lothian, M.

Strathspey, L.

Denham, L. [Teller.]

Mar, E.

Sudeley, L.

Derwent, L.

Merrivale, L.

Tenby, V.

Drumalbyn, L.

Milverton, L.

Tweedsmuir, L.

Ebbisham, L.

Monck, V.

Tweedsmuir of Belhelvie, B.

Effingham, E.

Mowbray and Stourton, L.

Vivian, L.

Elles, B.

Northchurch, B.

Windlesham, L. (L. Privy Seal.)

Ely, Bp.

On Question, Motion agreed to.

3.48 p.m.
THE LORD CHANCELLOR: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.—(The Lord Chancellor.)
LORD KILBRACKEN: My Lords, on a point of order. The noble and learned Lord announced the result of the voting but he did not say that the Not-Contents had it.
THE LORD CHANCELLOR: I think the noble Lord is entirely wrong—I did say that the Not-Contents had it, and so they did.
LORD BROCKWAY: My Lords, with the permission of the House I should like to make a personal reference. During the Committee stage I used words which seemed to impugn that the noble and learned Lord the Lord Chancellor was insincere. I ought not to have used those words. I have expressed regret to him and I should like to express regret to the whole House.
My Lords, the noble and learned Lord the Lord Chancellor has made reference
1528
to a point which I raised during the Committee stage. It was on Clause 29 which gave the Secretary of State power by reason of urgency to make an order or regulation without the draft being approved by the two Houses of Parliament, and during the Committee stage I suggested that such an order or regulation should be announced to both Houses of Parliament on the date it was made and that immediately afterwards there should be a debate in either House which would confirm it. I urged that this was particularly important because acts done before the approval are permitted under subsection (4). The noble and learned Lord made reference to this point in his speech to-day. I would continue to urge its importance and, though there is no Amendment before the House, I will ask the Government to give us an indication, in these exceptional circumstances, not only that the Order should be before the House for 40 days, which is quite a long period, but that the House should be given an opportunity to come to a decision about it immediately.
I do not propose to follow the example, given early last week on the Constitutional Bill, to deliver a Second Reading speech. I was not present at the Second Reading but I appreciate that that is undesirable.

1529
I want only to raise one consideration which has been very much in my mind over the weekend as, oppressed by the situation in Northern Ireland as we must all be, we are seeking means by which violence can be lessened and harmony can be developed. In the situation in Northern Ireland there is just a faint streak of blue in the sky of clouds, in the fact that, quite clearly, there is a reaction among the Catholic community against the violence of the I.R.A. This was indicated in the elections to the National Assembly, and it has been indicated in many incidents in Belfast where Catholic opposition to the violence of the I.R.A. has been expressed. This is the first reason for some hope as one looks at the situation in Northern Ireland.
The second reason for hope is that there has now been an acceptance of cooperation in the new National Assembly, both by the official Unionist Party and by the Social Democratic and Labour Party. But one must appreciate that, while there has been that acceptance in principle, there are still serious differences and there is a great danger that that co-operation may not take place. In considering the Committee stage of this Bill over the weekend, I have conic to the conclusion that its enactment at this moment is a very great danger to the development of an end of violence and to harmony in Northern Ireland. I believe that the enactment of this Bill at this moment will prejudice the co-operation in the National Assembly, which is the great hope of any solution of the problem in Northern Ireland. While it is probably too late to urge that the enactment should be postponed in order that an opportunity to end the violence and to bring harmony might be given, I should like to urge upon Her Majesty's Government, with all the depth of sincerity that I can command, that even though this Bill be adopted to-day there should be the greatest caution in its application, and that it should be regarded as something in the background which should not be immediately, and perhaps unnecessarily, applied, because that would make the possibility of improving the situation in Northern Ireland more difficult. I regret this Bill, and I hope that Her Majesty's Govern-
1530
ment will be very cautious in the way that they apply it.
3.56 p.m.
LORD KILBRACKEN: My Lords, in the course of the weekend my thoughts have been running in very similar channels to those of my noble friend who has just sat down, and I cannot allow-this Bill to become law—as I am afraid it is bound to do—without adding my own words of opposition to those which he has already expressed. I feel this opposition because, if I may paraphrase the words of my honourable friend Mr. Fitt in another place, it is a violent contradiction of every idea of making politics work in Northern Ireland. I believe that these diminutions of normal democratic principles will tend to increase rather than to diminish violence as the days go by, and this Bill fails to show a true understanding of the Northern Ireland tragedy and of the Northern Ireland people. It has been widely agreed—and I have expressed my agreement—that the jury system may be impossible in the Six Counties to-day. But what a condemnation that is of Government attitudes and of Government policies over fifty years or over three hundred years, whichever you choose! If there can be no juries, surely the suggestion of my noble and learned friend Lord Gardiner could have been considered, that there should be three judges or a judge and two assessors. But my proposal, that the British Bar should be called upon to supplement those so as to make that suggestion possible, was not even replied to.
I think that my most specific objection is to the Government's refusal to accept the Amendment moved by my noble and learned friend Lord Gardiner and by the noble and learned Lord, Lord Stow Hill, to what I would call the torture clause. The methods used to extract information, which were subsequently found illegal, were then enumerated but there were questions which have not been asked and questions which have not been answered. No one has inquired why those methods for obtaining information were ever used in the first place. On whose orders were they employed and who, if anyone, has been punished for using them? Secondly, it does not seem to have been realised that those methods were used not only to

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extract confessions from those who were being tortured, but to extract information in general about the organisation of the Irish Republican Army. Therefore they are not in any way affected by the bar on them which is implied in Clause 6(2).
The methods that were employed are now generally admitted to have Seen illegal. That is the opinion stated by my noble and learned friend, and lie can imagine the gratitude that is felt for the strength and reasonableness with which he expressed that opinion, which resulted in the supposed abandonment of those methods. How sure can we be that they are not being used? The noble and learned Lord the Lord Chancellor said at the Committee stage that no one had suggested this; but my noble and learned friend Lord Gardiner had told us how he had received allegations that they were being used. Of course, he went on to add that he could not say whether the allegations were true or not. The noble and learned Lord the Lord Chancellor had himself implied, though it might have been through a slip of the tongue and I do not want to make it a debating point, that they might still be used when he said that if we wanted to stop the practices which fall short of the convention we must do it by the ordinary processes of the law. If he speaks of "wanting" to stop the practices ", surely it must be possible to infer that they still exist.
Finally, I want your Lordships to consider what are the implications of the Lord Chancellor's statement that the effect of passing my noble friend's Amendment would be to increase the number of people who would be imprisoned without trial. The Amendment in question merely had the effect of substituting "severe and prolonged pressure" et cetera for "torture or inhumane or degrading treatment". The only implication I can make of the Lord Chancellor's remark is that the only possible way to bring some cases to court as opposed to the Commissioner is by using "severe and prolonged pressure".
My final objection, my final disappointment in this Bill, was that the Government were unwilling to include what I will call the extreme loyalist
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organisations other than the U.V.F. in the list of proscribed organisations. I do not intend (it would be inappropriate now) to go again into the details, but it seems to me to discredit the Government's avowd aim of showing impartiality —and the right honourable gentlemen the Secretary of State is, I believe, an impartial person who commands great respect among many people in Ireland, North and South of the Border. But how can that position of impartiality be maintained if an organisation such as Fianna na hEireann, the Catholic version of the Boy Scouts, with the undertones of Republicanism that there are bound to be in such a community, is on the proscribed list, while an organisation of murderers and thugs—and they are an organisation—such as the Ulster Freedom Fighters and the members of that organisation are perfectly legal?
My Lords, those are the most important of my objections to what I can only describe as a loathsome piece of legislation. At the Committee stage I was one in a minority of four who voted for the Amendment. If I were to divide the House to-day I suppose that I should be in a minority of one. Proud though I should be to be that one, I do not intend to divide; but from the bottom of my heart I wish that this Bill had never come before this House.
4.6 p.m.
THE LORD CHANCELLOR: My Lords, may I say this to the noble Lord, Lord Brockway, to deal with his speech first? In the first place, I am grateful to him for what he said at the outset of his remarks. I think that in politics one learns not to bear malice after the event. I can assure him that I accept what he said in the spirit in which it was offered and even if he had not said it I should have borne no malice after the event.
Dealing with the points that were made seriatim, first I must point out to him that I said on the Third Reading some little time ago that if an urgent order is made because it is urgent, Parliamentary approval is none the less required under the Bill under Clause 29(4). The reason why, presumably, an order has to be made under that procedure without the prior approval of Parliament is that an order has to be made quickly and Parliamentary time cannot be found on the same day. Whether it might not present insuperable

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difficulties in this House, I do not know. It obviously might be difficult here to provide a debate on the same day, but it would certainly provide—and no one knows this better than the noble Lord, Lord Brockway—very considerable difficulties in another place. They have a procedure there, quite independent of those provided by the Bill, of staging an urgent debate if debating the matter is urgent. Whether it would apply in that place to any order made under the existing Bill I canot say; but the complete safeguard is provided by Clause 29(4) and I cannot really offer any hope of anything more being given.
The remainder of Lord Brockway's speech was a plea that the Government should be cautious in applying the Bill. I am not sure what he meant by that because Clause 30 clearly says that it must come into force within two weeks of its passage into law. He should be under no illusions that that is what the Bill says and at this stage it will pass into law in that form. On Committee stage I took a great deal of trouble, as I did on Second Reading, to point out that what made it so urgent that it should come into law was that jury trials for murder and other crimes of violence only less serious than murder have now broken down in the Province. I explained the figures, I quoted from a Report. The Report is, broadly speaking, that if you get a Protestant jury it will undoubtedly convict a Roman Catholic but not a Protestant; if you get a Roman Catholic jury it will undoubtedly convict a Protestant but not a Roman Catholic; and if you get a mixed jury they will not agree. I do not see the point of a jury trial if a situation like that can be and has been created.
I do not see that there can be any justification, quite alone from the actual terms of the Bill, for demanding some kind of postponement; and in the Bill there is very little room for non-application by Executive action apart from my own feelings that I do not myself much care for legislation which leaves it to the Government of the day to decide whether or not to operate it. I have in the past been twitted from the Liberal Benches for allowing too much room for discretion in the Government of the day as to whether they apply Bills which are passed by Parliament. So I wish that I
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could give a more sympathetic reply to the noble Lord, Lord Brockway, but I cannot.
I was glad that he said he saw a little blue sky—perhaps he sees things slightly more optimistically than some of us. He accepts what I believe to be the case that in the Roman Catholic community there has been a reaction against violence and there has been an acceptance of cooperation by both the Unionists and by the Social and Democratic Labour Party. I should like to repeat in that connection what I think I have said in this House before; and if I have not said it before in this context I say it now. The French have a very useful proverb which ought to be studied, I think, by both communities in Northern Ireland. It is: "The absent are always wrong". What we demand from both communities is unqualified co-operation with the plans which we have for making life tolerable for them and their children. To stand out for unreasonable conditions on either side, or conditions which they know perfectly well will lead only to secession by the other side, is to ensure that life for them and their children will be intolerable, and perhaps intolerable for us as well.
The noble Lord spoke of this patch of blue sky. I was always taught when I was very young that it had to be large enough to make a pair of trousers for a seaman before you could really trust it as an augury of good weather. The noble Lord did not go so far as to say that the necessary trousers would be made by the patch of blue sky that he sees. I would say to him that we in this country, and indeed in Ireland, have a climate which leads us to be cautious about not taking out an umbrella or a mackintosh just when we see a patch of blue sky. We may not want to use the umbrella or to wear the mackintosh, but I think we should be foolish not to take it out in the weather conditions which we have been having in Northern Ireland now for some five or six years.
My Lords, I very much regret the speech of the noble Lord, Lord Kilbracken. I do, I must say, wish to say one or two rather firm things to him. In the first place, he went so far as to say that he acknowledged the necessity for doing away with jury trials at the moment. That, I think, is the principal

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provision of this Bill. Why therefore should he, having said that, say he would wish to be in a minority of one voting against it? I must remind the noble Lord again that it was he who, before this Bill, on the only previous occasion when he has spoken about the Administration of Northern Ireland, reproached me with a perverse acquittal by a jury of a Protestant who was undoubtedly guilty of an offence. And when I told him that the Government cannot do anything about perverse acquittals, because the law of the land implies that, when a jury has acquitted a man, he goes free, he did not seem to take the point, or what it meant. Now the Government have introduced legislation which would have the effect of preventing that kind of thing; and I should have thought that we should have been entitled, even from the noble Lord, to a little more generosity and courtesy than he has given us on this occasion, when we have done the very thing that would have achieved what he wanted.
LORD KILBRACKEN: My Lords, may I interrupt the noble and learned Lord to say that I understood perfectly well the point he made a year ago. I said on Committee stage that I had perfectly well understood it. I acknowledged it again to-day; and I said again to-day, as he has just reported, that I regretted the necessity for the abolition of the jury system in Northern Ireland. I do not see why he has to keep telling the House about it.
THE LORD CHANCELLOR: My Lords, it is because the noble Lord said the things that he has just said that I have to keep reminding the House of the moral position which the noble Lord, Lord Kilbracken, has chosen to adopt—because he said it was the most loathsome piece of legislation, and because he said he would be willing to be the only one in the House to stand against it. That is why I have to remind the noble Lord of his attitude, and I shall do so again if need be.
Now, my Lords, I turn to the other point he made. Having said that he acknowledged the necessity for doing away with jury trial, by implication, except for the point to which I shall come, he did not make much of a case either on Committee or now. On Second Reading, apparently, he had been
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suffering from the misfortunes which he found in hay-making. He did not make a case, but he said what a reproach it would be if jury trial has broken down after British administration, he thought, for 300 years. This is just the sort of thing which causes lives to be lost in Northern Ireland; when that kind of inflammatory remark is made. I wish people would realise that in relation to those unhappy Six Counties inflammatory remarks actually cause the shedding of blood. Our boys are fighting there for peace and for good will between two warring communities. They are being shot at by both communities, and that kind of remark does not help very much.
The next thing he said was about the Compton methods, and he asked a number of questions about them. This Bill has nothing whatever to do with the past. The noble and learned Lord, Lord Gardiner, who actually sat on the Inquiry, observed a decent restraint. We had a debate about the Report, which was very widely welcomed, as was the Government's decision that those methods should be discontinued. The noble Lord, Lord Kilbracken, semed to speak as if there was something disreputable about trying to find out information about the exact organisation of the I.R.A. I cannot imagine why our fighting Forces should not have sought that information; although it is quite right that the Government should have insisted that such methods should be discontinued on grounds quite different from those published.
LORD KILBRACKEN: My Lords, does not the noble and learned Lord the Lord Chancellor agree that it is disreputable to have tried to discover that information by the methods that were found to have been employed, and which have since been declared illegal?
THE LORD CHANCELLOR: My Lords, I should have thought that the noble Lord would have welcomed the ready acceptance by the Government of the Minority Report of the noble and learned Lord, Lord Gardiner. The majority of that Commission did not condemn the methods employed in the same terms as the noble and learned Lord, Lord Gardiner.
LORD KILBRACKEN: My Lords, may I ask—
THE LORD CHANCELLOR: May I answer one question before I am asked to reply to another? The noble Lord must know that the Government immediately accepted Lord Gardiner's view as distinct from the majority of the Commission. I should have thought that the noble Lord would have found it in his heart to be a little more generous to that position, as was the noble and learned Lord, Lord Gardiner. Now what was the next question?
LORD KILBRACKEN LORD KILBRACKEN My Lords, may I ask why those methods were used in the first place? And is it not a fact that it is exactly methods of that kind that typify a misunderstanding of the Irish people and it is those methods which have led to further bloodshed, further unhappiness, further misery, further damage?
THE LORD CHANCELLOR: My Lords, I am not to be drawn into a debate on the Compton Commission very nearly a year after it has reported. It was perfectly open to the noble and learned Lord to debate that subject then and—
LORD KILBRACKEN: I am not "learned".
THE LORD CHANCELLOR: —the noble and not learned Lord—to debate that subject then. It was perfectly open to him to do so. I do not propose to be drawn to-day, on the Motion, That the Bill do now pass, into anything except the consideration of its terms. I would only say this. I believe that the, forebearance of the people of this country, when their children are being shot at and murdered and blown up; when we have seen bombs exploded outside our principal criminal court in a crowded street in the City of London; the forebearance of this people and this Government, with the kind of treatment that they have received from the organisation, to the activities of which some of this Bill's provisions are distinctly directed, has been perfectly miraculous. I only hope that it continues in spite of the noble Lord's attacks on the British people and their history, after having sworn an oath of allegiance at the beginning of this Parlia
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ment—and sent his medals back to the Queen.
My Lords, the next point which the noble Lord raised was to cast doubt on whether the methods used had really stopped. The short answer to that is that if, as he says, and the noble and learned Lord, Lord Gardiner, says, they are illegal, no charges, I think, have so far been brought in the courts. If they are illegal they can be brought in court, as the noble and learned Lord said on the Commission, both by way of criminal prosecution and by way of action for tort. And I heartily endorse what the noble and learned Lord told us on Second Reading about the impartiality of the Judiciary. My Lords, I think that is all I need to say about that. The noble Lord put forward his point of view in Committee. He divided the House against the advice of his Leader, and he was one of a minority of four. I think the sense of the House was made abundantly plain on the hearing of that debate.
The next point the noble Lord raised was that we had not put forward the extreme loyalist organisations as proscribed under the Schedule. That, as he knows perfectly well, is incorrect. The Ulster Volunteer Force is in the Schedule, as he ought to have told the House if he was going to make that charge. The other organisation of which he complained, I thought I had dealt with adequately in Committee. I said that they were as detestable to me as they are to him, and that its members would be punished as severely as they were: and I explained the exact reason why at the present stage my right honourable friend did not feel it possible to add that organisation to the Schedule under the powers of the Bill. The Bill gives him powers to do so if the case is made out. Yet the noble Lord thinks it is proper to say that in his experience this is one of the most loathesome pieces of legislation proposed. This is the kind of fairness that we receive at the hands of the noble Lord. I can only ask the House to pass this Bill, and if the noble Lord desires to divide against it, he can, but he will be doing neither Ireland nor Ulster any good by so doing.
On Question, Bill passed, and returned to the Commons.

PROTECTION OF AIRCRAFT BILL [H.L.]
4.22 p.m.
LORD DRUMALBYN: My Lords, I beg to move that the Commons Amendments be now considered.
Moved, that the Commons Amendments be now considered.—(Lord Drumalbyn.)

COMMONS AMENDMENTS
[References are to Bill 94 as first printed for the Commons]
[No. 1]
Clause 2, page 3, line 22, leave out subsection (3) and insert—
"(3) It shall also, subject to subsections (3A) and (4) of this section, be an offence for any person intentionally to communicate any information which is false, misleading or deceptive in a material particular, where the communication of the information endangers the safety of an aircraft in flight or is likely to endanger the safety of aircraft in flight.
(3A) It shall be a defence for a person charged with an offence under subsection (3) of this section to prove—

(a) that he believed, and had reasonable grounds for believing, that the information was true, or

(b) that, when he communicated the information, he was lawfully employed to perform duties which consisted of or included the communication of information and that he communicated the information in good faith in the performance of those duties."

LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 1. The purpose of this Amendment is to replace subsection (3) of Clause 2 of the Bill by a new subsection which differs from the previous subsection (3) in two ways. The first is by making it an offence
"intentionally to communicate information which is false, misleading or deceptive in a material particular, where the communication of that information endangers the safety of an aircraft in flight or is likely to endanger the safety of aircraft in flight."
In so far as the Amendment includes information which is misleading or deceptive, it extends subsection (3), as it now is, which as previously drafted related only to information which the giver knew to be false or which he had no reason to believe to be true.
Secondly, the Amendment specifies the defences open to a person communicating
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information which is false, misleading or deceptive. It would be a defence for him to prove that he believed, and had reasonable grounds for believing, that the information was true. This means that, for example, any person who had reason to believe that there was a bomb on board an aircraft, though in fact there was not, would not be guilty of an offence if he acted as a good citizen in communicating this information. The Amendment also provides that it is a defence for a person accused of an offence to prove that when he communicated it he was lawfully employed to perform duties that consisted of, or included, the communication of information—for example, as a Telex or telephone operator—and that he communicated the information in good faith in the performance of those duties. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)
LORD HOY: My Lords, the only comment I want to make is that this Amendment is so big that it is difficult to understand how it was missed out before. There seem to me to be many provisions inside this Amendment to give protection. One is grateful for the protection that is given to an informant who might well think that some dangerous instrument was on board, that he or she should not be prosecuted simply because the information may have been mistaken. We are grateful that that has been achieved, even inside this very long Amendment.
LORD DRUMALBYN: My Lords, I should not like to leave any misunderstanding about this point. What the Amendment does is to extend "falsity" to include being misleading or deceptive. The reason why it originally read only "false" was because that was what the Convention said. We have considered this matter, and we are satisfied that to include "misleading and deceptive" information would not in fact bring us out of line with Article 1(1) of the Montreal Convention. It is, we think, legitimate to include "false" in the context of that Article as including information which is "misleading or deceptive", and it is in line with our other legislation.

COMMONS AMENDMENTS
[Nos. 2 and 3]
Clause 7, page 7, leave out line 7.
Clause 7, page 7, line 12, at end insert", and
(c) of air navigation installations which do not form part of an aerodrome".
LORD DRUMALBYN: My Lords, I beg to move that the House doth agree with the Commons in their Amendments Nos. 2 and 3. These two Amendments pave the way for the new clause in Amendment No. 15. During our earlier discussions I accepted a proposal by my noble friend Lord Trefgarne to extend the coverage of Parts II and III of the Bill to include protection against acts of violence on air navigation installations as well as aircraft and aerodromes. I said that Amendments would accordingly be introduced, but because of the time factor they would be introduced in another place. These two Amendments, and following Amendments that we shall come to (Amendments Nos. 14 to 18, 21 to 26, 28, 29, 32 and 33), are intended to meet this commitment. The effect of these Amendments to Clause 7 is to provide that the purpose to which Part II of this Bill applies includes protection against acts of violence to air navigation installations off aerodromes. The Amendments are limited to air navigation installations off aerodromes because such installations on aerodromes are already covered by Clause 7(1)(b). I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Drumalbyn.)
LORD HOY: My Lords, I would not dissent from this. What the noble Lord has said is, in my recollection, correct: that this promise was made during the Committee stage, and the noble Lord said that it would be put right in another place. This, as I understand it, is the commitment now being implemented.
THE EARL OF SELKIRK: My Lords, I would only add that this is a necessary Amendment, and I am grateful to the noble Lord for putting it in.

COMMONS AMENDMENTS
[Nos. 4 and 5]
Clause 9, page 8, line 28, after "direction" insert "in writing".
Clause 9, page 8, Line 44, after "direction" insert "in writing".
LORD DRUMALBYN: My Lords, I beg to move that the House doth agree with the Commons in their Amendments Nos. 4 and 5. The purpose of these Amendments is to provide that any directions under Clauses 9, 10 and 11 should be given in writing. Where it is necessary to give urgent direction for immediate implementation—for example, if we receive information that there is a bomb on a particular aircraft or at a particular aerodrome involving the need to give an immediate direction that the aircraft or the aerodrome should be searched or that an aircraft or the aerodrome or part of it should be guarded—we would then advise the aircraft operator or the aerodrome manager by telephone that a particular direction was given. The direction would not have any legal validity until it was furnished in writing, but we do not expect this to lead to any special difficulty in practice. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—[Lord Drumalbyn.]
THE EARL OF SELKIRK: My Lords, this is a point we raised. This makes the provision much clearer, and I am grateful to the noble Lord.

COMMONS AMENDMENTS
[Nos. 6 and 7]
Clause 10, page 10, line 12, after "direction" insert in "in writing".
Clause 11, page 10, line 27, after "direction" insert in "in writing".
LORD DRUMALBYN: My Lords, I beg to move that the House doth agree with the Commons in their Amendments Nos. 6 and 7. Both of these Amendments relate to the same point, that directions relating to Clauses 9, 10 and 11 should be in writing. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Drumalbyn.)
4.30 p.m.

COMMONS AMENDMENTS
[Nos. 8 and 9]
Clause 11, page 11, line 16, leave out from "property)" to "and" in line 17.
Clause 11, page 11, line 18, leave out from "require" to end of line 26 and insert

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"the modification or alteration of any aircraft, or of any of its apparatus or equipment, or the installation of additional apparatus or equipment, or prohibit any aircraft from being caused or permitted to fly without some modification or alteration of the aircraft or its apparatus or equipment or the installation of additional apparatus or equipment."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments No. 8 and 9. Amendment No. 8 results from a suggestion made in another place that the purpose of subsection (5) of Clause 11 of the Bill might be expressed more clearly and concisely. Subsection (5) is an important provision because it ensures that the limitations of the scope of directions which have been carefully written into Clause 9 are not by-passed by a general direction under Clause 11. This also was a matter which was criticised by your Lordships, and I hope that you will welcome this Amendment too. I should say that the Amendments do not alter the substance of the provisions in the clause; they merely provide a form of words which is shorter and perhaps a little clearer than was given in the original draft.
Moved, That this House does agree with the Commons in the said Amendments.—(Lord Drumalbyn.)
LORD HOY: My Lords, I should like to say just one word here. Any Minister who can get up and say that to shorten what he has said earlier will make something clearer will always be welcome in your Lordships' House!

COMMONS AMENDMENTS
[Nos. 10 and 11]
Clause 12, page 11, line 39, after "the" insert "minimum"
Clause 12, page 11, page 12, line 12, after first "the," insert "minimum".
4.31 p.m.
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 10 and 11. The purpose of these two Amendments is to remove any doubt that where the Secretary of State specifies a number of persons in accordance with subsection (1) of Clause 12 to carry out any search covered by protection given under Clause 9(1) or Clause 10,
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or in accordance with Clause 12(4) in respect of any measures including the guarding of aircraft or aerodromes covered by the direction under Clause 11, the number of persons specified shall be the minimum number. This was the intention, and I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 12]
Clause 13, page 13, line 8, leave out "force" and insert "such force as is reasonable in the circumstances".
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 12. Your Lordships will recall the debate that we had on Clause 13(4) concerning acts of violence in relation to directions under the Bill and the provision that the subsection should not restrict the use of force by a constable or some other person in the exercise of his powers conferred in the Bill. Here again there was some criticism of the lack of any restriction on the amount or nature of the force to be used. The purpose of this Amendment is to limit the use of force to such force as is reasonable in the circumstances. I believe that this Amendment meets the criticism, and I commend it to your Lordships.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 13]
Clause 14, page 14, line 18, leave out "shall serve on him" and insert "if so required by the objector, shall afford to him an opportunity of appearing before, and being heard by, a person appointed by the Secretary of State for the purpose, and shall then serve on the objector."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 13. Your Lordships will recall that Clause 14 was introduced into the Bill as a result of earlier debates in your Lordships' House. The purpose of this Amendment to the clause is to provide

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that a person who serves on the Secretary of State a notice objecting to a non-urgent direction under Clause 11 relating to buildings and works shall have the opportunity, if he wishes, to appear before a person appointed by the Secretary of State and have his objection heard by him.
I am advised that under Common Law it would be open to the person making the objection to be accompanied or represented by his legal advisor when his objection is being heard and that there is no need to make this explicit in the Bill—indeed it would be at variance with established practice to do so. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 14]
Clause 16, page 15, line 35, at end insert— "or
(d) in any air navigation installation in the United Kingdom which does not form part of an aerodrome".
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 14. This is another of a series of Amendments required to meet the commitment to extend the coverage of Part II of the Bill. The effect of the Amendment is to provide that it shall be an offence for any person without lawful authority or reasonable excuse to have with him any of the articles referred to in subsection (2) of Clause 16—that is to say, firearms and the like—in any air navigation installation in the United Kingdom off an aerodrome. It is not necessary to specify separately air navigation installations on an aerodrome because they are covered in subsection (1)(c) of the clause. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 15]
After Clause 17, insert the following new clause—
Application of provisions of Part II to air navigation installations
"(1) Sections 8, 10, 11, 12, 13 and 17 of this Act shall have effect in relation to air navigation installations in the United Kingdom in accordance with the following provisions of this section.
(2) In relation to any such air navigation installation which does not form part of an aerodrome, those sections shall have effect as if in them any reference to an aerodrome were a reference to such an air navigation installation and any reference to the manager of an aerodrome were a reference to the authority responsible for such an air navigation installation.
(3) Where an air navigation installation forms part of an aerodrome in the United Kingdom, those sections shall have effect as if in them any reference to an aerodrome were a reference either—

(a) to an aerodrome, or

(b) to an air navigation installation which forms part of an aerodrome, or

(c) to so much of an aerodrome as does not consist of an air navigation installation;

and accordingly a notice under section 8 or a direction under section 10 or section 11 of this Act may be served or given either in respect of the whole of the aerodrome, or in respect of the air navigation installation separately, or in respect of so much of the aerodrome as does not consist of an air navigation installation.
(4) For the purposes of the service of a notice or the giving of a direction under section 8, section 10 or section 11 of this Act as modified by subsection (3) of this section, where the notice is to be served or the direction given in respect of an air navigation installation separately, and for the purposes of the operation of section 13(6) of this Act in relation to a direction so given, any reference in any of those sections to the manager of the aerodrome shall be construed as a reference to any person who is either the manager of the aerodrome or the authority responsible for the air navigation installation.
(5) A direction under section 11 of this Act, as applied or modified by the preceding provisions of this section, may be given to the authority responsible for one or more air navigation installations so as to relate either—

(a) to all air navigation installations in the United Kingdom for which it is responsible at the time when the direction is given or at any subsequent time, or

(b) only to one or more such air navigation installations, or to a class of such air navigation installations, specified in the direction.

(6) In sections 14(1) and 15(1) of this Act any reference to a direction given under a provision therein mentioned shall be construed as including a reference to a direction given under that provision as applied or modified by the preceding provisions of this section.
(7) Notwithstanding anything in subsection (2)(a) of section 17 of this Act, a person inspecting an air navigation installation under that section (or under that section as applied or modified by the preceding provisions of this

1547
section) shall not be empowered thereby to test any apparatus or equipment which constitutes or forms part of the air navigation installation."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 15. This new clause is the most important in the series of 16 Amendments, of which we have already dealt with three: Nos. 2, 3 and 14. The purpose of this and the associated Amendments is to extend Part II of the Bill to cover air navigation installations. They thus fulfil the undertaking which I gave during Report stage and on the Third Reading of the Bill in this House. With your Lordships' permission, I shall speak to this Amendment and to Amendments Nos. 16, 17, 18 and 21 to 26 inclusive, and also to Nos. 28, 29 and 32. This Amendment brings air navigation installations generally under the provisions of Clauses 8, 9, 10, 11, 12, 13 and 17. I do not think that your Lordships will wish to have this explained in detail, but if there are any points which any noble Lord wishes to ask me, I shall be happy to answer them. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)
LORD BESWICK: My Lords, I am not raising any points, but should simply like to say that for my part I appreciate the care with which the noble Lord and his colleagues listened to the discussion we had. I am glad to see that they have been able to amend the Bill in this respect.
LORD DRUMALBYN: My Lords, I am much obliged to the noble Lord.

COMMONS AMENDMENTS
[Nos. 16–18]
Clause 18, page 18, line 17, at end insert—
"(3) Where a direction given under section 10 of this Act, as applied or modified by section (Application of provisions of Part II to air navigation installations) of this Act, is for the time being in force—

(a) if it is a direction given in respect of an air navigation installation separately (whether that installation forms part of an aerodrome or not), subsection (2) of this section shall have effect in relation to that direction as if the air navigation installation were an aerodrome and, where the direction was given to the authority responsible for the air navigation installation, as if it had been given to the manager of that aerodrome;

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(b) if it is a direction given in respect of so much of an aerodrome as does not consist of an air navigation installation, subsection (2) of this section shall have effect in relation to that direction as if any air navigation installation comprised in the aerodrome did not form part of the aerodrome."

Clause 18, page 18, line 18, leave out "and (2)" and insert "to (3)".
Clause 19, page 19, line 10, at end insert—
"(5) In the preceding provisions of this section any reference to section 8, section 10 or section 11 or to any provision of section 17 of this Act shall be construed as including a reference to that section or provision as applied or modified by section (Application of provisions of Part II to air navigation installations) of this Act."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 16, 17 and 18, which are part of this series. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 19]
Clause 19, page 19, line 12, leave out from "Act" to "to" in line 18 and insert "shall be liable—

(a) on summary conviction, to a fine not exceeding £400 or to imprisonment for a term not exceeding three months or to both;

(b) on conviction on indictment, to a fine or to imprisonment for a term not exceeding five years or to both.

(7) A person guilty of an offence under this section shall be liable—

(a) on summary conviction, to a fine not exceeding £400;

(b) on conviction on indictment."

LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 19. My noble friend Lord Selkirk criticised this subsection on the grounds both of substance and clarity, if I remember rightly. The purpose of this Amendment is to provide that a person guilty of an offence under Clause 16, which may include unlawful possession of firearms or explosives, shall be liable on summary conviction, as an alternative to a fine not exceeding £400, to imprisonment for a term not exceeding three months, or to both. It thus introduces imprisonment as a penalty on summary conviction for an offence under Clause 16.

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The Amendment is based on two premises: first, that offences under Clause 16, which may include unlawful possession of firearms or explosives are more serious than offences under Clause 19, which are regulatory. We believe it is right to ensure that the maximum penalties which the court may impose in respect of these offences reflect the comparative seriousness of those offences. Secondly, it is necessary to ensure that similar offences in different fields of legislation are not made punishable by widely differing maximum penalties. The Government accepted in principle that a penalty of imprisonment should be made available on summary conviction in respect of an offence under Clause 16. However, we did not consider that this should extend to offences under Clause 19, first because we did not believe the seriousness of offences under that clause merited such penalties and, secondly, because it is the policy of the Government to try to get away, wherever possible, from the provisions concerning short sentences of imprisonment on summary conviction. I hope your Lordships will agree that the Amendment considerably improves the Bill, and I am grateful to noble Lords for their help in achieving this. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)
THE EARL OF SELKIRK: My Lords, I thank the noble Lord for the improved drafting. I was worried mostly about clarity, and from that a doubt on the substance arose in my mind. I think the wording is now very much better and I certainly have no objection to the slight changes which have been effected. I am grateful to my noble friend.

COMMONS AMENDMENT
[No. 20]
Clause 20, page 19, line 29, leave out subsection (2) and insert—
"(2) Where the affairs of a body corporate are managed by its members, subsection (1) of this section shall apply in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body corporate."
4.40 p.m.
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree
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with the Commons in their Amendment No. 20. The Amendment rephrases the clause so as to follow the more modern precedent in, for example, Section 62(4) of the Civil Aviation Act 1971 and Section 43(5) of the Gas Act 1972. The new subsection is a part-formed provision making subsection (1) applicable when a body corporate is managed by its members. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENTS
[Nos. 21 to 26]
Clause 21, page 19, line 36, after "Act" insert "or under that section as applied or modified by section (Application of provisions of Part II to air navigation installations) of this Act"
Clause 21, page 19, line 37, after "aerodrome" insert "or the authority responsible for an air navigation installation"
Clause 21, page 19, line 40, at end insert "or that air navigation installation, as the case may be."
Page 20, line 10, leave out "manager of the aerodrome" and insert "person (whether being a manager of an aerodrome or the authority responsible for an air navigation installation)"
Clause 22, page 20, line 21, at end insert— "or;
(c) the authority responsible for an air navigation installation in the United Kingdom"
Clause 22, page 20, line 26, after "aerodrome" insert "or air navigation installation"
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in Amendments Nos. 21 to 26. These are Amendments related to the inclusion of air navigation installations.
Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 27]
After Clause 22 insert the following new clause:
Annual report by Secretary of State as to notices and directions under Part II
"(1) The Secretary of State shall, on or before 31st January in each year, lay before each House of Parliament a report stating the number of notices served by him under section 8 and the number of directions given by him under sections 9, 10 and 11 of this Act during the period of twelve months which expired with the preceding December.
(2) Each such report shall deal separately with notices served under section 8, directions given under section 9, directions given under section 10 and directions given under section 11 of this Act, and, in relation to each of those matters, shall show separately—

(a) the number of notices or directions which, during the period to which the report relates, were served on or given to persons as being, or as appearing to the Secretary of State to be about to become, operators of aircraft;

(b) the number of notices or directions which during that period were served on or given to persons as being, or as appearing to the Secretary of State to be about to become, managers of aerodromes; and

(c) the number of notices or directions which during that period were served on or given to persons as being, or as appearing to the Secretary of State to be about to become, authorities responsible for air navigation installations.

(3) In this section any reference to section 8, section 10 or section 11 of this Act shall be construed as including a reference to that section as applied or modified by section (Application of provisions of Part II to air navigation installations) of this Act."
Loan DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 27. During the earlier proceedings my noble friend, Lord Selkirk, moved an Amendment relating to Parliamentary safeguards. His Amendment would require an annual report to be made to both Houses of Parliament about notices and directions made under the Bill. Following debate on that Amendment and further discussion in the other place, my honourable friend the Minister for Aerospace and Shipping undertook to consider the form such an annual report might take. The new clause to which this Amendment relates is the Government's response to that undertaking.
Subsection (1) of the new clause provides that on or before January 31 in each year the Secretary of State shall lay before both Houses a report indicating the number of notices and directions served by him under Clauses 8, 9, 10 and 11 during the twelve months ended on the preceding December 31. Subsection (2) provides that the report shall specify separately the number of notices under Clause 8, and the number of directions under each of Clauses 9, 10 and 11 and in each case the number of notices and directions served separately on air-
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craft operators and aerodrome managers, and authorities responsible for air navigation installations. Subsection (3) is a technical provision to ensure references in the new clause, to be 8, 10 or 11, are construed in terms of those clauses as applied or modified by Clause 18. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)
THE EARL OF SELKIRK: My Lords, this meets fully the point we raised in this House. I am clad to see it. We are taking great powers under this Bill and it is right that they should be under some kind of review. I congratulate the Government on thinking that they will get the report out by January 31 for all events up to December 31. I think this is a very bold action, and I congratulate the noble Lord on undertaking this task.

COMMONS AMENDMENTS
[Nos. 28 and 29]
Clause 24, page 21, line 17, at end insert—
""air navigation installation" means any building, works, apparatus or equipment used wholly or mainly for the purpose of assisting air traffic control or as an aid to air navigation, together with any land contiguous or adjacent to any such building, works, apparatus or equipment and used wholly or mainly for purposes connected therewith."
Page 22, line 5, at end insert—
"(2) For the purposes of this Act

(a) in the case of an air navigation installation provided by, or used wholly or mainly by, the Civil Aviation Authority, that Authority, and

(b) in the case of any other air navigation installation, the manager of an aerodrome by whom it is provided, or by whom it is wholly or mainly used,

shall be taken to be the authority responsible for that air navigation installation."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 28 and 29. These are also linked with Amendment No. 15, the long clause on air navigation installations. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 30]
Clause 26, page 23, line 38, leave out "section 6(2)" and insert "the provisions specified in the next following subsection, shall come into force on the passing of this Act.
(3) Sections 1 to 5 and subsections (1) and (3) of section 6 of this Act."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 30. The purpose of this Amendment is to ensure that there will be no delay, once the Bill has been enacted, in bringing into force Clause 6(2) and particularly Parts 2 and 3 of the Bill. After passing the Bill there are certain formalities to be completed and complied with before the processes of ratifying the Montreal Convention can be completed. These will take time. It is therefore desirable that the Bill, as it relates to the Montreal Convention, shall come into force on such day as Her Majesty may by Order in Council appoint. It will be related to the date of ratification. However, it would not be appropriate to delay the coming into force of the rest of the Bill on this account. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 31]
In the Schedule, page 24, line 12, leave out "twelve months" and insert "two years".
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 31. The purpose of this Amendment is to allow from the time of the completion of the measures consisting of constructing, executing, altering, demolishing or removing a building or other works in compliance with Section 11 a period of two years in place of a period of 12 months within which a notice claiming compensation under Clause 21 may be served. The main consideration is to strike an appropriate balance between allowing the person affected a reasonable time to ascertain his loss and make a claim and enabling the recipient of the claim to know the nature of the claim while evidence to determine it is still fresh. It was considered originally, bearing in mind pre-
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cedents, that 12 months would be an appropriate period to allow for compensation. This is not a matter calling for any rigid line or involving any major points of principle. Following debate in another place, it was concluded that a period of two years might be more suitable. I beg to move.
Moved, that this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
[No. 32]
In the Schedule, page 25, line 2, at end insert—
"8. For the purposes of the application of paragraphs 2 to 7 of this Schedule to compensation in respect of measures taken by the authority responsible for an air navigation installation, references in those paragraphs to an aerodrome and to the manager of an aerodrome shall be construed respectively as references to an air navigation installation and to the authority responsible for it."
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 32. This is another Amendment which is consequential on Amendment No. 15.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)

COMMONS AMENDMENT
In the Title, line 4, leave out "and aerodromes" and insert "aerodromes and air navigation installations".
LORD DRUMALBYN: My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 33. This is an Amendment to the Title of the Bill and is consequential on Amendment No. 15. It is to leave out "and aerodromes" and insert "aerodromes and air navigation installations". The purpose is to reflect in the Title the extension we have made to cover protection against acts of violence on air navigation installations as well as aircraft and aerodromes. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Drumalbyn.)
LORD BESWICK: My Lords, we all wish to accept this Amendment. Since it is the last one of a long series, may

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I again be allowed to say to the noble Lord how grateful we are for the way in which he has listened to discussions and for the readiness to accept representations that have been made. I wonder whether, as a matter of record there has been any Bill at all that has been amended so thoroughly as this measure. When one thinks of what came in so innocently, at the beginning, and now looks at it, I think if any research were done it would show that it has been the most thoroughly amended Bill of all time. Would the noble Lord also agree that what is essential now is that we use Part I in order to ratify the Montreal Convention? What will be important about this, so far as the business of aerial piracy is concerned, is international ratification. May I ask again whether any effort has been made to get a united front among members of the E.E.C. on ratification? The last time I raised this issue the noble Lord said that two European countries had ratified, or had indicated their readiness to ratify, and one of them was not even in the E.E.C. Have we made an effort to get a common front there? Can we do more? It does not require me to say, with the knowledge of what is happening in Kuwait at the present time, how urgent this is.
LORD DRUMALBYN: My Lords, first of all I should like to thank the noble Lord for what he has said. So far as Part I of the Bill is concerned, of course this is largely governed by the Montreal Convention. As to Parts II and III, the point here was that we were trying to do two things. On the one hand, we were trying to provide for the safety of those who travel by air and those who fly in aircraft altogether, and secondly, we were at the same time trying to do that in a way which would interfere with the liberty of the subject to the minimum extent possible. We were therefore particularly anxious to have the assistance and cooperation of all Members of this House, and indeed it has been forthcoming and I am most grateful for the assistance that has been given in this regard.
The next stage is the ratification. What we were particularly anxious to do was to be in a position to say that we were able to ratify when we go on to this conference which is to take place very shortly, in which the noble Lord, Lord
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Janner, is taking a particular interest. This was the occasion for the question of the noble Lord, Lord Beswick, when the noble Lord, Lord Janner, asked a Question. The fact that we and the French and the Swiss have been able to combine together to put forward a recommendation is very good. I do not know that there is actual machinery within the E.E.C. itself for the co-ordination of these matters because they are not exactly covered by the Treaty of Rome; so I am not really in a position to answer the noble Lord's question. But I am quite certain that every effort will be made to obtain the widest possible support among the members of the E.E.C. and other European countries, as well as a much wider range of countries, for the proposals that are being put in in order to secure that where there are instances of hijacking or sabotage, then it will be possible to bring pressure to bear on the members of the international organisation, at any rate the other signatories of the Chicago Convention, and possibly on a much wider range. But our objective, of course, is to obtain the very widest range of agreement. It is not enough only to get agreement within the European countries, the E.E.C. or the other European countries; in order for this to be effective we must involve every possible country, certainly all the countries that have signed the Chicago Convention, and we hope that more will sign in consequence of the action taken.

BREEDING OF DOGS BILL
Brought from the Commons; read 1ª, and to be printed.
CONSOLIDATED FUND (APPROPRIATION) BILL
Brought from the Commons endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read 1ª.
DOMICILE AND MATRIMONIAL PROCEEDINGS BILL
Returned from the Commons with the Amendments agreed to.
HALLMARKING BILL HEAVY COMMERCIAL VEHICLES (CONTROLS AND REGULATIONS) BILL
Returned from the Commons with the Amendment agreed to.

INSURANCE COMPANIES BILL [H.L.]
4.53 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK): My Lords, I beg to move That the Commons Amendments be now considered. It might be helpful if I were to explain that I shall be asking the leave of the House to take certain Amendments in groups, and also to mention that I shall be moving a Lords Amendment in lieu of Commons Amendments Nos. 46, 47 and 48—that is the one appearing immediately after No. 48 on the Marshalled List—and a consequential Lords Amendment to Commons Amendment No. 71.
Moved, That the Commons Amendments be now considered.—(The Earl of Limerick.)
COMMONS AMENDMENTS, LORDS AMENDMENT IN LIEU OF THREE OF THE COMMONS AMENDMENTS AND LORDS AMENDMENT TO ONE OF THE COMMONS AMENDMENTS
[References are to Bill 113 as first printed for the Commons]

COMMONS AMENDMENT
[No. 1]
Clause 1, page 1, line 16, at end insert "and an order under that subsection may make different provision in relation to different cases or circumstances."
THE EARL OF LIMERICK: My Lords, I beg to move that the House doth agree with the Commons in their Amendment No. 1. It would, I think, be convenient to consider with this Amendment, No. 34. We have accepted the suggestion made in another place that there could be advantage in enabling the Secretary of State to prescribe different minimum financial standards under Clause 1 according to the class of insurance to be carried on. Clause 1, however, deals only with the minimum requirements to be satisfied by
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a company at the time of application for authorisation as to the amount of paid up capital and uncommitted reserves. The solvency margin for the general business corresponds in the case of an established company with the uncommitted reserves and this is governed by Clause 28. The second Amendment therefore adds the same words to Clause 28. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[No. 2]
Clause 2, page 2, leave out line 16 and insert "a director, controller or manager of the company, as the case may be".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 2. With this I think we might take No. 37. The Amendment to Clause 2 makes clear that the fitness of a director, controller or manager of a company seeking authorisation to carry on a class of insurance business is to be related to the requirements and responsibilities of whichever of these positions he is to hold. It replaces the wider, less precise and possibly more pejorative phrase
"a fit and proper person to be associated with the company".
The clause as introduced had already substituted references to a managing director or chief executive, a director or manager for the less precise and broader term "officer" used in Section 64 of the 1967 Act which it replaced. In both cases we are seeking to avoid casting the net unnecessarily wide.
The second Amendment to Clause 34 is to a large extent presentational rather than substantive. It gets rid of the unnecessarily pejorative expression,
"not a fit and proper person to be associated with the company",
(which could suggest that the man concerned was not fit even to be perhaps an office boy or hall porter), and substitutes the more precise reference to "a controller". It is not necessary to make corresponding Amendments in Clause 33, dealing with the appointment of a managing director or chief executive, as it is already clear that it is fitness for appointment to that position which is now under consideration, or in Clauses 22 and 23 where

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the particulars to be given must necessarily include the name of the holder of a particular position. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl or Limerick.)

COMMONS AMENDMENTS
[Nos. 3–5]
Clause 2, page 3, line 9, at end insert—
"(a) the wife or husband or minor son or daughter of that person;"
Clause 2, page 3, line 11, leave out "employer or employee" and insert "employee or partner";
Clause 2, Page 3, line 17, at end insert "and for the purposes of this subsection 'son' includes step-son and adopted son, 'daughter' includes step-daughter and adopted daughter and 'minor', in relation to Scotland, includes pupil".
THE EARL or LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 3, and with the leave of the House, we can also take Nos. 4 and 5. The first and third of these Amendments (that is, Nos. 3 and 5) add spouses and children to the list of "associates" in subsection (5); that is to say, the persons whose shareholdings are to be aggregated with those of the person with whom they are connected in order to establish whether that person effectively controls one-third or more of the voting power in an insurance company. The addition of a member of a partnership to the list of associated persons (Amendment No. 4) was suggested by the industry in the course of our discussions with them leading to the revision of Clause 10, where the definition of a "controller" in this clause is applied. Partnerships are common inter alia in insurance broking.
The removal of the employer of the person from the definition of an "associate", also by Amendment No. 4, may require a slightly fuller explanation. The purpose of subsection (5) is to identify various categories of persons who may be regarded in general as being financially dependent upon or otherwise likely to be compliant with the wishes of another person. Such associates, as the subsection calls them, may appear as nominally independent holders of shares on the register of an insurance company, whereas the practical reality probably is that they will invariably vote as directed by a prin-
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cipal, who may thus control one third or more of the voting power, although personally holding less.
The Amendment removes from the list of associates an employer of a person who holds shares, while retaining an employee. This is more consistent with the idea underlying the provision, that of economic dependence. It may happen that a company or a person who effectively controls an insurance company will avoid holding directly a one-third interest by putting part of it in the name of a trusted employee. It is considerably less likely that an employee will be able to influence the attitude of his employer when both hold shares in the same company, a fact of which neither may even be aware. As the subsection stands, an employee who held a fraction of one per cent. of shares in a particular company would become a controller of it if his employer held 33 per cent. It would clearly be wrong, and probably impracticable, to treat him as such for the purposes of the clause and of the later clauses where these definitions are applied. What we want to ensure in this clause is that a major shareholder should not escape being identified as controlling an insurance company by distributing some part of his shareholding to stooges, among whom may be his employees in some other company. But we do not want to put the boot on the other foot and make the employee with a modest shareholding a controller because his employer holds a substantial holding. It might be 99 per cent. in the employer's name and one per cent. in the employee's; if we leave in the reference to employer that would make the employee a controller and subject him to all the vetting which that involved. I beg to move that this House doth agree with the Commons in their Amendments Nos. 3, 4 and 5.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 6 to 8]
Clause 3, page 4, line 22, leave out "is terminated" and insert "comes to an end"
Clause 3, page 4, line 24, leave out "or terminating"
Clause 3, page 4, line 27, leave out "concerned" and insert "appointed; and if an appointment under that subsection comes to

1561
an end the company shall within fourteen days serve on the Secretary of State a written notice stating that fact and the name of the person concerned."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 6, with which, with the leave of the House, we might consider Amendments 7 and 8. Subsections (5) and (6) of Clause 3 formalise the position of the actuary responsible for the investigation of a company's long-term business, who may be an employee, a consultant or a firm of consultants. The word "terminate" in the present tense does not cover the situation where the cessation of the actuary's appointment results from his resignation rather than from action on the part of the company. The combined effect of these three Amendments is to rectify that anomaly so that the necessity for a company to make a fresh appointment (subsection (5)) and to notify the Secretary of State of the cessation of the previous appointment (subsection (6)) is clearly laid upon the company, however that cessation arose.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 9 and 10]
Clause 4, page 4, line 36, leave out from "statement" to "any" in line 40 and insert "of the names and connection with the company of any persons who during the period to which the other documents deposited under that subsection relate—
(a) were authorised by the company to issue, or to the knowledge of the company have issued,"
Clause 4, page 5, line 1, leave out "are" and insert "were".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 9, with which, with leave, we could consider No. 10. Subsection (2) of Clause 4, which was added when the Bill was first in this House, supplements the requirements to be made by regulations under Clause 42, that an intermediary who is connected with an insurer in a manner to be prescribed, for example as its subsidiary, shall reveal that fact in inviting a potential policy holder to enter into a contract with that insurer, so that
1562
the policy holder may be aware that the advice is not necessarily unbiased.
Amendment No. 9 recognises that some intermediaries to whom such requirements may be applied may act without any formal authorisation from the insurer concerned. The existing text requires the "register" of names of any such connected intermediaries which is to be included by an insurer in its annual returns to refer to those who were authorised by the insurer as at the last day of the year to which the returns relate. This would be inappropriate where there is no formal authorisation, and the Amendment therefore alters the subsection so as to include in the register also "connected" intermediaries who have to the knowledge of the company issued invitations at any time during the period to which the returns relate. Amendment No. 10 makes a minor consequential Amendment to paragraph (b) of Clause 4(2).
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 11 and 12]
Clause 6, page 6, line 19, after "applies" insert "or subordinate company within the meaning of section (Restriction on transactions with connected persons) below of any such company".
Clause 6, page 6, line 23, at end insert—
"(2) Different classes or descriptions of agreements or arrangements may be prescribed for the purposes of this section in relation to companies of different classes or descriptions."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 11. If it is convenient to the House it may be desirable, in considering the Amendments to Clause 6, where we have the first reference to the new concept of a subordinate company, to deal at the same time with Amendments to later clauses, especially to Clause 10 where that concept has its main application. This involves considering together Amendments Nos. 11, 12, 17, 19, 42 and 55. I think it would be helpful to the House if I were first to explain the Amendment to Clause 10 itself—that is, Amendment No. 17.
As your Lordships may recall, Clause 10 was added to the Bill while it was

1563
under consideration in this House. Its purpose is to place a limit on the extent to which assets of long-term—that is to say life—insurance funds may be invested in, loaned to or used to back guarantees of companies under the same control as the long-term insurance company and thus avoid any major conflict of interest for those involved in the direction, both of the long-term business and of those other businesses which may have nothing to do with insurance. The complexity of the inter-company relationships from which that conflict may arise is reflected in the length of Clause 10. Your Lordships may recall that the clause was originally introduced at the instigation of the industry, and I gratefully acknowledge the further help we have had from them in improving it. It might occasion some surprise that the inspiration for it should have come from those whose freedom it is designed to curtail. Long-term insurers have, however, customarily exercised restraint in such matters and they feel that it is desirable now to establish a statutory standard.
It is not easy to express an effective limitation in this area in statutory terms and it will be noticed that the clause has undergone extensive reconstruction since it left this House. The substance and the objective are still the same but the detail has been given greater precision. The principal changes made are these: first, the introduction of the concept of a subordinate company as defined in subsection (4). This may be briefly described as a company, not necessarily engaged in insurance business itself, in which the majority of the beneficial interest is held as an asset of the long-term funds. Investment in such a company is not limited by this clause, but any investments it may make in what are now called connected persons are to be aggregated with those of its parent long-term fund for the purpose of the limitation. This is provided for in subsection (3).
The second change is that the list of transactions covered by the limitation now includes undertakings such as guarantees, whereby the insurance company undertakes a liability to meet an obligation of another person or to help him in doing so. This is in paragraph (c) of subsection (2). The third change is
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that what the clause as it left your Lordships' House rather confusingly called "associated companies" are now referred to as "connected persons". It will be seen that the definition in subsection (5) has been extended so as to include not only a company which controls an insurance company and one which is under that same control (a mother and a sister company, let us say) but also the partner of a major shareholder and a director of the company and his wife or children. The broad purpose of these modifications is on the one hand to permit the legitimate use of subsidiary companies to undertake ancillary functions without allowing them to become a channel whereby the limitation can be evaded and, on the other, to apply the limitation to as many other forms of connection as can reasonably be defined and identified in practice.
My Lords, I hope I have said enough to indicate the changes in Clause 10 which have been made, but I am equipped to go on at great length if your Lordships so wish. But if your Lordships are agreeable I will turn to the associated Amendments. Amendments 11 and 12 to Clause 6 are consequential. The Department will want to be kept in touch with the transactions of the kind limited by Clause 10. Clause 6 provides the necessary machinery. Since the transactions of subordinate companies with connected persons are to be aggregated with those of their parents, it is necessary to be able to impose a notification requirement on the subordinate also. This is the effect of the first Amendment, No. 11. Amendment No. 12 stems from the first, which leads to the need for a power to prescribe to be applicable to certain companies for certain transactions.
Amendment No. 19 is in part a consequential amendment to Clause 12(1)(b). It relates to the Secretary of State's powers of intervention on the ground that a company appears to him to have failed to satisfy an obligation under the insurance companies legislation. It may be necessary to intervene to protect the interests of the long-term policy holder if either a long-term insurance company or its subordinate company has failed to observe the limitation imposed by Clause 10, or where a subordinate company has failed to notify a relevant transaction under Clause 6.

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Amendment No. 42, to Clause 38, which contains powers to modify the effects of certain clauses, is consequential. It is recognised that, despite the care in drafting Clause 10, some anomalies may result. The additional subsection will allow the Clause 38 powers of modification to apply to the obligations upon a subordinate company where that is considered appropriate. Finally—and I am grateful for your Lordships' forbearance on this complex matter—Amendment No. 55 is in part a consequential Amendment to Clause 46, in relation to offences and penalties relating to Clauses 6 and 10. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)
LORD DIAMOND: After such a careful and detailed explanation I feel it would be less than courteous if I did not say how much we appreciate not only the explanation the noble Lord has given but the excellent "gardening" which the Government have been doing. The seeds which we have sown, whether they came from this side of the House or the other matters not, were sown at the time your Lordships were in the first place considering this Bill. They have not only developed; they have grown and flourished. We are very glad to see it, and glad to note the attention which the Government have paid to the suggestions made in formulating the policy now included in this Bill.

COMMONS AMENDMENT
[No. 13]
Clause 7, page 7, line 17, leave out from "year" to end of line 18.
5.14 p.m.
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 13. Out of order as it may be, may I thank the noble Lord, Lord Diamond, for his comments. It is in that spirit that we approach the Bill.
Clause 7(3)(b) allows companies which are carrying on long-term business when the Bill is enacted a period of grace before they have to comply with the requirement to separate out their long-term assets and liabilities. The aim is,
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of course, to arrive at a situation where companies have separated out their long-term assets and liabilities as quickly as they can. But some companies may, for perfectly valid reasons, need longer to do this than others. Consequently, it is desirable that we should be able to extend the period of grace in particular cases. The powers available in Clause 38 enable us to grant extension so that the words deleted by the Amendment are necessary.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 14]
Clause 8, page 7, line 42, at end insert—
"(5) For the avoidance of doubt it is hereby declared that money from a fund maintained by a company in respect of its long term business may not be used for the purposes of any other business of the company notwithstanding any arrangement for its subsequent repayment out of the receipts of that other business."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 14. Clause 8 provides that long-term business assets only be applied may for the purposes of the long-term business, except when and to the extent that an actuarial investigation discloses a surplus. Subsection (1) contains the essential provision, to protect the long-term policyholder, that the assets of the long-term business may be applied only for the purposes of the long-term business. It has been suggested that the clause does not make it clear beyond doubt that a loan from the long-term business funds cannot be made to the general insurance business side of a composite company or for the purpose of any non-insurance business carried on. The new subsection removes any doubt on this point.
I am not suggesting that this type of arrangement, commonly referred to as an inter-class loan, is improper in every conceivable circumstance, but it is prima facie undesirable that long-term fund money should be used, for example, to support an ailing motor insurance business carried on by the same company. Subsection (3) provides a mechanism whereby problems of liquidity as distinct from solvency can be handled. In exceptional circumstances the Secretary of State

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could also consider an easement under Clause 38.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 15]
Clause 8, page 7, line 43, at end insert "and no company of which any such insurance company is a subsidiary".
THE EARL OF LIMERICK: My Lords, I beg to move, that this House doth agree with the Commons in Amendment 15. With the consent of the House, may I speak also to Amendments Nos. 16, 19 and 55. These four Amendments are directly related.
LORD DIAMOND: We have already taken Amendment No. 55 with Amendments 11 and 12.
THE EARL OF LIMERICK: My Lords, there is a small difficulty here, in that Amendment No. 55 and also Amendment No. 19 relate to two groups of Amendments. It is perhaps necessary to refer briefly to that in connection with each. The suggestion for the first Amendment, No. 15, came originally from the Institute of Chartered Accountants. The effect of this Amendment would be to prohibit an insurance company's holding company, as well as the long-term insurance company itself, from paying a dividend when an insurance company has an inadequate long-term fund. The Institute of Chartered Accountants' justification for the suggestion was based on the fact that a company could conduct its long-term business entirely through a subsidiary and thereby abdicate its legal responsibility for deficiencies in the insurance funds. We accept this as a fair point. As the beneficial owner, the holding company has at least a moral responsibility and should be required to hold any reserves under its control to rectify the position of the long-term fund until such time as its adequacy is restored. This does not necessarily mean a subvention from the holding company if the cause of the inadequacy is ephemeral. It does, however, provide a strong incentive for seeing that things are put right as soon as possible.
The second Amendment No. 16 is a drafting change and the third, No. 19, is
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consequential in part on the first Amendment. Its effect would be to make any default by the holding company in complying with the dividend prohibition (in relation to declaration of its own dividend) a further ground for the use against its insurance subsidiary of any of the intervention powers specified in Clauses 13 to 21. The rest of the Amendment is consequential to Amendment 17.
The last Amendment adds inter alia Clause 8(5) in subsection (3)(b) of the penalty clause, Clause 46, the effect of which would be to make any default by the holding company in contravention of the dividend ban an offence for which the maximum penalty would be a fine of £400. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
LORD DIAMOND: My Lords, we should not let this go past without paying our tribute to the Institute of Chartered Accountants, notwithstanding the loyalties of the noble Earl, and indeed my own.

COMMONS AMENDMENT
[No. 16]
Clause 8, page 8, line 1, leave out "it" and insert "the insurance company ".
5.20 p.m.
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 16.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 17]
Leave out Clause 10 and insert the following new clause:
Restriction on transactions with connected persons
"10.—(1) Neither an insurance company to which the Act of 1958 applies which carries on long term business nor a subordinate company of any such insurance company shall enter into a transaction to which this section applies—

(a) at a time when the aggregate of the value of the assets and the amount of the liabilities attributable to such transactions

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already entered into by the insurance company and its subordinate companies exceeds the prescribed percentage of the total amount standing to the credit of the insurance company's long term funds; or

(b) at any other time when the aggregate of the value of those assets and the amount of those liabilities would exceed that percentage if the transaction were entered into.

(2) This section applies to any transaction entered into by any such insurance company as is mentioned in subsection (1) above (whether or not itself a subordinate company of another company), being a transaction under which—

(a) a person connected with the insurance company will owe it money; or

(b) the insurance company acquires shares in a company which is a person connected with it; or

(c) the insurance company undertakes a liability to meet an obligation of a person connected with it or to help such a person to meet an obligation,

if the right to receive the money would constitute a long term asset of the insurance company, the acquisition is made out of its long term funds or the liability would fall to be discharged out of those funds, as the case may be.
(3) Without prejudice to subsection (2) above, this section applies to any transaction entered into by a subordinate company of any such insurance company as is mentioned in subsection (1) above, being a transaction under which—

(a) the insurance company or a person connected with it will owe money to the subordinate company (not being money owed by the insurance company which can be properly paid out of its long term funds); or

(b) the subordinate company acquires shares in the insurance company or in a company which is a person connected with the insurance company; or

(c) the subordinate company undertakes a liability to meet an obligation of the insurance company or of a person connected with that company or to help the insurance company or such a person to meet an obligation;

but where the subordinate company is itself such an insurance company as is mentioned in subsection (1) above this section shall not by virtue of this subsection apply to any such transaction if the right to receive the money would constitute a long term asset of the subordinate company, the acquisition is made out of its long term funds or the liability would fall to be discharged out of those funds, as the case may be.
(4) In this section "subordinate company", in relation to any such insurance company as is mentioned in subsection (1) above, means—

(a) a company having equity share capital some or all of which is held by the insurance company as part of its long term assets where the share capital so held by the insurance company—

(i) amounts to more than half in nominal value of that share capital; and

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(ii) confers on the insurance company the power to appoint or remove the holders of all or a majority of the directorships of the company whose share capital is held and more than one half of the voting power at any general meeting of that company;

(b) a company having equity share capital some or all of which is held by another company which is itself a subordinate company of the insurance company where the share capital held by that other company—

(i) amounts to more than half in nominal value of that share capital; and

(ii) confers on that other company the power to appoint or remove the holders of all or a majority of the directorships of the company whose share capital is held and more than one half of the voting power at any general meeting of that company;

and for the purposes of this subsection share capital held for any person by a nominee shall (except where that person is concerned only in a fiduciary capacity) be treated as held by that person, and share capital held by a person in a fiduciary capacity or by way of security shall be treated as not held by that person.
(5) For the purposes of this section a person is connected with any such insurance company as is mentioned in subsection (1) above if that person is not a subordinate company of the insurance company but—

(a) controls, or is a partner of a person who controls, the insurance company; or

(b) being a company, is controlled by the insurance company or by another person who also controls the insurance company; or

(c) is a director of the insurance company or the wife or husband or a minor son or daughter of such a director;

and for the purposes of this subsection a person controls a company if he is a controller of it within the meaning of section 2(2)(c) above.
(6) For the purposes of this section the value of any assets and the amount of any liabilities shall be determined in accordance with any applicable valuation regulations.
(7) In this section—
"company" (except in the expression "insurance company") and "equity share capital" have the meaning given in section 154(5) of the Companies Act 1948;
"liability" includes a contingent liability;
"long term assets" and "long term funds", in relation to an insurance company, means respectively assets representing the fund or funds maintained by the company in respect of its long term business and that fund or those funds;
"the prescribed percentage" means 5 per cent. or such greater percentage as may from time to time be prescribed for the purposes of this section by regulations;
"share" has the same meaning as in the Companies Act 1948;

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"son" includes step-son and adopted son, "daughter" includes step-daughter and adopted daughter, and "minor", in relation to Scotland, includes pupil.
(8) This section shall not be construed as making any transaction unenforceable as between the parties thereto or as otherwise making unenforceable any rights or liabilities in respect of property".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 17. We have already discussed this.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 18]
Clause 11, page 11, line 9, after "not" insert "a contract of insurance or".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 18. The voiding of contracts for an uncertain amount by Clause 11 has been criticised as being too general in its terms and too dependent for its precise effect upon exemption by regulations. It has been pointed out that a number of kinds of insurance contract fall within the description in the clause.
The kind of transaction to be made void by the clause is not, of course, intended to include a genuine insurance contract. It is the isolated guarantee of some other company's or person's obligations, some forms of which might be difficult to distinguish from an insurance contract. On further consideration, therefore, we concluded that the purpose of the clause would be substantially met if insurance contracts were specifically excluded. This does not eliminate the need for exempting regulations, but it will considerably reduce the list.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 19]
Clause 12, page 11, line 26, at end insert "or that a company of which it is a subsidiary has failed to satisfy an obligation to which it is subject by virtue of section 8(5) above or that a subordinate company within the meaning of section (Restriction on transactions with
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connected persons) above the company has failed to satisfy an obligation to which it is subject by virtue of that section or section 6 above".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 19. We discussed this with Amendment No. 6.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 20]
Clause 12, page 11, line 28, leave out from "information" to end of line 29 and insert "to the Secretary of State under or for the purposes of any provision of the Act of 1958, Part II of the Act of 1967 or this Act;".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 20. This Amendment widens the unnecessarily restricted ground for intervention in Clause 12(1)(c), so that the furnishing of misleading or inaccurate information to the Secretary of State under, or for the purposes of, any provision contained in the 1958 Act, the 1967 Act or the Bill constitutes a ground for invoking any of the powers in Clauses 13 to 21. The existing wording of Clause 12(1)(c) would permit the invocation of these powers only when the misleading or inaccurate information is furnished in connection with an application for authorisation. This anomaly was overlooked in reformulating the 1967 powers.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
On Question, Motion agreed.

COMMONS AMENDMENT
[No. 21]
Clause 12, page 12, line 19, leave out "14" and insert "13".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 21. Perhaps we may also consider No. 26. Clause 13 was not included in the original text of Clause 12(4) as a power which could be exercised solely on the ground that the company had recently been authorised or brought under

1573
new control. This was because the power to restrict, that is effectively ban, acceptance of new contracts, can at present be applied only to the whole of the company's insurance business and such a restriction would be prima facie irreconcilable with the issue of an authorisation or approval of a change of control. The situation will, however, be altered by the Bill in that the power to restrict business will be applicable selectively to a particular description within a class of insurance—for example, motor fleet policies or "Road Traffic Act only" policies. There may therefore be cases in which it makes sense to issue an authorisation for a class of business or approve a change of control subject to a restriction upon the undertaking of a particularly hazardous description of risk within a class.
The question arises, however, whether the procedure of giving a company notice and the opportunity to make representations regarding the contemplated imposition of a restriction is appropriate in the particular circumstances covered by Clause 12(4). The conclusion reached is reflected in the second Amendment. This modifies Clause 22, so that, first, the procedure of notice, and so on, is not necessary where a restriction is to be imposed at the same time as an authorisation is issued; and, second, in the other circumstances covered by Clause 12(4), that is to say during the five years following an authorisation and at the time of approval of a change of control or during the five years following, the procedure of notice and opportunity for representations is retained, but particulars of the grounds are not required to be stated since the ground is the simple one of Clause 12(4), that the company is recently authorised or that control has recently passed.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 22]
Clause 12, page 12, line 39, at end insert—
"(6) The Secretary of State shall, when exercising any power conferred by sections 13 to 21 below, state the ground on which he is exercising it or, if he is exercising it by virtue of subsection (4) above, that he is so exercising it; but this subsection shall not apply where
1574
the Secretary of State has given notice under section 22 or 23 below of the proposed exercise of the power."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 22. The Amendment requires the Secretary of State to state the grounds on which he is exercising any of the powers in Clauses 13 to 21 in circumstances other than those covered by Clauses 22 and 23, which already require the ground to be stated. The reference to subsection (4) of Clause 12 is based on the view that the circumstances to which that subsection refers, authorisation or change of control, are matters of fact rather than grounds, in the sense of the term elsewhere in the clause. It is therefore only necessary to identify that subsection as the basis for action. The references to Clauses 22 and 23 makes it clear that the requirements of the Amendment do not duplicate those of those clauses.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 23]
Clause 13, page 13, line 4, at end insert—
"(c) not to vary in such a manner as to increase the liabilities of the company any contracts of insurance of a specified description, being contracts effected in the course of carrying on long-term business and in force when the requirement is imposed."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 23. In another place the question was asked why, when a restriction was imposed on an insurance company under Clause 13, it should be permitted to vary long-term contracts although specifically prohibited from varying general insurance contracts. The original reason for this was that the need to vary long-term contracts inevitably arose more commonly than is the case with short-term ones, that the policy-holder's rights to vary were not necessarily defined in the policy, and that it would often be a hardship to him to be unable to obtain a variation such as the issue of a paid-up policy or the premature surrender of the policy for cash. It was subsequently accepted, on the other hand,

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that variations of other kinds were possible and that these might in some circumstances increase the company's liabilities, contrary to the intention of the restriction. This possibility is dealt with by this Amendment.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 24]
Clause 15, page 13, line 28, leave out "maintained elsewhere than in the United Kingdom shall" and insert "shall or shall not".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 24. This Amendment permits assets technically maintained in the United Kingdom not to be accepted as such for the purposes of a localisation requirement under the clause. These assets will not necessarily be of a dubious nature, or be improper in any way. There may, however, be technical difficulties—for example, in relation to the monitoring of the value of the assets or as to the risk of their being realised abroad in spite of the share register being kept in this country. This is quite apart from the application of the valuation regulations to assets required to the maintained here, which is provided for in subsection (4), or the possibility of requiring, under Clause 14, the realisation of inherently unsuitable assets. It was thought nevertheless that the Amendment represented a useful additional provision to ensure that the maintenance of assets here, where considered necessary, provides effective security for U.K. policy holders. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
THE EARL OF SELKIRK: My Lords, I am not certain what is the effect of this Amendment. The noble Earl gave the impression that it was on the whole restrictive. I asked the noble and learned Lord the Lord Chancellor at an earlier stage whether it was the policy to encourage and support international rein-
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surance. I do not know whether this Amendment is intended to do that or not. I should rather like to know whether it is. There are two sides to it; one is the freedom of the operators in this country, the other is the confidence of their clients overseas that they will in fact be free and able to do this. I was not certain what the effect of this Amendment would be: whether it would be additionally restrictive, or whether it would allow greater freedom in operating the international market.
THE EARL OF LIMERICK: My Lords, the Amendment is intended to safeguard the position of United Kingdom policy holders. The powers in Clause 15 would be imposed only on the fulfilment of preconditions in Clause 12 in a specific case where it seemed necessary, in pursuance of the protection of the policy holder, to require localisation of assets. The effect of this Amendment is that if there are assets about which there is doubt as to whether they could be effectively realised in the event of need of cover of United Kingdom liabilities, there should be a discretion to the Secretary of State not to reckon those assets about which there was doubt in calculating the cover. This is the sole effect of the Amendment.
LORD DIAMOND: My Lords, it is still not absolutely clear. I thought that the purpose was the purpose that the noble Earl has just described; namely, to give discretion. But Clause 15(2) says:
"The Secretary of State may direct that … assets … shall be treated as assets …"
If he does not want to direct that they shall be so treated, he is not compelled to do so. It says that he "may" direct. If he is not compelled to, then they are not treated as assets, so I did not follow why it was necessary to give him power to say that they are not treated as assets.
THE EARL OF LIMERICK: My Lords, if, with the leave of the House, I may add a word, this is the converse case. The words the noble Lord, Lord Diamond, has read give the Secretary of State a discretion to declare that assets which are not, prima facie, United Kingdom assets may be deemed to be such. The effect of the Amendment is to provide for the converse case where, for the protection of the policy holders, he would wish to deem that assets which are prima facie United

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Kingdom assets should be deemed not to be such.

COMMONS AMENDMENT
[No. 25]
Clause 20, page 16, line 37, leave out "or controller" and insert "controller or auditor".
5.34 p.m.
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 25. This Amendment adds the present or past auditor of an insurance company to the persons who may be required to provide an explanation of books or papers of the company produced for inspection under this clause. The auditor could be in a position to give most useful explanations of matters in books or papers which he will probably have examined.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
LORD DIAMOND: My Lords, I want to ask whether the Government have considered this matter with due care, and whether, possibly, they have been in touch with outside professional advice about it. What is going to happen now is that the auditor of a company where both parties thought that they were communicating with one another in complete confidence may be required to disclose to a person other than his client information which may be thought to be useful by the Department. One is anxious that all information which may be useful ought to be given, but if the result of this is to be that whenever companies consult their auditors they are inhibited by the knowledge that they are not having private and confidential discussions, then one is doubtful whether the benefit that the Department may obtain by invoking this practice may be greater than the benefit which is lost through the inhibition which directors and others may feel. No doubt this matter has been carefully considered, but perhaps the noble Earl would care to say a word about it.
THE EARL OF LIMERICK: My Lords, I can say that this matter was considered. It is not envisaged that this is a matter which would arise very frequently, but there could be occasions when it would be very much to the disadvantage of an
1578
inquiry not to be able to seek to consult with an auditor. I may add—and I hope that this will be of reassurance to the noble Lord—that informal soundings were taken in the accountancy profession before this Amendment was added to the Bill, and the indication was that they would see no objection to such a proposal.

COMMONS AMENDMENT
[No. 26]
Clause 22, page 17, line 42, at end insert—
"(6) This section shall not apply in relation to the exercise of the power conferred by section 13 above where, by virtue of subsection (4) of section 12 above, it is exercised by the Secretary of State when issuing an authorisation; and in relation to any other exercise of that power by virtue of that subsection this section shall have effect as if subsection (1)(a) required the notice to state that the Secretary of State is considering exercising the power by virtue of the said subsection (4) and as if subsections (2) and (3) were omitted."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 26. This was considered with Amendment No. 21.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 27 to 30]
Clause 26, page 20, line 19, leave out "in Great Britain".
Clause 26, page 20, line 33, after "Gazettes" insert "and, except where the court has otherwise directed, in two national newspapers".
Clause 26, page 22, line 10, leave out "Subsection (1) above" and insert "Subsection (7) above does not apply to a transfer of long term business carried on elsewhere than in Great Britain but, save as aforesaid, this section".
Clause 26, page 22, line 10, after applies" insert "whether or not the long term business is carried on in Great Britain and".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 27 to 30 inclusive, and with the agreement of the House I would propose that we should consider Amendments Nos. 58 and 61. Clause 26 replaces Section 11 of the Insurance Companies Act 1958 which provides that the whole or

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any part of the long term business of an insurance company carried on in Great Britain may be transferred to another company only by means of a scheme sanctioned by the court. It has now been decided that the provisions of the clause need not be confined to the transfer of long term business carried on in Great Britain, as a company may find it of some advantage abroad to have the transfer of the business in question valid under English law, and such a transfer may indirectly affect the interests of United Kingdom policyholders. The first Amendment, No. 27, therefore deletes the reference to "Great Britain" in subsection (1) of Clause 26, and so provides for it to apply to the transfer of long term insurance business carried on anywhere in the world by any company to which the 1958 Act applies.
Amendments Nos. 29 and 30 are consequential, but also remove the mandatory provision of subsection (7) of the clause. A company wishing to transfer long term business carried on elsewhere than in Great Britain may, therefore, apply for the sanction of the court under the permissive provisions of subsection (1) but is not obliged to do so. Amendment No. 28 meets a criticism that the protection which subsection (5) was intended to give to other interested persons, including employees, would be inadequately publicised by notices in the London Gazette and Edinburgh Gazette only.
The Amendments to Clauses 48 and 51 —that is, Nos. 58 and 61—are transitional, and postpone the coming into operation of the revised procedure established by Clauses 26 and 27 because the preparation of schemes for submission to the court takes a considerable time and it would be inconvenient to have to revise any that were based on the present procedure but not ready to be put before the court until after the new requirements would otherwise become effective.

COMMONS AMENDMENTS
5.40 p.m.
[Nos. 31 and 32]
Clause 27, page 22, line 40, at end insert—
"(3) For the purposes of any provision requiring the delivery of an instrument of transfer as a condition for the registration of a transfer of any property (including in par-
1580
ticular section 75 of the Companies Act 1948 and section 56(4) of the Finance Act 1946) an order which by virtue of this section operates to transfer any property shall be treated as an instrument of transfer."
Clause 27, page 22, line 41, leave out subsections (1) and (2) above" and insert "this section".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 31, with which we might take Amendment No. 32. We have been advised that there is some difficulty in connection with Section 75 of the Companies Act 1948 in relation to Orders made under Section 208 of that Act for transferring shares from one company to another. The proviso to Section 75 is presumably intended to allow company registrars to accept an Order under Section 208 as vesting shares without a further instrument of transfer. In practice, however, company registrars have been refusing to take advantage of this and insist on an instrument of transfer in addition to the Section 208 Order. It is possible that similar provisions existing in other enactments may create similar difficulties. It is desired to avoid this difficulty in connection with Orders made under Clause 26, and the proposed new subsection therefore makes it clear that for the purposes of any provision requiring the delivery of an instrument of transfer as a condition for the registration of a transfer of any property under Section 75 of the Companies Act 1948, under Section 56(4) of the Finance Act 1964 (which makes a corresponding provision to Section 75 of the 1948 Act in relation to units in a unit trust) or under any other similar provision which may exist in other enactments, any Order under Clause 26 or any subsequent Order referred to in Clause 27 shall be treated as an instrument of transfer. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 33]
Clause 28, page 23, line 16, leave out "three" and insert "twelve".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 33. This Amendment extends the minimum period which must be allowed

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before an Order increasing the solvency margin can come into force. In practice, insurance companies could have a longer period for compliance with such an Order. This is because the margin is calculated by reference to the premium income of the preceding financial year of the company. It is doubtful whether any Order would be so drafted as to require the margin to be calculated on a new basis otherwise than in respect of a financial year commencing after the date of the coming into force of the Order, but it was thought that the extension proposed was reasonable and the Amendment was therefore accepted. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 34]
Page 23, line 19, at end insert "and an order under that subsection may make different provision in relation to different cases or circumstances".
THE EARL OF LIMERICK: This was considered with Amendment No. 1. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 35]
Clause 31, page 27, line 4, at end insert—
"(7) Notwithstanding section 245(1) of the Companies Act 1948 (which requires a liquidator to obtain the sanction of the court or committee of inspection for the bringing of legal proceedings in the name of and on behalf of the company) the liquidator may without any such sanction make an application in the name of and on behalf of the company under section 26 above."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 35. Clause 31(2) contemplates that in most cases where an insurance company is wound up the liquidator will apply to the court for an Order under the provisions of Clause 26 for the transfer of any long-term business to another body. For this purpose the liquidator would, under Section 245(1)(a) of the Companies Act 1948, require the preliminary consent either of the court or
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of the committee of inspection. This is considered unnecessary in this context, and the proposed Amendment therefore makes it possible for a liquidator to make an application under Clause 26 without such preliminary consent. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 36]
Clause 34, page 28, line 30, leave out "have" and insert "has".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 36. This is the correction of a grammatical error. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 37]
Page 29, line I, leave out "associated with" and insert "a controller of".
THE EARL OF LIMERICK: My Lords, this Amendment was discussed with Amendment No. 2. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[Nos. 38 to 40]
Clause 35, page 29, line 20, leave out "director, controller or manager" and insert "controller"
Clause 35, page 29, line 25, at end insert "; and a person who becomes a director or manager of any such insurance company shall, before the expiration of the period of seven days beginning with the day next following that on which he does so, notify the insurance company in writing of such matters as may be prescribed"
Clause 35, page 29, line 27, leave out from "shall" to end of line 31 and insert "give written notice to the Secretary of State of the fact that any person has become or ceased to be a director, controller or manager of the company and of any matter of which any such person is required to notify the company under subsection (1) above; and that notice shall be given before the expiration of the period of

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fourteen days beginning with the day next following that on which that fact or matter comes to the company's knowledge".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 38, and, with leave, with this we could consider Nos. 39, 40, and later Amendment 56. Clause 35 has been criticised as being nonsensical so far as it required managers and directors to notify the insurance company which employed them of their appointment to those positions or of the cessation of such appointments. The clause was defended on the ground that the notification was really intended to inform the company of the "other matters" to be prescribed under Clause 35(1). These other matters would be predominantly personal matters, information on which only the individuals concerned could provide. We accept, however, that it is unnecessary to require directors and managers to notify the company of their appointment or the cessation of their appointment, and Amendment No. 38 accordingly removes those particular requirements, while No. 39 retains the requirement that they should give the company the prescribed matters so that it may pass them to the Department.
The case of the controller in the sense of Clause 2(2)(c) is different. Although his intention to acquire control should have been submitted to the Department for approval, the intention would not necessarily be realised. The Department therefore needs notification when it has been achieved. This would not necessarily become known immediately to the company, for example, if control were fragmented as envisaged in Clause 2(2)(c)(ii) and 2(5). But the company needs to know so that it may observe other requirements of the Bill, for example, those of Clause 10. For the same reason, the company needs to know when control has been relinquished. Amendment No. 38, therefore, leaves the requirements unchanged in the case of controllers.
Amendment No. 40 is consequential. It re-states the duty of the company to notify the Department in the various cases. Amendment No. 56 to the offences and penalties clause rectifies an omission in identifying the circumstances in which a default in compliance with Sec-
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tion 35 may not be an offence. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 41]
Clause 37, page 30, line 35, leave out "9" and insert "(Restriction on transactions with connected persons)".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 41. This clause allows specified business which is not ordinary long-term business to be treated as long-term business, and vice versa. This is an existing facility which is useful in saving expense and time, and is only allowed when the Department is satisfied that it does not represent a loss of protection to policyholders. The effect of the Amendment is to apply the provisions of Clause 37 to Clause 10, as amended, in addition to Clauses 7, 8 and 9. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 42]
Clause 38, page 31, line 12, at end insert—
"(5) In relation to section (Restriction on transactions with connected persons) above, subsection (1) above shall have effect as if the reference to an insurance company to which the Act of 1958 applies included a reference to any subordinate company within the meaning of that section of any such insurance company."
LORD DIAMOND: My Lords, may I help the noble Earl, who seems to have lost his place? This has already been discussed. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(Lord Diamond.)
LORD BROWN: My Lords, I intended to make a comment about the content of the subordinate company when it was raised on the new Clause 10, but I missed my opportunity. I wonder whether I could make this comment now. It had never occurred to me previously that the

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term "subordinate company" did not, so to speak, embrace the sort of control set out in Clause 10, and it seems to me to be very useful that this conception should be brought into this Bill.
The comment which I want to make now, which may be slightly off-centre for the purpose of this Amendment, is this, that this would be an extremely important and useful conception to bring into the Companies Bill, which I believe the Department of Trade and Industry now has under consideration, because, as well as being relevant to the operations of insurance companies, it is equally relevant to the operations of many other companies. We have recently had cases in company affairs which are highly undesirable, and if this conception of a subordinate company had appeared in the Companies Act some of the wrongdoers might have been caught. So I would congratulate the Minister on introducing this conception into the Bill, and I hope it will be thought of as being useful in the future Companies Bill.
THE EARL OF LIMERICK: My Lords, I am grateful to the noble Lord, Lord Brown, for that comment. I can assure him that I will give consideration to what he said, and will bring it to the attention of my noble and right honourable friends who share responsibility for these matters.
5.51 p.m.

COMMONS AMENDMENT
[No. 43]
Clause 39, page 31, line 34, leave out paragraph (b).
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 43. Clause 39(4)(b) maintained the status quo as laid down in the Industrial Assurance Act 1923 and as repeated in Schedule 2, paragraph 6(8), of the Insurance Companies Act 1958. The anomaly of different arrangements for appointing independent actuaries, according to whether or not industrial assurance is involved in a proposed transfer of long-term business under Clause 26, was criticised. The Amendment removes that anomaly by bringing the industrial assurance procedure into line with the ordinary long-term one. My Lords, I beg to move
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that this House doth agree with the Commons in their Amendment No. 43.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 44]
After Clause 41, insert the following new clause—
Misleading statements etc. inducing person to enter into contract of insurance
". Any person who, by any statement, promise or forecast which he knows to be misleading, false or deceptive, or by any dishonest concealment of material facts, or by the reckless making (dishonestly or otherwise) of any statement, promise or forecast which is misleading, false or deceptive, induces or attempts to induce another person to enter into or offer to enter into any contract of insurance with an insurance company shall be guilty of an offence."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 44. With this Amendment I propose that we take Amendments Nos. 53 and 54. The Report of the Scott Committee on linked life insurance was published on April 18, shortly after we gave a Third Reading to the Bill in this House on April 12. Amendment No. 44 is the first that stems directly from that Report, and it may be helpful if I indicate very briefly what the Government have done to implement its recommendations. By keeping in touch with the Committee's thinking when preparing the Bill, we were able to anticipate a number of recommendations, particularly those dealing with solvency. Many of the Scott Committee's other recommendations break new ground, particularly those dealing with the conduct of linked life insurance schemes and those dealing with selling methods.
These recommendations flow from six basic ideas: first, that prospective linked policyholders should be given a document describing in simple terms the main features of the policy; secondly, that linked policyholders should be entitled to a cooling-off period; thirdly, that it should be an offence to issue misleading sales material; fourthly, that the value of assets to which policies are linked should be properly determined; fifthly, that proper accounts should be kept for internal funds; and, sixthly, that linked

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policyholders should be sent annual reports about the linked scheme of which they are members. We agree with all six of these basic ideas and the necessary Amendments were introduced. Much of the detail remains to be filled in by regulation, but this is inevitable bearing in mind that the Scott Report was published only on April 18. I think we can fairly claim substantially to have implemented the Scott recommendations in the new clauses, starting with the one to which I now turn.
Amendment No. 44 implements Recommendation 39 of the Scott Committee's Report, that it should be made an offence to issue misleading sales material. We think it right that this recommendation should be applied to all forms of insurance. Reputable insurance companies take great care that their sales material is fairly presented. Even so, this clause will be a valuable addition to the law in that it should allow action to be taken at least against any deliberately misleading sales material; and, perhaps more important, it should act as an incentive to use great care in the preparation of sales material generally. The Scott Committee took Section 13 of the Prevention of Fraud (Investments) Act 1958 as their model and the clause closely follows that section, as amended in 1963 by the Protection of Depositors Act. The clause does not refer explicitly to that part of the Scott Committee's recommendation that, in the case of forecasts, the dishonest concealment of material assumptions should be an offence. The aim is to ensure that material assumptions are disclosed. We think that this will be achieved more effectively by regulations under Clause 41. We have it in mind, for example, to require assumed rates and periods of growth to be stated with any forecast of benefits.
The Scott Committee commented that there is some uncertainty as to whether the Prevention of Fraud (Investments) Act could be held to apply to some linked contracts. As a consequence of the recommendation which I have just mentioned, they further recommended that,
"… it should be made clear by Statute that the Prevention of Fraud (Investments) Act 1958 does not apply to linked life assurance",
because this is more appropriately regulated in insurance legislation, and it is
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done specifically in this area by the new clauses which we are considering. Amendment No. 53 implements that recommendation. Amendment No. 54 makes the penalty for an offence under Amendment No. 44 on conviction on indictment a term of imprisonment not exceeding two years, or a fine or both, or on summary conviction a fine not exceeding £400. This is the heavier of the two standard penalties under Clause 46, but it is justified by the potentially serious nature of the offence. My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 44.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
THE EARL OF SELKIRK: My Lords, instead of saying "by the reckless making … of any statement", would it not have been better to say "by recklessly making any statement"?
THE EARL OF LIMERICK: My Lords, my noble friend Lord Selkirk may well be right. This point could have been considered by the draftsman, but I am afraid that it is a little late to put it to him now.

COMMONS AMENDMENT
[No. 45]
Clause 42, page 33, line 15, leave out from "to" to end of line 16 and insert "give the prescribed information with respect to his connection with the company to the person to whom the invitation is issued".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 45. The Amendment to subsection (1) was made after it had been pointed out that in many cases it might be difficult to identify an act which could be regarded as an invitation to enter into an insurance contract. In addition, some parties were in such frequent contact that a separate statement on each occasion might be an unnecessary burden. It seems sensible, therefore, to make the regulation-making power sufficiently flexible to permit the Secretary of State to prescribe the manner and the time or times when the information about the insurer/intermediary connections is to be given, so that the risk both of leaving loopholes and of requiring unnecessary repetition can be avoided. The rewording of subsection (1) achieves

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this. My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 45.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 46 to 48]
Page 33, line 17, leave out "section" and insert "subsection (1) above"
Page 33, line 18, at end insert—
"(2A) Where a person in the course of carrying on any business or profession issues any such invitation as is mentioned in subsection (1)(a) above in relation to an insurance company which is not an authorised insurer in respect of the contract in question he shall, when issuing the invitation, inform the person to whom it is issued that the company is not such an insurer as aforesaid.
In this subsection 'authorised insurer', in relation to a contract of any description, means a person entitled to carry on in Great Britain insurance business of a class comprising the effecting of contracts of that description."
Page 33, line 19, leave out 'this section' and insert "subsection (1) above or who contravenes subsection (2A) above".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth not agree with the Commons in their Amendments Nos. 46, 47, and 48 but proposeth an Amendment in lieu. I think it would be convenient to discuss Amendments Nos. 46, 47 and 48 together. I shall be explaining the reason for this procedure later in my remarks. In explaining the purpose of the Amendments, I would first draw the attention of your Lordships to recommendation (xiii) of the Scott Report, and to paragraphs 217 and 218 of that Report, on page 62. The Scott Committee recommended that it should be an offence, unless the prior approval of the Department had been obtained, to sell policies issued by companies not authorised to carry on insurance business here. During the earlier proceedings in your Lordships' House, there was more than one reference to the international nature of insurance business. Our balance of payments derives substantial benefits from foreign business placed in this country. In the light of these benefits and of our traditionally liberal international commercial policy, we are not inclined to go as far as the Scott Committee recommended. However, as matters stand, the policyholder in Great Britain may not be
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aware that he is dealing with an insurance company which is not supervised in this country. The Government do not want to impair the right of United Kingdom residents to purchase insurance abroad if they wish—subject, of course, to exchange control considerations—but we think it desirable that they do so with a proper appreciation of the risk which they might be running.
As the Amendments indicate, we propose to do this by requiring a person who issues an invitation in relation to an insurer not authorised to carry on insurance in Great Britain to so inform the potential policyholder. We propose to apply this to all classes of insurance, not only linked life assurance. This will impose a useful safeguard in the interests of the potential policyholder, but will not deny him a freedom of choice which, we think, he should have a right to exercise, just as policyholders in other countries may, sensibly, elect to purchase British insurance.
It became apparent in the consideration of the Bill in another place that the operation of subsection (1) would present difficulties if provision were not made for regulations to deal with the manner and timing of the statement to be made by the intermediary as well as the information it should contain as to the prescribed connection. At a much later stage—too late, in fact, for another Amendment to be tabled in the other House—it became apparent that similar difficulties could arise in the operation of the additional subsection which your Lordships have before you as Amendment No. 47. Accordingly, that new subsection has been redrafted in the Amendment proposed in lieu so as to make it subject to regulations, and the redrafted subsection has been so placed as to make subsection (2) applicable to it also.
It is doubtless unusual to make such a proposal at this stage of a Bill's passage, and in so doing I should like to make two things clear. The first is that the alterations now proposed to the Commons Amendments relate to a subject which was discussed at two stages in another place, the principle of which was not in dispute, so that we are looking at a modification of the mechanics rather than the principle. The second thing is that I have reason to believe that the substitution of the proposed Amendment

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for Amendments Nos. 46 to 48 is acceptable both to Mr. Nicholas Edwards, who first raised the matter, and to the official Opposition in another place, so that no procedural difficulties are anticipated such as to delay the coming into force of the Bill. With that explanation, I beg to move that this House (doth not agree with the Commons in their Amendments Nos. 46, 47 and 48, but proposeth in lieu the Amendment as printed on the Paper.
Moved, That this House doth not agree with the Commons in their Amendments Nos. 46 to 48, but proposeth the following Amendment in lieu:
Page 33, line 16, at end insert—
"(1A) Regulations may be made for requiring any person who, in the course of carrying on any business or profession, issues any such invitation as is mentioned in subsection (1)(a) above in relation to an insurance company which is not an authorised insurer in respect of the contract in question to inform the person to whom the invitation is issued that the company is not such an insurer as aforesaid.
In this subsection "authorised insurer", in relation to a contract of any description, means a person entitled to carry on in Great Britain insurance business of a class comprising the effecting of contracts of that description.".—(The Earl of Limerick.)
LORD DIAMOND: My Lords, I am in a little difficulty. On the one hand, I am anxious to save your Lordships' time and therefore not to intervene to say things which are not essential to the debate. On the other hand, I am conscious of the fact that the noble Earl has to speak non-stop and will shortly come to a standstill unless he gets a little rest. It seemed appropriate, therefore, to choose this occasion to allow him a breather, and to say that those of us who have carefully followed the proceedings both in this House and in another place will have no hesitation in accepting what the noble Earl has proposed; namely, the substitution for the Commons Amendments of an improved Amendment. They will do so the more readily if they have observed that those in another place would have been likely to prefer this course had they been (how shall I put it?) even more fully and more accurately informed in debate by the Minister concerned than appears from Hansard. So I have no hesitation in subscribing to what the noble Earl has said as to the likelihood of the acceptability
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of the Lords Amendment in another place, and, indeed, in assuring him of its acceptability here.

COMMONS AMENDMENTS
[Nos. 49 to 51]
After Clause 42, insert the following new clause:
Statutory notice by insurer in relation to long term policy
".—(1) Subject to subsection (5) below, no insurance company to which the Act of 1958 applies and no member of Lloyd's or of any other association of underwriters approved for the purpose of Part II of the Act of 1967 by the Secretary of State shall enter into a contract of a kind mentioned in section 59(6) of the Act of 1967 (long term insurance contracts) unless that company or member ("the insurer") either—

(a) has sent by post to the other party to the contract a statutory notice in relation to that contract; or

(b) does so at the time when the contract is entered into.

(2) For the purposes of this section a statutory notice is a notice which—

(a) contains such matters (and no others) and is in such form as may be prescribed for the purposes of this section and complies with such requirements (whether as to type, size, colour or disposition of lettering, quality or colour of paper, or otherwise) as may be prescribed for securing that the notice is easily legible; and

(b) has annexed to it a form of notice of cancellation of the prescribed description for use under section (Right to withdraw from transaction in respect of long-term policy) below.

(3) Regulations made for the purposes of subsection (2) above may make different provision—

(a) in relation to contracts of different classes or descriptions;

(b) in relation to cases where the statutory notice is sent before the contract is entered into and in relation to other cases;

and the Secretary of State may, on the application of any insurer, alter the requirements of any regulations made for the purposes of subsection (2)(a) above so as to adapt those requirements to the circumstances of that insurer or to any particular kind of contract proposed to be entered into by that insurer.
(4) Any insurer who contravenes this section shall be guilty of an offence but, without prejudice to section (Right to withdraw from transaction in respect of long-erm policy) (2) below, no contract shall be invalidated by reason of the fact that the insurer has contravened this section in relation to that contract.
(5) Subsection (1) of this section does not apply to any contract the effecting of which by the insurer constitutes the carrying on of industrial assurance business; and regulations may exempt from that subsection contracts of any other class or description.
(6) In sections (Right to withdraw from transaction in respect of long-term policy) and (Service of notice of cancellation) below 'insurer' and 'statutory notice' have the same meaning as in this section."
Insert the following new clause:
Right to withdraw from transaction in respect of long term policy
".—(1) A person who has received a statutory notice from an insurer in relation to any contract to which section (Statutory notice by insurer in relation to long-term policy) (1) above applies may before the expiration of—

(a) the tenth day after that on which he received the notice; or

(b) the earliest day on which he knows both that the contract has been entered into and that the first or only premium has been paid,

whichever is the later, serve a notice of cancellation on the insurer.
(2) A person to whom an insurer ought to have, but has not, sent a statutory notice in relation to any such contract as aforesaid may serve a notice of cancellation on the insurer; but if the insurer sends him a statutory notice in relation to that contract before he has served a notice of cancellation under this subsection, then, without prejudice to his right to serve a notice of cancellation under subsection (1) above, his right to do so under this subsection shall cease.
(3) A notice of cancellation may, but need not, be in the form annexed to the statutory notice and shall have effect if, however expressed, it indicates the intention of the person serving it to withdraw from the transaction in relation to which the statutory notice was or ought to have been sent.
(4) Where a person serves a notice of cancellation, then—

(a) if at the time when the notice is served the contract has been entered into, the notice shall operate so as to rescind the contract;

(b) in any other case, the service of the notice shall operate as a withdrawal of any offer to enter into the contract which is contained in, or implied by, any proposal made to the insurer by the person serving the notice of cancellation and as notice to the insurer that any such offer is withdrawn.

(5) Where a notice of cancellation operates to rescind a contract or as the withdrawal of an offer to enter into a contract—

(a) any sum which the person serving the notice has paid in connection with the contract (whether by way of premium or otherwise and whether to the insurer or to a person who is the agent of the insurer for the purpose of receiving that sum) shall be recoverable from the insurer by the person serving the notice;

(b) any sum which the insurer has paid under the contract shall be recoverable by him from the person serving the notice.

(6) Any sum recoverable under subsection (5) above shall be recoverable as a simple
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contract debt in any court of competent jurisdiction."
Insert the following new clause:
Service of notice of cancellation
".—(1) For the purposes of section (Right to withdraw from transaction in respect of long-term policy) above a notice of cancellation—

(a) shall be deemed to be served on the insurer if it is sent by post addressed to any person specified in the statutory notice as a person to whom a notice of cancellation may be sent, and is addressed to that person at an address so specified; and

(b) where paragraph (a) above applies, shall be deemed to be served on the insurer at the time when it is posted.

(2) Subsection (1) above shall have effect without prejudice to the service of a notice of cancellation (whether by post or otherwise) in any way in which the notice could be served apart from that subsection, whether the notice is served on the insurer or on a person who is the agent of the insurer for the purpose of receiving such a notice.
(3) A notice of cancellation which is sent by post to a person at his proper address, otherwise than in accordance with subsection (1) above, shall be deemed to be served on him at the time when it is posted.
(4) So much of section 26 of the Interpretation Act 1889 as relates to the time when service is deemed to have been effected shall not apply to a notice of cancellation."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in Amendments No 49, 50 and 51, and with agreement I would propose to speak to No. 62. This group of Amendments stem from the Scott Committee's recommendations for a statutory notice describing the main features of the policy and for a cooling-off period. One of the reasons leading the Scott Committee to make these recommendations was the possibility of "pressure selling". There is no reason to suppose that pressure selling will necessarily be confined to linked life insurance, and we have therefore drafted the powers more widely, to apply to all ordinary long-term insurance business.
Amendment 49 makes it an offence for an insurer to enter into a long-term insurance contract without sending the policy-holder a statutory notice. The contents of that notice will be laid down by regulation after consultation with the industry. The Scott Committee, in paragraph 191 of their Report, suggested a list of the points that might be covered in the case of policies linked to an internal fund. In all cases the statutory notice will include

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a statement of the policyholder's right to a cooling-off period. Subsection (3) of the new clause gives the Secretary of State the power to adapt the regulations to suit the particular circumstances of a particular insurer or of a particular kind of policy. Linked life insurance is still a rapidly changing sector of the insurance industry, and we think this extra degree of flexibility is desirable in order to make the statutory notice as helpful and as informative as possible to policyholders.
We recognise that the statutory notice and the cooling-off period may not be appropriate for certain types of policy, notably short-term life assurances, where it is important that the cover should come into effect at once. Subsection (5) enables us to exempt such policies from these provisions.
Amendment 50 deals with the cooling-off period. The basic procedure is that, under Amendment 49, the insurer sends the policyholder a statutory notice which will include a statement of his right to a cooling-off period. Under subsection (1) of Amendment 50, having received that statutory notice, the policyholder is entitled to serve a notice of cancellation on the insurer within a specified period of time. If he chooses to serve that notice, the policyholder is then entitled, under subsection (5), to a full refund of his premiums. The minimum cooling-off period is ten days from the date of receipt of the statutory notice. There is a complication. The Scott Committee suggested that the insurer should be able to issue the statutory notice before the contract comes into force, and this option is open to the insurer under subsection (1) of Amendment 49. If the insurer exercises this option, it is possible for the cooling-off period to expire before the contract comes into force. However, as part of the normal law of contract, the prospective policyholder is entitled to withdraw at any time until the policy comes into force. But he will find out that the policy has come into force only a little after the event, when so informed by the insurer. In these circumstances, in order that the policyholder should know where he stands and that it should be practical for the statutory notice to inform him of his full rights to withdraw, it seems to us that the best solution is to provide that the cooling-off period should continue
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until the policyholder knows that there is a contract, and this is achieved by subsection (1)(b).
Subsection 2 deals with the situation where the insurer does not issue a statutory notice as required by Amendment 49. In this situation the policyholder will not have benefited from the safeguards in the way intended, and it is right that he should be able to withdraw from the contract at any time until the omission is rectified, whereupon he will be entitled to the "normal" cooling off period. Amendment 51 is consequential. It provides that the notice of cancellation shall be deemed to be served on the insurer at the time of posting. Amendment No. 62 to Clause 51 is also consequential. It provides that Amendments 49, 50 and 51 shall not take effect until the first regulations under subsection (5) of Amendment 49 have come into operation.
Moved, That this House cloth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 52]
After Clause 42, insert the following new clause:
Linked long-term policies
".—(1) Regulations may be made, as respects the matters specified in subsection (2) below, in relation to contracts of the kinds mentioned in section 59(6) of the Act of 1967 (long term insurance contracts) which—

(a) are entered into by insurance companies to which the Act of 1958 applies or by members of Lloyd's or of any other association of underwriters approved for the purposes of Part II of the Act of 1967 by the Secretary of State; and

(b) are contracts under which the benefits payable to the policy holder are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of description (whether or not so specified).

(2) Regulations under this section may make provision for—

(a) restricting the descriptions of property or the indices of the value of property by reference to which benefits under the contracts may be determined;

(b) regulating the manner in which and the frequency with which property of any description is to be valued for the purpose of determining such benefits and the times at which reference is to be made for that purpose to any index of the value of property;

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(c) requiring insurers under the contracts to appoint valuers for carrying out valuations of property of any description for the purpose of determining such benefits (being valuers who comply with the prescribed requirements as to qualifications and independence from the insurer) and to furnish the Secretary of State with the prescribed information in relation to such appointments;

(d) requiring insurers under the contracts to furnish in such manner and at such times or intervals as may be prescribed, such information relating to the value of the benefits under the contracts as may be prescribed, whether by sending notices to policy holders, depositing statements with the Secretary of State or the registrar of companies, publication in the Press or otherwise;

(e) requiring insurers under the contracts to furnish to the Secretary of State, in such manner and at such time or intervals as may be prescribed with respect to so much of their business as is concerned with the contracts or with any class or description of the contracts, and enabling the Secretary of State to publish such information in such ways as he thinks appropriate.

(3) Regulations made for the purposes of subsection (2)(d) above may, in relation to notices required to be sent to policy holders, impose requirements (whether as to type, size, colour or disposition of lettering, quality or colour of paper, or otherwise) for securing that such notices are easily legible.
(4) Regulations under this section may make different provision in relation to different cases or circumstances; and the Secretary of State may, on the application of any insurer, alter the requirements of any regulations under this section so as to adapt those requirements to the circumstances of that insurer or to any particular kind of contract entered into or proposed to be entered into by that insurer.
(5) Regulations under this section may, to such extent as may be specified therein, apply in relation to contracts entered into before the coming into operation of the regulations, including contracts entered into before the passing of this Act.
(6) Regulations under this section shall not apply in relation to any contract the effecting of which by the insurer constitutes the carrying on of industrial assurance business or to any contract entered into by an insurance company to which the Act of 1958 applies by reason only that the policy holder is eligible to participate in any established surplus as defined in section 9(4) above."
6.11 p.m.
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 52. This new clause is designed to enable the Department to implement the Scott Committee Recommendations, 14 to 23, 24 to 27, and 31 to 35. The first group of recommendations envisage that the Department should issue from time to
1598
time a list of the types of asset to which policies may be linked and measures to ensure that these assets are properly valued. The Scott Committee, in paragraph 137 of their Report, suggest some types of asset which might be included in the list—units in authorised unit trusts, quoted securities, land and real property in the United Kingdom, deposits with a building society. The Scott Committee go on to suggest, in paragraphs 140 to 154 of the Report, that where there is no immediately available current market price assets should be independently and professionally valued, and they make a number of detailed recommendations to this end. In the case of linked policies it is the value placed on particular assets that determines the benefit payable and the Scott Committee's proposals are intended to ensure that that calculation is soundly based. They largely reflect the best business practice and, subject to consultation with the industry on details, it seems to us right that these standards should be made general and mandatory.
The second group of recommendations basically envisage that where policies are linked to an internal fund, a set of accounts should be drawn up for that fund and should be audited. The third group of recommendations envisage the policyholder being sent an annual report about the scheme of which he is a member and regular information about his particular policy. The Scott Committee also suggest that the price of units in internal funds should be published regularly. Under linked policies the benefits to which policyholders are entitled depend directly on the skill with which the insurance company invest the premium receipts and it is right that the company should report regularly on the success (or otherwise) of its investment management. Again the Scott Committee's recommendations largely reflect best business practice and those standards should be made general and mandatory.
Against that background I need deal only briefly with the text of the new clause. Subsections (1) and (6) define the policies to which the regulations are to apply: that is, linked policies. Subsection (2) defines the matters as to which regulation may be made: paragraph (a) deals with the list of types of assets to which policies may be linked; paragraphs (b) and (c) with the valuation of those

1599
assets; paragraph (d) with regular reporting and paragraph (e) with the accounts of internal funds. Subsection (4) allows the regulations to be adapted to suit the particular circumstances of a particular insurer or of a particular kind of policy. Linked life insurance is still a rapidly changing sector of the industry: we think this extra degree of flexibility desirable to make the provision as effective as possible in protecting the interests of policyholders.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 53]
After Clause 42, insert the following new clause:
Scope of Prevention of Fraud (Investments) Act 1958
".The agreements and arrangements mentioned in section 13(1) of the Prevention of Fraud (Investments) Act 1958 (misleading statements etc. inducing persons to invest money) and in the definition of "dealing in securities" in section 26(1) of that Act shall not include contracts of insurance."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 53, which was discussed with Amendment No. 44.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 54]
Clause 46, page 34, line 35, after "41" insert "(Misleading statements etc. inducing person to enter into contract of insurance)".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 54, which was discussed with Amendment No. 44.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 55]
Page 35, line 3, after "section" insert "6, 8(5), (Restriction on transactions with connected persons)".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 55. This was discussed with Amendments Nos. 11 and 15.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 56]
Page 35, line 17, leave out from "became" to "of" in line 18 and insert "or ceased to be a controller".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 56. This we considered with Amendment No. 38.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 57]
Clause 47, page 35, line 44, leave out from "instrument " to "House" in line 1 on page 36 and insert "and no such order shall be made unles a draft of it has been approved by resolution of each".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 57. The Amendment makes subject to the Affirmative Resolution procedure orders under Clauses 1 and 28 to vary the requirements as to minimum initial share capital, initial sufficiency of assets and the solvency margin for general insurance business. We have accepted the view that it would be right to apply the Affirmative procedure in these cases because they concern a power to vary the provisions of the Acts and because the exercise of the power could materially affect eligibility for entry into the industry and the technical solvency of companies already engaged in it.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 58]
Clause 4S, page 36, line 13, leave out subsection (4).
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 58. This was discussed in the group beginning with Amendment No. 27.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 59]
Clause 49, page 37, line 15, at end insert—
"'contract of insurance includes a contract to pay an annuity on human life".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 59. This is a purely clarificatory Amendment. References have been made —for example, in Clauses 41(5) and 42(1)(a)—to contracts of insurance with the intention of covering all such contracts. Doubt might be raised because in the 1967 Act, Section 59(6)(a), which defines ordinary long term insurance, separate references were made to "contracts of insurance on human life" and to "contracts to pay annuities on human life".
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 60]
Clause 51, page 38, line 8, at end insert "Amendment".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 60. The effect of this Amendment will be that the Bill, when enacted, will be entitled the "Insurance Companies Amendment Act 1973", rather than the "Insurance Companies Act 1973". The purpose is merely to reserve the latter title for the Consolidation Act which will bring together the 1958, 1967 and 1973 Acts which it is hoped might be enacted before the turn of the year.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDEMENT
[No. 61]
Page 38, line 14, at end insert—
"(4) Sections 26 and 27 above and the repeal of sections 11 and 12 of the Act of 1958 shall not take effect until the expiration of the period of six months beginning with the date of the passing of this Act; and, in relation to any amalgamation or transfer in respect of which proceedings under the said section 11 have been begun before the expiration of that period, that Act and the Act of 1967 shall continue to have effect as if this Act had not been passed."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 61. This was discussed with the group of Amendments beginning with No. 27.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 62]
Page 38, line 29, at end insert—
"(7) Sections (Statutory notice by insurer in relation to long term policy), (Right to withdraw from transaction in respect of long term policy) and (Service of notice of cancellation) above shall not take effect until the first regulations under subsection (5) of the said section (Statutory notice by insurer in relation to long term policy) come into operation."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 62. This was discussed with Amendments Nos. 49, 50 and 51.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 63]
Schedule 1, page 41, line 3, at end insert—
"(c) in paragraph (c) for the words 'consider whether or not they should exercise with respect to the body' there shall be substituted the word 'exercise'".
6.20 p.m.
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 63. This is a somewhat technical Amendment. The Department's present powers of inspection of the books and

1603
papers of an insurance company are contained in Part III (Section 109) of the 1967 Act which relates to all types of companies. In Schedule 2 the Bill will repeal Section 109(1)(f) which applies these powers to any body, incorporated or not, which falls within the definition of an insurance company contained in the 1958 Act, since Clause 20(2) provides specifically, and in some respects differently, for such companies. Since the Bill was drafted there has been a case in which a non-insurance company which was an associate of an insurance company was the subject of an investigation under Section 109 which brought to light doubts about the fitness of some of the directors of the insurance company. Section 111(1)(c) as it stands would not allow the Department to quote to the associate insurance company without the permission of the investigated company particulars of the unfitness revealed by that inspection. Such permission might well be withheld and it would then be impossible to give particulars of the unfitness required when action is contemplated under Clauses 22 and 23 in respect of a sitting tenant.
This Amendment would remove the difficulty. The position would be the same if the power of investigation under Clause 20(2) were used after the Bill comes into force, since Section 111(1) of the 1967 Act is applied to that clause by paragraph 16 in Schedule 1. Were the Amendment not made, it would be difficult, and in some cases impossible, to act on information in investigating one company in order to protect the policyholders of another, without first conducting a separate investigation into the second company. Not only would that waste time, but also it might fail to uncover separate evidence—for example, as to the unfitness of a person associated with both companies—and the Department would then be effectively baulked in its inquiries. I beg to move.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 64]
Schedule 3, page 43, line 29. at end insert—
"10. In section (Restrictions on transactions with connected persons) (7), in the definitions
1604
of 'company' and 'equity share capital' for '154(5)' there shall be substituted '148(5)' and in those definitions and the definition of 'share' for '1948' there shall be substituted '(Northern Ireland) 1969 ".
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 64. There are a number of Amendments to Schedule 3. I would propose that we take en bloc those up to and including No. 70. We have a small Amendment to make to the Commons Amendment No. 71. The explanation which I shall give will apply equally to all the other Amendments which follow. As your Lordships may recall, Clause 46, which is now Clause 56, applies the provisions of the Bill to Northern Ireland. At present there is separate provision in the Insurance Companies Act (Northern Ireland) 1968. Schedule 3 makes the necessary Amendments to apply the provisions of this Bill to Northern Ireland by substituting the appropriate Northern Ireland references. These Amendments now before your Lordships, which may be conveniently taken in the way I suggest, reflect the changes necessary as the result of the Amendments to clauses which we have been considering.
Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)

COMMONS AMENDMENTS
[Nos. 65 to 70]
Page 43, line 31, leave out from '12' to 'in' in line 33 and insert subsection (1)(b) and (c) the words 'Part II of the Act of 1967' shall be omitted;"
Page 44, line 22, leave out from "26" to "in" in line 23.
Page 44, line 35, at end insert "; in subsection (10) for 'Great Britain' there shall be substituted "Northern Ireland"."
Page 44, line 36, after "27", insert "in subsection (2A) for '1948','56(4)' and 'Act 1946' there shall be substituted respectively (Northern Ireland 1960', '27(4)' and '(No. 2) Act (Northern Ireland) 1946';"
Page 45, line 37, leave out "For section 31(4)" and insert "In section 31, for subsection (4)"
Page 45, line 41, at end insert "and in subsection (6A) for '245(1)' and '1948' there shall be substituted respectively '227(1)' and 'Northern Ireland) 1960'."
THE EARL OF LIMERICK: My Lords I beg to move that this House doth agree with the Commons in their Amendments Nos. 65 to 70.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)

COMMONS AMENDMENT
[No. 71]
Page 46, leave out line 16 and insert—
"30. Section 40 shall be omitted.
31. In section 42(2A) for the words "Great Britain" there shall be substituted the words "Northern Ireland".
32. In section (Statutory notice by insurer in relation to long term policy) for the words "Part II", "Secretary of State" and "section 59(6)" there shall be substituted respectively the words "section 3", Ministry of Commerce for Northern Ireland" and "the definition of "ordinary long-term insurance business" in section 72(1)".
33. In section (Service of notice of cancellation) for "26" and "1889" there shall be substituted respectively "24" and "(Northern Ireland) 1954".
34. In section (linked long term policies) for the words "section 59(6)", "Part II" and "Secretary of State" there shall be substituted respectively the words "the definition of ordinary long-term insurance business in section 72(1)", "section 3" and "Ministry of Commerce for Northern Ireland".
35. In section (Prevention of Fraud (Investment) Act 1958 not to have effect in relation to contracts of insurance) for "13(1)", "1958" and "26(1)" there shall be substituted respectively "12(1)", "(Northern Ireland) 1940" and "22(1)".
36. Section 43 and 45 shall be omitted."
THE EARL OF LIMERICK: My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 71 but proposes the following Amendment thereto:
"In line 2, leave out (2A) and to insert (1A)." This is purely consequential on the fact that we have negatived Amendments Nos. 46 to 48 and substituted the Amendments to Clause 42.
Moved, That this House doth agree with the Commons in the said Amendment but proposes the following Amendment thereto:
In line 2, leave out ("2a") and insert ("1a").

COMMONS AMENDMENTS
[Nos. 72 to 74]
Page 46, line 33, leave out from "(2)" to "House" in line 34 and insert "No order shall be made under section 1 or 28 above unless a draft of it has been approved by resolution of each".
Page 46, line 38, leave out from " omitted" to "in" in line 41.
Page 47, line 22, after "omitted" insert "; in subsection (3A) for `11 and 12' and '11' there shall be respectively substituted '40 and 41' and '40' and the words 'and the Act of 1967' shall be omitted".
THE EARL OF LIMERICK: I beg to move that this House doth agree with the Commons in the said Amendments, Nos. 72 to 74.
Moved, That this House doth agree with the Commons in the said Amendments.—(The Earl of Limerick.)
LORD DIAMOND: My Lords, as this is the last of the Amendments, I am sure that your Lordships would like me to thank the noble Earl, Lord Limerick, for the care with which he has entered into this marathon exercise which, happily, he will feel that he has now completed. Perhaps I may be permitted to make a very short comment. Although we are indeed grateful for the way in which the protection provided by the Bill has been developed through all the Amendments which have now been adopted, it poses in one's mind the question whether a straightjacket—although, of course, it is an ideal method of defending any person who is in communication with one so circumscribed—is the ideal garment for permitting enterprise, individual effort and so on. But, obviously, this is a matter which will have to be thought about, as will also whether another totally different approach to the problem of safeguarding insurance and safeguarding the insurers is required. So I return to the original purpose of my intervention, which was to thank the noble Earl for his explanation.
THE EARL OF SELKIRK: My Lords, may I second what the noble Lord, Lord Diamond, has said about the skill, care and clarity with which the noble Earl, Lord Limerick, has handled this very complicated subject. May I acknowledge, also, the consideration given to those of us who wished to understand it, and who were even bold enough to suggest improvements. We are very grateful.
THE EARL OF LIMERICK: My Lords, if I may, with leave, speak again, I would acknowledge with gratitude the remarks made, and say that we have paid attention to the comments made to us, and not infrequently we felt that we were able to act upon them and so to improve the Bill.

PAKISTAN BILL
6.29 p.m.
House in Committee.
House resumed: Bill reported without Amendment.
Then Standing Order No. 44 having been suspended (pursuant to Resolution of July 12).
BARONESS TWEEDSMUIR OF BELHELVIE: I beg to move, That this Report be now received.
Moved, That the Report be now received.—(Baroness Tweedsmuir of Belhelvie.)
LORD BROCKWAY: My Lords, I want to raise one issue on the Report stage of this Bill. During the Second Reading I raised the question as to whether the dependants of those who had registered here who came after Pakistan left the Commonwealth, or who may come in the future, will be allowed to become British citizens. The noble Viscount, Lord Colville of Culross, indicated that he thought they would automatically be accepted as British nationals because the heads of their family were already accepted as such. He indicated that he was a little uncertain about this, but that he would give an indication as to what the position was at a later stage of the Bill.
My Lords, I also raised the question of children born in this country to Pakistanis who might not be registered, or who might not be nationals, and it was indicated to me that if they were born in this country they would later be regarded as nationals. The point I want to stress on this Report stage is that it is very important indeed that these issues, and the decision reached on them, should be made clear to the Pakistani community, because within the Pakistani
1608
community there is great misunderstanding. I should be glad if some statement could be made about the two points I have raised and if an undertaking could be given that it will be made clear to the Pakistani community what the decision is.
VISCOUNT COLVILLE OF CULROSS: My Lords, this time I cannot possibly complain that I have not had notice of the question. If the noble Lord and the House will bear with me for one moment, I will just see whether I can go through what I think are three categories to see if I can get it right. The noble Lord asked about dependants who came here after Pakistan left the Commonwealth. They will have come here as dependants of a head of household who is already in this country. The first sort of head of household will be one who has already registered and has already become a citizen of the United Kingdom and Colonies and is being joined by his dependants. Those dependants, as I understand it, are themselves automatically registered as such citizens on their arrival. That is the first category.
There will, however, be others who come as dependants of Pakistan citizens who have been admitted to this country but have not yet registered. There is a fairly large variety of circumstances. If one looks at Schedule 2 to the Bill, one gets some idea of the different types of circumstance that might arise and the different dates upon which people may be able in the future to register, even if they are not at this particular moment qualified to do so. The dependants of those people will also be admitted into this country in the ordinary way, and their fate will follow that of the head of the household. If he registers and is successful under one of these transitional provisions, then as a result of his registration his dependants will become United Kingdom and Colonies citizens as well. He may not succeed in doing it by way of registration; he may have to do it as an alien, by means of naturalisation, because he does not fall within one of the transitional provisions. If he succeeds in that, his dependants will also follow suit. If he does not succeed under either of those heads, then, although his dependants may be here, they will all be here as aliens and

1609
they will be treated in the same way as other aliens. But there are fairly generous transitional provisions whereby people from Pakistan who have come here and have not yet qualified themselves for registration will have a period of time, indeed up to 1979, to do so, and their dependants will follow suit with them.
My Lords, as to children, a child born in this country, of whatever parents or at whatever time, is, as I understand it, a citizen of the United Kingdom and Colonies under the British Nationality Act 1948. I think the noble Baroness, Lady White, asked me that question, and I should have known the answer; but it is clear that that is so. I think those are the answers to the questions the noble Lord asked.
LORD BROCKWAY: My Lords, if I may speak again, could we have an assurance that this will be made clear to the Pakistani community in leaflets in Urdu and by co-operation with organisations in touch with the immigrants, because there is great misunderstanding about this matter.
VISCOUNT COLVILLE OF CULROSS: My Lords, if with the leave of the House I may answer, I think I said before that we were going to do everything we could to explain as simply as possible to the people concerned, whether by leaflets or by using the good offices of those who are in direct contact with the immigrant community, or through some other media, what the position is. I do not think there is any point in trying to explain every single complexity in this Bill, because that has caused enough difficulty to Members of this House and to Members of another place, and what it would do to the immigrant community, I do not know. But we will try to get the sort of simple explanation the noble Lord has mentioned over to those who are concerned.
Bill read 3a, and passed.

BANGLADESH BILL
6.38 p.m.
House in Committee:
Bill reported, without Amendment.
House resumed.
Then, Standing Order No. 44 having been suspended (pursuant to Resolution of July 12):
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I beg to move that the Bill be now read a third time.
Moved, That the Bill be now read 3ª. —(Baroness Tweedsmuir of Belhelvie.)
6.40 p.m.
LORD BROCKWAY: My Lords, I do not think that this Bill, which is quite historic, should go through without some comment. My comment would be this—and I hope the noble Baroness Lady Tweedsmuir will be able to confirm what I say—that we hope that Bangladesh, becoming independent, becoming a member of the Commonwealth, will have a future in which her vast economic difficulties as a result of that terrible war and and her relations with India and Pakistan may be solved in a way that will enable her to realise all the hopes that we have for her people, for her future and for our co-operation with her in the Commonwealth.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I should just like to reply to the noble Lord, Lord Brockway, and in so doing to thank all those who have taken part in the proceedings on this Bill and on the previous one. I sensed that your Lordships wished, following the long scrutiny which has been given to these Bills in another place, that this House should satisfy itself that all is well but that we should not prolong the proceedings. Therefore in reference to Bangladesh I should like just to say that of course we have had a very long-standing relationship with East Bengal and it was right that when Sheikh Mujib, as the first Prime Minister of Bangladesh, left Pakistan at the end of 1972 he should have come to London on his way to Bangladesh.
May I, on behalf of us all, say that we hope our relationship will continue to be as good in the future as it has

1611
been hitherto. We gave £12 million of relief aid, a great deal of which was for the reconstruction of transport and communications, which are of course quite vital to this country. We look forward very much to sharing economic development together—development which we hope will enable in the end this country to have self-sufficiency and to improve the standard of living of all her people. Therefore may I once again, as I did on Second Reading, wish her people well.
LORD GREENWOOD OF ROSSENDALE: My Lords, my noble friend Lord Brockway and I have been so frequently in a small minority in our Party that I should not like it to be thought on this occasion that my noble friend was speaking for only a small minority of noble Lords on this side of the House. The House will recall that on Second Reading we all extended felicitations to Bangladesh on achieving independence, and expressed our wishes for a prosperous and peaceful future. On behalf of the Opposition, I entirely endorse what has been said by my noble friend and the noble Baroness.
On Question, Bill read 3ª, and passed.

PIG PRODUCTION DEVELOPMENT (AMENDMENT) (NORTHERN IRELAND) ORDER 1973.
6.44 p.m.
THE PARLIAMENTARY UNDERSECRETARY or STATE, NORTHERN IRELAND OFFICE (LORD BOLSTEAD)THE PARLIAMENTARY UNDERSECRETARY or STATE, NORTHERN IRELAND OFFICE (LORD BOLSTEAD) rose to move, That the Draft Pig Production Development (Amendment) (Northern Ireland) Order 1973, laid before the House on July 11, 1973, be approved. The noble Lord said: the Pig Production Development Act (Northern Ireland) 1964 established the Pig Production Development Committee whose functions are to provide services and facilities intended to benefit pig producers, to make pig production more profitable and to encourage the genetic improvement of pigs in Northern Ireland. The members of the Committee are appointed by the Minister and are representative of the various agriculture interests.
The expenditure of the Committee is met from the Pig Production Development Fund established under Section 3 of the Act. The Committee makes payments to the owners of nucleus breeding herds to encourage them to test pigs at the pig testing station and to keep farm records; it provides two-thirds of the capital costs of the testing station and 100 per cent. of the running costs; it pays incentives to encourage the dissemination of high-quality breeding stock; and it is underwriting a pig artificial insemination service for a 2-year trial period. The only source of income of the Fund is the levy on each pig sold to the Pigs Marketing Board. At present this levy is fixed at 5p per pig, the maximum level permitted under Section 4 of the Act. The income provided by this levy is insufficient to allow the Committee to meet its present commitments and proceed with its plans, which include the building of an extension to the Northern Ireland Pig Testing Station.
This Order amends the Act to allow a levy of up to 20p per pig to be collected. However, the intention in the first instance is to raise the levy to 10p only The Ulster Farmers' Union and the Pigs Marketing Board are content that the Act should be amended in this way and that the levy should be raised from 5p to 10p per pig, although the Order is an enabling one for a larger rise later if necessary. I beg to move.
Moved, That the Draft Pig Production Development (Amendment) (Northern Ireland) Order 1973, laid before the House on July 11, 1973, be approved.— (Lord Belstead.)
LORD GARNSWORTHY: My Lords, the House will welcome the very clear statement made by the noble Lord, Lord Belstead. The uses to which this levy are to be put are doubtless very admirable. Nevertheless, I think note ought to be taken that it is a pretty tremendous increase from 5p to 20p—something of the order of 400 per cent. One can only hope that the results of the services will justify the increased expenditure. I did take note of the explanation given by the noble Lord and of the care that would be taken with regard to the increase. Nevertheless, the Order does permit an increase of the size I have

1613
indicated, and I think it is proper that we should take due note of that fact.

MR. SPEAKER NEILL'S RETIREMENT (NORTHERN IRELAND) ORDER 1973.
6.47 p.m.
LORD BELSTEAD LORD BELSTEAD rose to move, That the Draft Mr. Speaker Neill's Retirement (Northern Ireland) Order 1973, laid before the House on July 16, 1973, be approved. The noble Lord said: My Lords, the purpose of the Draft Order before the House is to make provision for an annuity for the former Speaker of the Northern Ireland House of Commons, Mr. Speaker Neill, who retired on March 31. The Parliamentary and Other Pensions Act which was enacted last year created a formula for awards and provides authority which obviates the necessity of periodical legislation to provide a pension for a retiring Speaker of another place, which had hitherto been necessary. No such legislation exists in Northern Ireland, and this Draft Order is therefore before the House. It provides an annuity for Mr. Speaker Neil based on one-third of his salary, which corresponds to the previous superannuation award to a Northern Ireland Speaker, but, taking account that this salary was fixed in April, 1965 (which in fact was before Mr. Speaker Neill became Speaker), it is considered only reasonable to increase the pension by the amount by which it would have been increased under pensions increase legislation had it been awarded in April, 1965. This produces a figure of £2,260, and in addition to this Mr. Speaker Neill will be permitted to draw a Member's pension of £665. The Ministry of Finance for Northern Ireland will, by Regulations under the Pensions (Increase) Act (Northern Ireland) 1971 (Ch. 35), provide for future increases of the pension, as they will for the pension of the previous Speaker whose pension is also now eligible for increases. My Lords, I beg to move.
Moved, That the Draft Mr. Speaker Neill's Retirement (Northern Ireland) Order 1973, laid before the House on July 16, 1973, be approved.—(Lord Belstead.)
LORD SHACKLETON: My Lords, I must apologise to the noble Lord, Lord Belstead—I had not heard on the loudspeaker that he was up. I just wanted to say that this seems to be entirely right. I do not think we ought to let this Order go by without expressing appreciation to Mr. Speaker Neill for his services, which towards the end must have become arduous. The Government have arrived at the right solution in an area where obviously there are difficult points of judgment. There is no obvious standard. Pensions were not automatically paid in the past, but we have arrived at the right answer.

AGRICULTURE ACT 1967 (AMENDMENT) REGULATIONS 1973
6.50 p.m.
EARL FERRERS: My Lords, I beg to move, That the Draft Agriculture Act 1967 (Amendment) Regulations 1973, laid before the House on July 11, 1973, be approved. At the same time perhaps we may also consider the other two Orders which are standing in my name on the Order Paper. All three Orders are tied up with amalgamations of farm units.
They deal with annuities or lump sum payments to outgoers, and also payments of grants for amalgamations. There are some differences in the new Scheme from the one which is in current use. I am perfectly prepared to explain those differences to your Lordships if you wish it. On the other hand, your Lordships may feel that it would be more desirable to take these formally in each case. I beg to move.
Moved, That the Draft Agriculture Act 1967 (Amendment) Regulations 1973, laid before the House on July 11, 1973, be approved.—(Earl Ferrers.)
LORD CHAMPION: My Lords, I think we ought to have some explanation. Up to now, with the existing Act we have had schemes for the amalgamation of farms to make them viable units. This still will be the case, I gather, under Orders that are now before us; but they introduce a number of new features consequent upon our entry into the E.E.C. It would be right to place on record what those differences are and how they will apply to

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those people who will be seeking amalgamations in order to bring about these viable units which are so badly needed. I do not know the extent of the differences to be made. The fact is that on the Continent as a result of the laws of inheritance they have been cursed in having too many too small units which have been completely unable to produce a decent standard of living for the people who were trying to make a living from them. It was right that on the Continent they should do something about this, but I wonder to what extent the fact that we are fitting these schemes into the E.E.C. schemes will affect, either badly or to their advantage, the farmers in this country. I think the noble Earl should explain this. I am sure he has the material with him, and I think it ought to be on the Record.
EARL FERRERS: My Lords, I am entirely happy to explain the provisions of these three Orders because they contain new details. If I could refer to the first one which is the Agriculture Act 1967 (Amendment) Regulations 1973, we have always thought it right that a helping hand should be given to the occupier of a one-man farm who wants to resettle or retire and is willing to release his land in order to create or expand the farm large enough to provide work for two men. This particular scheme alters the powers of the Agriculture Act in three ways. First, it enables payments to be made for amalgamations which are carried out by leasing extra land as well as for amalgamations by purchase. This extension to leasehold amalgamations is not likely to have a material effect on the predominance of amalgamations by purchase, but it is expected to be of value in some cases where there are obstacles, such as trusts, to transfer of ownership.
Secondly, these Regulations enable payments to be made to an outgoer who gives up land for afforestation or public use, as well as in cases where all the land goes for farm amalgamation. There have in the past been cases where it is clear that the best use for all or part of the outgoer's land was not agriculture but afforestation. In such cases the outgoer will now be able to receive payment in respect of that land. As a safeguard against undesirable afforestation, para
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graph 9 of the outgoer's scheme makes it clear that payment will not be made on land released for afforestation unless the land is more suitable for forestry than for agriculture. Land released for public use would cover cases where, for example, the landowner acquires an outgoer's land mainly for planting, but proposes to use some of it for a public car park or a picnic place. It will facilitate the use of land for recreational activities or nature reserves, where appropriate. But grant will not be given for the release of land for public use where it would merely duplicate the provisions made under the Acts on land compensation.
Thirdly, the amending Regulations extend the factors which can be taken into account in deciding whether an outgoer is what one might call a full-time farmer. They enable a test to be based on his income from agriculture in general rather than just from the land he is giving up. This will widen the field of eligibility. These are Amendments which will enable the Community Directive to be implemented; but they are also desirable changes in their own right.
Now if one could look at the Farm Amalgamations Scheme, this gives effect to the changes announced on November 8, 1972. The existing scheme affords amalgamators a special rate of grant under the Farm Capital Grant Scheme if there is a need for new buildings, roads, or other "remodelling work". Instead of the special grants, paragraph 8 of the new Farm Amalgamations Scheme provides that the amalgamator will receive an acreage payment of £12·50 on the additional acreage obtained from the amalgamation up to a maximum of £1,250. The purpose of this is to assist farmers, many of whose needs are not so much for fixed equipment, but working capital for such things as livestock and farm machinery. Amalgamators will, as they are now, be required to maintain the amalgamated unit and not change its agricultural use without the Minister's consent for five years. In future, under the powers conferred in the Agriculture (Miscellaneous Provisions) Act 1972, the requirement will be personally binding on the amalgamator as a condition of grant instead of being registered as a land charge. The scheme no longer offers grant for boundary adjustments. We have found that this

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provision attracted very few applicants —in fact fewer than 200 since the inception of the scheme.
If I could now refer to the Payment of Outgoer's Scheme, I should like to draw attention to the alterations here. The annuities available to those of 55 years of age or more have been increased to a new minimum of £250, plus an annual payment of £2 per eligible acre, up to a maximum of £450. The lump sum which is available to those under 55, and also to those between the ages of 55 and 65, who have the choice but who prefer a lump sum to an annuity, has not been changed at the minimum, but the acreage payment has been increased from £10 to £20, while the maximum available has been raised to £3,000.
There are three other main changes to the schemes which will enable more farmers to benefit than hitherto. Under the existing scheme an outgoer must have occupied his unit on or before August 5, 1965. This scheme alters the date to January 1, 1973. The income tests have been modified to take account of the applicant's earned income only. Under the present scheme the total incomes of both husband and wife are taken into account. The next test requires not less than 50 per cent. of the applicant's earned income to have been derived from farming during a period of five years, and where other income does not exceed that from farming by more than £500. We do not wish to exclude from the main grants those people who, while they are occupied mainly on their farms, nevertheless supplement their income from other part-time employment.
A further condition is that outgoers should have spent not less than 50 per cent. of their working hours in farming during the five years prior to application. This requirement ensures that the main grants go to full-time farmers. Those who are not full-time farmers, however, will also be able to benefit from the Scheme which provides some incentive to part-time farmers. There are many uneconomic holdings in the United Kingdom where the occupier undertakes other forms of work in order to improve his income. Such a man will not qualify for the main grant if his income from other employment is more than £500
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above that from farming. But the Scheme provides an acreage payment for these cases at the rate of £10 an acre, subject to a maximum of £1,000. In all cases the first 10 acres do not count for the purposes of the acreage payment which is made on the area above 10 acres up to a maximum of 110 acres; but even below 10 acres full-time farmers are entitled to the minimum payment.
With these new conditions and the wider scope of the grants and improved incentives which are being offered, it is hoped that applications will have trebled by 1977–78, rising from the present level of about 1,000 a year to 3,000 a year or more in five years' time. Taking this into account, the changes which are now embodied in the new Scheme will cost an estimated additional sum of £11 million by 1977–78. This means that during the first five years of the Scheme we expect to incur a total cost of something approaching £27 million. There will be a contribution from FEOGA as a result of our membership of the European Economic Community, but it will be very small in relation to this expenditure—we estimate about £½ million in all over the next five years.
We hope that these Schemes will encourage more farmers to increase the size of their farms and therefore their incomes by undertaking amalgamations. When drawing up these proposals, the agricultural Departments have kept closely in touch with the organisations representing the agricultural industry who have welcomed the improved arrangements for outgoers, and there is every reason to hope for a good response from farmers and landowners. I hope that I have been able to explain to the House and to the noble Lord, Lord Champion, some more detail of these Schemes.
7.3 p.m.
LORD CHAMPION: My Lords, by leave of the House, I would thank the noble Earl for having placed that information on the Record. There is just one point that still worries me. He tells me that compensation is going to be paid for farmers who leave their land for public use. This seems to me to be right outside an agriculture scheme altogether and ought to be included in some compensation provisions under other Acts of

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Parliament rather than under Regulations of this kind. This seems to be entirely new. I know that the afforestation is something new in this connection (at least, I think it is), but to talk in terms of an operation of this kind in relation to farmers who get out of their land in order that it can be used, say, for roads or something of that sort—I take it that public use must be involved—would seem to me to be rather strange if it is to be done in this way, having regard to the fact that we have Acts which provide for compensation for that type of situation. I wonder whether the noble Earl could help the House on that point.
EARL FERRERS: My Lords, if I may be allowed to clarify that point, the noble Lord, Lord Champion, is quite right to be concerned about it. The point that I would make is that where there is any form of compensation under other Acts, then this will not be duplicated in this particular instance. The type of public use which could be exampled is, for instance, where a small unit may be joined on to another unit and part of that small unit may, for instance, be made into a picnic place or something for some other public use for which there is no outside grant or outside compensation under an Act. Up to now it was impossible to allow compensation to outgoers whose land was not specifically given to further agriculture. This scheme is designed first to bring it into line with the European Economic Community's organisation and, secondly, to enable cases such as this to be allowed to be undertaken. But I can reassure the noble Lord that there is no possibility of a grant's being duplicated and where land is subject to compensation as a result of other Acts there will not be a possibility of this being taken twice.

FARM STRUCTURE (PAYMENT OF OUTGOERS) SCHEME 1973
EARL FERRERS: My Lords, I beg to move that this Scheme be now approved.
Moved, That the Draft Farm Structure (Payment to Outgoers) Scheme 1973, laid before the House on July 11, 1973, be approved.—(Earl Ferrers.)

FARM AMALGAMATIONS SCHEME 1973
EARL FERRERS: My Lords, I beg to move.
Moved, That the Draft Farm Amalgamations Scheme 1973, laid before the House on July 11, 1973, be approved.—(Earl Ferrers.)

THE HOVERCRAFT INDUSTRY
7.6 p.m.
THE EARL OF KINNOULL THE EARL OF KINNOULL rose to ask Her Majesty's Government whether they will give a review of the progress of the Hovercraft Industry. The noble Earl said: My Lords, in rising to ask the Question on the Order Paper on the progress of the Hovercraft Industry I should like to thank at the outset, as I shall not have a chance later, the noble Earl, Lord Halsbury, for putting down his name to take part. The noble Earl has played such a distinguished part in the relatively short history of this technology and I understand was virtually at the birth, as a midwife, when he was with the N.R.D.C. It is appropriate, therefore, that he should now be chairman of the Parliamentary Hovercraft Group in succession to the late Lord Delacourt-Smith, whose expertise and interest is much missed on this subject. I hope that later my noble friend Lord Kings Norton may also feel moved to speak, particularly after his close connection with Hovercraft during his distinguished career as Chairman of the old A.R.B.
The invention of the Hovercraft principle by Sir Christopher Cockerell in the late 1950s has proved, in my submission, one of the more spectacular British inventions of this century. Its many wide and varied applications are, I know, well known to the House, in its role in civil transport, in its military capability—with two years' active service in Vietnam—in its industrial application with the hover platform, in its medical application with the Hoverbed for badly burnt patients. And many believe still it has an immense untapped future in the leisure market with small hovercraft. But, above all, its unique amphibious characteristic offers a host of uses which no other form of

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surface transport is able to perform—from operations over ice packs in the Arctic to rescue operations in swamp conditions in some of the undeveloped countries. These are the characteristics which make the invention so spectacular.
The purpose of the Question to-night is not only to ask the Government what progress has been achieved in the recent past but, perhaps more important, to ask, where do the Government see the industry going over the next decade and what positive policy are the Government adopting to cater for this? When one talks of the future of the industry, my noble friend will be well aware that there is a growing belief, indeed to some an unenviable truth, that Britain is fast losing the impetus and will to remain in the forefront of Hovercraft development. The evidence for this gloomy prediction is seen by the fact that at the very time when the Government's policy includes the termination of their financial support, and the dismantling of their own Hovercraft Directorate within the D.T.I., foreign Governments are announcing substantial financial programmes in the development of their own industries. We see, for instance, in the United States a 40 million dollar programme, which was announced last year, for the development of the second generation craft; and in France the Government, I understand, have just announced an order for two craft worth 40 million francs to compete against the S.R.N.4 on the Channel crossing. These craft, one assumes, will be larger and no doubt more economically competitive. And in Japan there is, I understand, a substantial Government programme of research and development for their industry.
All this points to an unhappy but familiar pattern, where yet another British invention is being forced to surrender, through lack of financial support, to foreign competition. We have seen it in the computer industry and we have seen it in the fuel cell invention. In the case of hovercraft, if no further Government support is forthcoming on new designs, we must surely see the surrendering of the very threshold of a break-through in the commercial viability of the invention—the second generation of the craft. Our foreign competitors will be free to recoup the benefit of our experience over these last 15 years.
Why have the Government seemingly lost faith in the industry? I believe the answer was due to a combination of events: first, a climate of drastic pruning of Government expenditure (which happens to all Governments), and, secondly, because, despite all its potential, the present craft had attracted only a very limited home market and virtually no foreign civil market at all. How, it must have been argued, can the Government justify substantial public investment in developing new craft when there appears a total lack of demand for the existing one? If this was the Government's view I believe it would be a wholly unfair judgment on such a relatively new and advanced technology. I believe it can be shown that the first generation craft, although not wholly a commercial success, have greatly improved over the years: the noise problem is being tackled, existing craft are being stretched, with the same engine power. Both the S.R.N.4 and the S.R.N.6 have been stretched, the former being under development at this moment.
Little direct support has ever been given to the three pioneer operators, and yet two of them—Hovertravel and HoverIloyd—have each demonstrated that they can make a profit with the Mark I craft. The level of growth of passenger traffic by hovercraft has shown a dramatic upsurge. In the case of the cross-Channel route, Seaspeed and Hoverlloyd have won a traffic share in five years from zero to 33 per cent., and this with only five craft.
It is an odd fact that with the hovercraft winning such a dramatic share of traffic across the Channel, in the space of only five years, its future should merit only four lines in the Channel Tunnel Study Report. This is a matter on which I am sure the noble Earl, Lord Halsbury, will comment later. Another significant plus factor for the first generation craft is that the industry has earned so far no less than £30 million export sales of military hovercraft, and this from a total Government investment to date of some £14 million, spread over 15 years. In this, of course, I am not including the hovertrain development.
What should the Government do to prevent the industry losing its technical lead to foreign competitors? I believe there are three priorities. The first

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priority is that the Government should agree now to be prepared to enter into supporting a new design of a second generation craft—a craft that is larger, faster, less noisy and more economical in power. The benefit of such a move would be to retain the impetus of the industry, to compete with foreign development and to keep together the expertise of the present design teams. The second priority, which I believe will prove a great fillip to the industry, would be to restore the financial support for the developing of existing craft and to erase that rather unhappy phrase—the terminal grant. This phrase in itself must have been sweet music in the ears of a foreign competitor waiting in the wings to pick up the British industry's pieces. Perhaps my noble friend could comment later and say whether all the terminal grant has now been used. The third priority is perhaps one which the Government are already actively considering. It is to examine what areas of development could perhaps be carried out as a joint venture with either the French, Japanese or United States industries.
There are other areas in which I believe the Government could assist the industry, at very little cost to themselves. Help, for instance, with the training costs of hovercraft captains, perhaps through the joint Inter-Services Unit; help with the financing of hovercraft purchases, on the lines offered to the ship companies; help by awarding the operators the carrying of mail contracts; help by considering the use of hovercraft within the overseas development programme, particularly as there is now scientific evidence that the hovercraft application can improve the quality of life in certain underdeveloped countries. In saying that it is perhaps significant that over two years ago the United Nations commissioned a British consultant, Mr. Anthony Brindle, to prepare a report on the beneficial use to which hovercraft could be put in the underdeveloped countries. I understand that this report was submitted to the United Nations some 12 months ago, and perhaps my noble friend could say later whether the Government have seen a copy of the report and what action within our United Nations delegation is being sought to press for the publication of the report.
Yet another aspect where the Government could support the industry is in the military hovercraft role. The trials and evaluations carried out by the joint Inter-Services Unit at Lee-on-Solent must be one of the most exhaustive ever undertaken. I know this unit has been of very great value to the industry and it would be of interest if my noble friend could say whether any of the three Services yet sees a requirement for hovercraft and whether the tests are still being evaluated. Again, have NATO shown any interest in military hovercraft; and would the information gleaned at the unit be available to the NATO forces?
Turning briefly to the operators, my noble friend will be aware that Seaspeed operates a parallel service across the Channel and across the Solent in competition with two other operators, Hoverlloyd and Hovertravel. My noble friend will also be aware that Seaspeed has built up accumulated losses of some 3½ million in competing with these private companies that do not enjoy this cushion of support. Would my noble friend agree that it would be wholly wrong for Seaspeed to use this subsidised advantage to drive off the private operators? And would my noble friend also agree that at this important stage of hovercraft transport it would make a great deal more sense if operators could share the facilities of hoverports, rather than having wasteful duplication only a few miles apart? As to the future of Seaspeed, while I appreciate that the policy of Seaspeed is a matter that lies with British Rail, will my noble friend confirm that the Government would have no objection to Seaspeed either merging with independent operators or selling out their interest? Perhaps I may ask my noble friend one final question on an application of hovercraft quite foreign to transport, namely, the hoverbed. Can my noble friend advise us what progress has been made by the Medical Resarch Council on this fascinating invention?
In conclusion, I hope my noble friend can assure us to-night that the Government have not lost faith in the hovercraft industry; that they are ready to support a new development, if called upon to do so, and that they have got a positive policy to assist the industry in the face of increasing foreign competition.
7.20 p.m.
THE EARL, OF HALSBURY: My Lords, in rising to support the noble Earl, Lord Kinnoull, I am sure that I express the gratitude of all those Members of your Lordships' House who are interested in Hovercraft for the interest he has taken for so long, for putting down this Question this afternoon and for keeping the torch burning. With your Lordships' indulgence I should like to tell you a little of the history of this matter. On April 16, 1958, Christopher Cockerell, as he then was, came into my office bearing close to his heart a letter of introduction from the noble Viscount, Lord Caldecote, the patent specification, a working model of the hovercraft and three pages of mathematics which gave the first explicit formulation of a new principle of the inwardly directed jet. His hovercraft invention had been on the secret list for so long and taken off so late that there was neither time nor money to make foreign patent applications within the Convention date. In this I took rash action, because the whole of the foreign patents would have been lost to the country because there was a Swiss inventor who had filed after Cockerell but before the end of the Convention date, so all those valuable patent royalties that Hovercraft Developments Limited would have earned from foreign sales would have gone to Switzerland.
The next step was the setting up of a little company called Hovercraft Developments Limited. It had a number of functions. First of all, Cockerell was given some active participation in it, patents were assigned to it and it became the focus of the first development contract for the Saunders Roe SRN 1. I call them "1", "2" and "3" but there was only one hovercraft, the SRN, which did not have a skirt; all the others had skirts. About a year after that, I had completed ten years' service with the N.R.D.C. and wanted to return to industry. Through the courtesy of my ex-colleagues I was kept informed of what was going on, but I had nothing officially to do with them because there was further use in industry for their activities. A lot of second-line supplies are necessary for hovercraft operating in different conditions: for instance, windscreen wipers. My energies were often employed in seeing that the right compon-
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ents reached the hovercraft builders. This was not altogether unsuccessful.
The hovercraft segmented skirt was the invention of Mr. Bliss. The skirt is a pure piece of engineering intuition, and even yet it is still not known fully how it works. Work went on under Cockerell and, with the exception of the team at Saunders Roe, anyone who is anyone in the hovercraft industry started with Hovercraft Developments under Cockerell. The segmented skirt has proved Protean in its applications. As the noble Earl said, one can convert it from the vertical to the horizontal and make a bed, one can strap it round a quarter million ton oil tank of 150 tons deadweight steel and tow it a quarter of a mile across country. One can build a platform the size of a hockey field, strap a skirt round it and manoeuvre it about ice floes. That was done in Canada. Although your Lordships may not think that people really want to move things around in this way, the surprising fact emerges that they do. Next year, a 3,000 -ton hoverplatform, complete with oil rig and living quarters for the crew, will be in operation; this follows the operation of a smaller prototype this year. Then there are the various hover-ferries with which your Lordships are familiar.
To ask, "What are the principal uses of the hover principle?" would be like asking, "What are the principal uses of the wheel?" There are no principal uses; it is a general purpose device. To say that it is general purpose and possibly ubiquitous does not mean that it is universal. One does not use a wheel in ski-ing or skating, unless one is roller skating, and there are contexts where it it better to employ a wheel than a hover machine. For draining marshes and acting as a traction device where wheeled or tracked vehicles would get bogged down, the hover platform is superb.
My Lords, during the 15 years that have passed since it all began, a number of alternatives have been tried out. First of all there are the merits of the soft or H.D.L. type skirt versus the hard or B.H.C. type skirt; there are the merits of the amphibious versus the side wall hovercraft in different contexts; there are the merits of the propeller versus the ducted fan as a means of aerodynamic drive and the elimination of noise, and

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these are the merits of the screw as a means of marine propulsion versus an updated paddle wheel for hydrodynamic drive. In this connection, Sir Christopher Cockerell, in retirement, looking over Southampton Water, watching the children of his brain ply up and down, is to be found surrounded by the patent literature and the text-books of the last century, re-inventing the paddle wheel as a means of silent, high-speed marine drive, going at it with his usual fertility of mind on a shoestring grant of £5,000 from the Royal Society, now nearing termination, and eked out by whatever amount of his private fortune he is prepared to invest.
With the exception of the paddle, all these matters are reaching resolution. It is beginning to be possible to specify what the noble Earl again called the second generation hovercraft; I call it the third generation, but we are talking about the same thing. It is beginning to be possible to see what the second generation will look like, and other nations are sitting up, taking notice and contemplating their design. Therefore it will be a public disaster if the Government's intention, announced through various Ministerial pronouncements both in public and private, to abandon further support for the first generation hovercraft were to be implemented. This needs to be implemented by turning it into the second generation hovercraft, and the time to do it is now. It is the wrong moment to attempt to withdraw support. Governments of all complexions—I have to address the Government of the day in this context, but if noble Lords on my left were to exchange places with noble Lords on my right I should still find myself addressing the same instruction to them—constantly preach competitiveness to industry. When will they learn to compete with other Governments with respect to the support they all give to their domestic industry in one context or another? One must practise what one preaches.
As the noble Earl has said, further Government expenditure on the hover-train was terminated. If this decision was right, if this was the right thing to do, why is it that the German industry, with Government support, is producing a slow speed hovertrain with
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application to suburban transport, in Toronto? Once again we have missed the bus. The patent rights are here, the know-how is here; only the will to succeed is lacking. I used to say sometimes to my colleagues at the N.R.D.C., when someone seemed to be dragging his feet, "I can provide the money but not the will power. Someone in executive control has to provide that." In those circumstances this is what we are lacking. It is no good saying that magnetic drive and suspension will be transferred to Hawker Siddeley. The leaders are the chaps with the enthusiasm, and they want to go to Imperial College, where the whole thing started; and that is where they will go if they can get the necessary support. You cannot turn to a free Englishman and say to him, "You will now be employed by Hawker Siddeley". I am afraid this is a non-starter and that is why the whole approach was no good at all.
I have posed problems to the Government, but what is the N.R.D.C. going to do about it? I do not want to address stern parental admonitions to them, but they may perhaps forgive me for a little therapeutic acupuncture, a little pinpricking. They are profitable and prosperous. They have paid off a number of loans from early days. They have several million in the bank and a large positive cash flow; they are making profit. All this is splendid and all this is derived from what my colleagues and I started a quarter of a century ago. What are the N.R.D.C. going to put that money into now? They are no longer the young commandos of mid-thirty-year-olds whom I recruited in those far off days. We are all a little older and all suffering from middle-age spread. I think they ought to try to jack themselves up from down under and work on high risk enterprises. They are ten times the size that they were in my day. That is excellent. I had £5 million to play with and I needed only £2½ million to do all that I did. They have £50 million at their disposal and they have still not drawn on more than £25 million. Their tendency has been, I think, to back low-risk enterprises on a large scale instead of doing what I believe is the right thing; that is, to back a small, select number of high-risk enterprises on a small scale to start with.

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What could they do? First of all, they have had what is called a model 58 skirt in cold storage since 1967. They are just sitting looking at it. They could perfectly well put it on to a CC7 or a modified N6. I apologise for these technical names, but I have no others to use, because they go by numbers. One is a little hovercraft and the other is that which goes from Southampton across to Cowes. Scrap the model 58 skirt, which is the ultimate in soft skirt design, and resolve the problem whether you should have a soft skirt or a hard one and thereby contribute to the next generation of hovercraft.
Next, they could help the civil engineering industry to develop the high pressure skirt so that concentrated loads could move about. At the present moment the hover platform does not operate at higher than about 1 lb. per square foot (or is it square inch?—I cannot remember) but they want 10 lb. of pressure. Thirdly, they could give the industry a workhorse, a prime mover designed for hovercraft only and specifically designed. All the amphibious hover ferries currently use gas turbines for lift and propulsion picked from whatever is available in the aero-engine industry. They are much too expensive in prime cost and the upkeep cost is really frightening. They were designed to be super-lightweight objects, because weight is very important in designing a prime mover for aircraft; it is a good deal less important for hovercraft. What we want is a light industrial gas turbine suitably marinised. The Enfield Marine Company's E.M.2 freighter—and this is financed by a Greek shipping line—is using a light industrial gas turbine, but it is bought out in America. It is made by the Waukesha Motor Company and it is the 400 horse power Waukesha T400L. It was developed for standby plant, for pumping stations and so on. What we want is a workhorse hovercraft, possibly in two size ranges, a big one and a little one, or even three; and that is what N.R.D.C. could profitably do with its money.
What can the Government do? They can intervene decisively with a directive to resolve the buck-passing going on between the airport authorities and the airline operators over who ought to own hoverpads for removing crashed aircraft.
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It is generally agreed that this is the final solution to a most difficult problem. The obvious thing is for the airport authorities to own them. It seems absolutely absurd that every airline operator should have to own one hover platform in order to put it to use perhaps once in five years. It should be the definite responsibility of the airport authorities to own a facility which can remove anything up to a crashed Jumbo off the crowded runway and get it to somewhere where it need not be cut up into pieces. This is what has to happen to them at the moment. Lloyds are in favour of this. There would be a big export potential for this hover platform if only we could say that we are using it in this country. If we are not using it in our country the importer at the other end says: "It cannot be very good if you are not selling it to your own nationals". So here is a clear case for a Ministerial directive.
Secondly, the Government could help the operators. I will not repeat all that the noble Earl has said, because other noble Lords want to speak, and I think he said it all so clearly and ably that it is not necessary for me to do more than to say that I agree with every word. I want to see a situation in which people operating hovercraft are going to compete flat out to knock shipping out of the routes, and then we shall find out whether they really can or cannot. But so long as they are owned by British Rail, which does not want to see either of them win because it means writing the other off, they will never be allowed to compete flat out.
Then we come to the Chunnel problem. Again the noble Earl has put his finger right in the centre of this problem. He mentioned five craft, four of them N6.s and one stretched N5, distributed between Seaspeed and Hoverlloyd in the straits crossing. As the noble Earl said, they are carrying a third of the traffic. Multiply by three, and you want about 15 at about £3 million each, which is £45 million, and they take the whole of the Chunnel motor traffic as fast as the Chunnel, with as much convenience to the passengers, and the terminal facilities would be just as easy to provide—£45 million instead of (what is the latest figure?) £800 million, of which our share is half, £400 million. That is still a nearly ten to one ratio. Ought we not to do some really cool thinking about this?

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It may be that the Government want to pull out, but let me again remind your Lordships what the noble Earl said about the rate at which the Americans are pulling in. They are making naval craft of up to 2,000 tons. So far they have spent, apart from current spending, £84 million. There is the £40 million or so that the noble Earl added to the development projects that are now in hand. In Britain, expenditure has been about £17 million, of which £3 million was provided by N.R.D.C. Her Majesty's Government now propose to step that down. France has spent £4 million and is stepping it up; Canada has spent £4 million and is stepping it up on an active lively research and development programme. No one knows what the Japanese have spent, but they are talking of 600 ton hovercraft for ferry work, and it is quite certain, I think, that these craft will not be military craft. But there is a big demand for military craft so far as users are concerned. The Persians seem to be building up what will in the future be a 100-knot Navy of these light craft. Is Britain going to be the only country which has not got a 100-knot Navy in a few years' time?
Remember that the Admiralty, as it then was, fought off every progressive invention from the time of the lightning conductor through the screw-driven ship up to the hovercraft themselves. One must never never listen to marine engineers on a marine problem of this kind. I regret to say that there was an anti-hovercraft lobby in the Ministry of Technology which did a tremendous amount of damage for no worthier motive than competitive empire building. I hope no trace of that lobby remains, and I would invite the noble Lord who is to reply to give an assurance that if anything is hiding under stones in the way of an anti-hovercraft lobby it will be shooed off the premises without any respect to persons.
It has been written that a prophet is without honour in his own country. It has been said that the British are good at making inventions but not good at developing them. This cannot be generally true, because we have developed a lot. But we may be slow in recognising when an invention worth developing has landed among us. It was once my official responsibility to accelerate this progress. It is still my hobby. I therefore ask
1632
Her Majesty's Government what they are going to do to practise what they preach, to compete vigorously with other Governments in respect of the support they give to what matters for the future of new growth points; it is not only hovercraft but all new growth points. So far, there has always been a massacre of the innocents every time the Government cut back on expenditure. It is always the growth points that suffer. The hovercraft is just such a growth point. Has it got to be massacred by the Government, through indifference on the one hand, or Departmental lobbies on the other?
7.40 p.m.
LORD KINGS NORTON: My Lords, I did not put my name down to speak in this Debate, but there are just two things I should like to say before the noble Lord, Lord Drumalbyn, replies. First of all, I should like to offer my complete support for everything the noble Earl, Lord Kinnoull, and the noble Earl, Lord Halsbury, have said. I think they have again made it abundantly clear, if that was ever needed, that this is a most important industry we are talking about, and one which deserves the utmost support from the Government for the technological advances which are its potential.
I think that all that has been said this evening has been about hovering by means of an air cushion. Indeed, in the Bill which the noble Lord, Lord Beswick, piloted through this House five years ago, the Hovercraft Bill, the hovercraft was defined as an air cushion vehicle, a matter on which he and I disagreed at the time. I pointed out at that time that just as there are more ways of killing a cat than choking it with cream, as the late Charles Kingsley said, there are more ways of hovering than on an air cushion: you can be sucked up, you can rest on jets, you can rest on magnetic repulsion, particularly electro-magnetic repulsion. I do not think that I am out of order in suggesting that something that hovers by means of electro-magnetic repulsion is not a hovercraft.
If that could be agreed, I should like to make a plea once again for the hovertrain. The hovertrain, which started life as a train propelled by a linear motor but supported by an air cushion, has reached the stage of being a train not only propelled by a linear motor but supported by that same motor by electro-magnetic

1633
force. This is one of the great advances that has been made in this country in the last few years. In this field we are ahead of the Americans, the Japanese, the French and the Germans, but we are not exploiting this tremendous invention as we ought. When one learns of the immense sums which are likely to be committed to the establishment of ancient technologies, in Channel tunnels, and in long concrete runways, one feels that surely there must be the odd million or two available somewhere to support some work which could put this country in the forefront of one of the latest means of transport. It is not long since we were struggling to keep the experimental track at Earith in Cambridgeshire on which the hovertrain did its initial work; and then a few months ago Tracked Hovercraft Limited, was disbanded and the people—perhaps they did not want to go to Hawker-Siddeley, as the noble Earl, Lord Halsbury, said—went across the Atlantic. There are nine of them in North America, and it is tragic that the sort of expertise that we built up so seriously and so well should be just given away in this fashion.
I heard a rumour the other day that after all this track at Earith was not going to be thrown away, and that the vehicle would still be there for further experiment. I should like the noble Lord who is to reply to comment on this; and if he can tell us that arrangements are being made—and I have some suspicions that they are—to maintain this train so that we can demonstrate to the whole world that the British linear motor, with its transverse induction motors, can provide magnetic repulsion, can provide hovering for this new form of track, I think that we shall have an asset which will be worth many hundred of millions of pounds to us, because we should be right in the forefront of a method of travel which would not only be fast but would be extremely economic.
LORD RANKEILLOUR: My Lords, I also did not put my name down to speak on this Unstarred Question put by my noble friend Lord Kinnoull, but I should like to ask whether or not, with the huge exports and home markets that this system has for the United Kingdom, there could be a Government department known perhaps as the Ministry of Hover Power? After all, it is a long time
1634
since Sir Christopher and his cocoa tin hit the headlines, and it took longer for his genius to be recognised and rewarded; yet still this Kingdom does not realise the potential of this remarkable invention.
LORD BESWICK: My Lords, I am yet another one who has not put his name down, but I should like to take the opportunity of saying how much I appreciate the way that the noble Earl, Lord Kinnoull, has put his Unstarred Question. I only hope that if the noble Lord, Lord Drumalbyn, has not got a speech which reacts favourably to what has been said, he will consider putting that speech aside and delivering another.
7.45 p.m.
LORD DRUMALBYN: My Lords, when last my noble friend Lord Kinnoull asked an Unstarred Question in this House about the hovercraft industry just over two years ago he said that it was in dire need of confidence. He said it was at the crossroads. He said—and I think that he used the same words again to-night—that the spectacular invention of Sir Christopher Cockerell had been revealed in 1959, but the noble Earl, Lord Halsbury, said 1958.
THE EARL OF HALSBURY: May, 1957.
LORD DRUMALBYN: My Lords, he said that although 12 years' work had produced technically viable craft, their commercial viability was still in question. I should like to take the opportunity that my noble friend has given me by asking his Question to-day of bringing the record up to date and saying what the attitude of the Government is. I should like to thank my noble friend for raising this matter. I thought that he was a little doleful from time to time, but in fact he has chosen a particularly auspicious day on which to raise his Question, because to-day we have something to celebrate. For the first time a hovercraft commuter and tourist service is running on the Thames; a service which is supported by the Department of the Environment, the Greater London Council, the Greenwich Council, and a host of commercial interests. This is a venture worthy of success, and I am sure that we all wish it well. Apart from fulfilling its task of transporting passengers up and down the Thames, it will

1635
serve as a living advertisement for hovercraft to hundreds of thousands of visitors from abroad—and hovercraft are not all that easy to demonstrate all round the world, as we have found. Here we shall have, right in the centre of the Commonwealth, a visible demonstration of the virtues of hovercraft. Part of the £2 million development that I am going to speak about in a second was used for the benefit of the H.M.2—the Hover Marine side-wall craft, the type now operating the Thames service.
A great deal has happened since our last discussion. In March, 1972, we announced that £2 million would be spent during the following two years to develop and improve existing craft. As could be expected, virtually the whole of the £2 million has now been committed for a variety of projects. The British Hovercraft Corporation's SR-N4 cross-Channel craft has already been enlarged from 180 to 200 tons, and studies for a further stretch, so as to increase the pay-load, are being carried out. The smaller SR-N6 is not restricted to passenger service, and has a variety of roles. It has been used both in the Wash and on the Maplin sands. It is new being redesigned to improve control and reduce noise. In response to the demands of the environmentalists, engineering development of the Rolls Royce Proteus engine for the SR-N4 has been undertaken, and a 10-foot propellor for the SR-N6 Mark 6 and a ducted fan for the Vosper Thorneycroft VT2 have been developed with the assistance of the Government. Skirts take a large share in the cost of maintenance of all hovercraft, and new materials with a longer life and greater strength are being investigated. I take note of what the noble Earl, Lord. Halsbury, has said. These engineering and materials studies and developments are directed towards achieving cheaper operation, lower maintenance costs and greater acceptance by the public. These are almost exactly the words used by the noble Earl, Lord Halsbury.
May I say right away that I have no expertise in this subject at all and that I feel rather a dwarf in a house of giants to-night, but I hope that the House will bear with me, and I shall try to deal with as many of the points that have been raised as I can. We were dis-
1636
appointed that in the battle of fares between hovercraft and hydrofoils in the Baltic, the hovercraft, as the newcomers, were defeated. Vospers are now turning to a new model, the VT2, a craft with a different type of propulsion which they plan to launch for the first time next year, mainly with an eye, I understand, on the military market.
My Lords, as to the prime mover which the noble Earl, Lord Halsbury, referred to, he has suggested that this could be an area where useful development could take place. It has been suggested that the industrial gas turbine rather than the aircraft gas turbine would be a more suitable prime mover for the craft and shipbuilders are searching for suitable marinised versions. The noble Earl spoke of one that has recently emerged—I think it was the Enfield Company he mentioned. Studies indicate, however, that industrial turbines are too heavy and too expensive. The weight reduces the effective payload of the hovercraft to uneconomic terms and the other advantages are outweighed by these disadvantages. Again, as the noble Earl said, and I agree with him, the problem is to find a gas turbine which has the cost advantages of industrial gas turbines but without their weight. The normal hovercraft engine is a modified aircraft gas turbine which is lighter but far more expensive.
All these developments taken together may he described as approaching the third generation of hovercraft. The noble Earl talked about the assistance that could be given to this, the sums that are available to the N.R.D.C. I am bound to say to him that it is a matter for the Corporation's judgment as to how they spend their funds. The Government cannot direct the N.R.D.C. to support any particular development, but I should imagine that he has made his views very clear to the N.R.D.C. on the development of a suitable engine. It may be that in time one single type of hovercraft may emerge as preferable to either the amphibious or the sidewall craft, but we have not yet had the benefit of Sir Christopher Cockerell's advice about his latest ideas; nor, I am bound to say, has he sought assistance from us in support of a stated objective. As between the two types, the amphibian can operate in shallow waters or over sandbanks from landing areas quite simply prepared on

1637
a beach; the sidewall craft require adequate depth of water and conventional piers, but in these conditions may well be cheaper to operate. The SR-N4 uses a British Hovercraft Corporation skirt; the new VT2 now being developed with Government assistance will demonstrate the HDL skirt on a larger craft than hitherto. Both skirts are subject to continual development and are tending to approach each other in current concepts. The new VT2 will also demonstrate the practical advantages of the ducted fan in comparison with the normal propeller, but it may well prove that the two propulsors are suitable for different types of craft.
One of the interesting features about hovercraft development, even so far as seagoing and water going craft or land operating craft are concerned, is the enormous span in size from the very small to the very large—the American type of which the noble Earl was talking. As I have said, operators are already benefiting from the investment we have made in improving the craft. Public acceptance and liking for the craft is also evident in the continual increase in the number of passengers and cars carried, particularly across the Channel. I note with great interest the figures which my noble friend Lord Kinnoull quoted. In addition to the London Hoverservices operating on the Thames, another commuter service between Southport and Blackpool began this year on May 24; one SR-N6 and one SR-N5 are employed, and outside the scheduled service are available also for pleasure and holidays trips. The scope for new domestic use is always being considered, and I have no reason to doubt that, as the advantages of the new generation of hovercraft become more widely appreciated, the demands from sophisticated communities for high speed transport by water on short haul routes will become substantial. My noble friend Lord Kinnoull referred to the Brindle Report. I can tell him that we are in close touch with the overseas development administration and craft have been sold abroad with their help. At the moment, however, it is doubtful whether the cost of the ideas proposed in the Brindle Report could be within the budget of developing countries.
My Lords, it is not usual to couple sophistication with enthusiasm, although
1638
we have certainly had a tremendous example of both in the speech of the noble Earl, Lord Halsbury, to-night. The Hoverclub of Great Britain, a band of highly enthusiastic amateurs who often make their own craft, has as its new President that sophisticated gentleman, Michael Bentine. The club is to be congratulated. It is, of course, the ideal means of encouraging the use of small craft for pleasure and leisure. Although some small craft are produced commercially, such as the Pindar Skima, which was demonstrated on television, the AV2 and the Cyclone, so far the small hovercraft have proved difficult to market successfully.
I have been asked about a merger between Seaspeed and Hoverlloyd. All I can say is that they are known to have discussed a merger of their Channel services—I am afraid I cannot say more about it than that. Among manufacturers, British Hovercraft Corporation and Hovermarine Transport Limited have been notably successful in their efforts to sell abroad. The BH7, produced by British Hovercraft Corporation for defence purposes, has been remarkably well received in Iran. We had already sold two there and Iran have ordered another four. Sales in Europe and the Middle East have opened up new markets, and further sales of the Hover-marine 2 and the SR-N6 in particular are in prospect or under negotiation. The BH7 is at this moment the subject of a presentation in North Virginia. Sales of complete craft do not end there: they bring in their train requirements for spares and possible modifications, besides introducing the craft to new communities.
Commercially, the British Hovercraft Corporation with its major interest in patents and licensing is constantly in touch with manufacturers in France and Germany and with potential partners in Germany. Both France and Germany participated in the E.E.C. Cost 32 project which investigated the merits of large scale hovercraft (about 2,000 tons) and the market potential for such a craft. The conclusion reached was that there would be only a small market for a very large craft, and that only a craft of at least 1,000 tons would justify multinational co-operation. Nevertheless, British Hovercraft are still hoping for co-operation in the production of a craft larger than the N4 but less than 1,000 tons. British

1639
manufacturers are already taking part in the United States defence programme. As to Anglo-French discussions, they are in progress at the present time and it is possible that French and British firms may co-operate in future developments. Discussions with other European firms are also in progress. British Hovercraft have a relationship with the Japanese industry which will bring in licence fees. In this sort of field collaboration of this kind is essential, because patents do not endure for ever. They are not extended unless it can be proved that the return has been inadequate, and on this basis it is improbable that the patents held by Hovercraft Development Ltd., the N.R.D.C. subsidiary, will be extended. They still hold some dozens of groups of patents, of which about ten are effectively used at the present time. The oldest of the patents will expire within the next few years, and others will expire within the next 12 years or so. It is difficult to identify which patents will continue to be used or what new ones will evolve, and the situation is continually in flux.
I should now like to turn to industrial applications of the hover principle, which both noble Earls mentioned, and in which some of your Lordships have a particular interest. Air Cushion Equipment is well-known as the major designer of skirts for industrial use, and this company has wisely built up connections in Europe, the Middle East and Canada, with associated companies which are licensed to use their designs. Oil storage tanks and heavy industrial equipment have been moved with ease, as the noble Earl, Lord Halsbury, explained, and further applications are being exploited as the possibilities become more widely understood by industry. The British Hovercraft Corporation have sold hundreds of hoverpallets, and platforms and trailers are common.
The hoverbed, about which my noble friend Lord Kinnoull asked, and which was originated by A.C.E. for the treatment of patients with severe burns, has been taken over by the medical profession. My noble friend asked what the future holds. I can tell him that a ward in Mount Vernon in North London is currently being equipped with more installations to enable about 200 patients to be treated there. His Royal Highness
1640
the Duke of Kent is due to open the ward later this year. From the burns bed has been developed the low air loss bed for geriatric patients which prevents or heals pressure sores considerably reducing nursing time, but some further development is needed on this bed. A.C.E. also produce an aircraft salvage or removal kit, designed to remove damaged aircraft quickly from runways without further damage to the airframe. The kit costs about £100,000 to £150,000, dependent upon the size of the plane to be lifted. There has recently been an international agreement—and I think this answers the point of the noble Earl—that the home airline should be responsible for this type of equipment. The noble Lord seemed to think—
LORD BESWICK: My Lords, I wonder whether the noble Lord would explain exactly what he means by "home airline". It does not seem to make sense.
LORD DRUMALBYN: My Lords, I mean B.O.A.C. in this country, Air France in France, K.L.M. in the Netherlands and so on. The home airline, not the airport, is to be regarded as responsible. It would be an encouragement to the airlines to invest this kind of money if Lloyd's were to reduce the insurance premiums.
That is a summary of the situation as we now see it. The total market is running at about £10 million to £20 million a year. Sir Christopher Cockerell, writing in The Times just over a week ago, looked forward to a hovercraft which is larger, quieter and highly profitable, and dubbed the Channel Tunnel train the "Victoriana Express". I am certainly not qualified to argue with the inventor, nor am I prepared to question the objectivity of the Channel Tunnel Report prepared for the D.O.E. But at least I can assure your Lordships that a considerable study of the future of hovercraft preceded the Report, even if there were only four lines in the Report itself.
The noble Earl, Lord Halsbury, asked about the hovertrain. As the first managing director of the N.R.D.C., he naturally has a very strong interest in it. I have little to add to the information given by the Minister for Aerospace and Shipping in another place on February 14 this year. We took the views and advice of individuals and organisations in

1641
both the private and public sectors into account, including those of industrial companies in the transport and mechanical, electrical and civil engineering fields. The Government did not specifically seek advice from other countries, since they already had information from foreign Governments and agencies, and also from our own posts overseas. The immediate requirement for Toronto was not the high-speed train which was being developed, but a low-speed system over a two-mile demonstration route. The fact of the matter is that there is no market in sight for the hovertrain such as to justify the many millions of pounds that would be required for its development. What the research and development into the hovertrain has brought cut—and here I come to what the noble Lord, Lord Kings Norton, said—are the prospects for the linear induction motor, irrespective of the means of suspension adopted, be it air cushion, magnetic or otherwise. It is for that reason that the Government accepted in principle the Hawker-Siddeley group's proposal for a linear motor development programme.
LORD KINGS NORTON: My Lords, may I intervene? The point I want to make is that the linear motor, as developed by Professor Laithwaite of Imperial College, provides the sustentation as well. It does not need to have an air cushion or any other form of sustentation associated with it. The one thing does the lot.
LORD DRUMALBYN: My Lords, I am much obliged to the noble Lord. I shall certainly convey what he has said to the Minister for Aerospace and Shipping. This programme is to be jointly funded with the D.T.I., and the Government's proposals for the continued development of the linear motor will take account of all potential applications—urban, interurban and others. As my honourable friend the Minister for Aerospace said, the exploratory work on magnetic suspension will be undertaken by British Rail on behalf of the Department of the Environment, and the two programmes will be co-ordinated.
LORD KINGS NORTON: My Lords, may we know the budget for these programmes?
LORD DRUMALBYN: My Lords, I am afraid that at the present time I am not in a position to tell the noble Lord what this is. If the information is available, I shall let him know. In addition, the Select Committee on Science and Technology in another place has been conducting an inquiry into the tracked hovercraft project, and we look forward to the publication of their report in the near future, which I am sure the noble Lord, Lord Kings Norton, will read very carefully. As to our future policy, it is unlikely that special assistance will be continued, or that the concessions granted to ships will be extended to hovercraft. The shipbuilding home credit scheme was designed to counteract a situation in which ships were built abroad rather than in the United Kingdom, because foreign shipbuilders were able to offer more advantageous credit terms than were obtainable here. The position for hovercraft is not comparable. The E.C.G.D. offer the manufacturers terms which are on balance, more favourable than those offered for ships. Manufacturers will of course compete for assistance under the Industry Act, on equal terms with other industries. The National Research and Development Corporation will also consider any proposals put to them on their commercial and technical merits.
LORD BESWICK: My Lords, as the noble Lord appears to have left the hovertrain, can he answer the question put by the noble Lord, Lord Kings Norton, about the stretch of experimental track in Cambridgeshire? Is it to be maintained or reactivated?
LORD DRUMALBYN: My Lords, all I can say is that for the moment it is in abeyance. As it is at present, it would not be adequate for any future use. It was originally intended that it would be 4 miles long, but even that is rather scant for what is required for testing at the very high speeds that are contemplated. But I think that the RTV.31 achieved over 100 m.p.h. even on this very short track. But obviously if you are contemplating the sort of speeds that were contemplated as being capable of development, that is another matter. The trouble with the hovertrain really is the market that is concerned. The demand that one can envisage for passenger transport capable

1643
of speeds of up to 150 m.p.h. should be satisfied by more conventional transport. It is only if one wants to go above that, that one may look to the hovertrain—but not in the immediate future. The hovertrain has shown what advanced passenger transport can do. It seems logical that it is in the high speeds that, if development is to come about, one can expect development. But one cannot foresee any consumer need for it at the moment.
My Lords, the Corporation is fully aware of its statutory functions and of its financial responsibility. Hovercraft also fall within the area of responsibility for research and development covered by the Ship and Marine Technology Requirements Board, which will accept and consider any proposals put to it. So I can say to your Lordships that there is no question of the Government in any way deserting the hovercraft, but the general principle of assistance of this kind is that it is launching assistance. Further development can also be contemplated when there is a clear need for it; but I can say that the avenue for further assistance is not closed.

1964–65

1965–66

1966–67

1967–68

1968–69

Defence Budget total (current prices) (£m.)

1,998

2,120

2,172

2,205

2,271

Percentages attributable to:

(i) Research and Development*

13

12

11

10

8

(ii) Navy Production

10

12

12

12

12

(iii) Army Production

5

5

5

6

6

(iv) Air Force Production

12

13

13

12

12

Total percentages attributable to equipment*

40

42

41

40

38

1969–70

1970–71

1971–72

1972–73

1973–74

Defence Budget total (current prices) (£m.)

2,266

2,280

2,545

2,854

3,365

Percentages attributable to:

(i) Research and Development*

8

7

8

9

10

(ii) Navy Production

11

10

8

25†

27†

(iii) Army Production

5

4

4

(iv) Air Force Production

13

13

11

Total percentages attributable to equipment*

37

34

31

34

37

* These figures exclude manpower employed on intramural R&D.

† Because of changes in vote structure it is extremely difficult to continue the Service breakdown after 1971–72. The breakdown of production expenditure on Systems Votes for the final two years is:

1972–73 Per cent.

1973–74 Per cent.

Sea Systems

7

7

Land Systems

4

5

Air Systems

9

10

Guided Weapons and Electronics

5

5

Total

25

27

BADGERS BILL [H.L.]
Returned from the Commons on Friday last agreed to, with Amendments; the said Amendments printed pursuant to Standing Order No. 48.
MAPLIN DEVELOPMENT BILL
Reported from the Select Committee on Thursday last, with Amendments; a Special Report made, and Bill recommitted to a Committee of the Whole House on Wednesday, 25th July, 1973.
  DEFENCE EXPENDITURE
  DEFENCE EXPENDITURE
  DEFENCE: QUALITY ASSURANCE PERSONNEL
  DEFENCE: QUALITY ASSURANCE PERSONNEL
  IMMIGRATION INQUIRIES: TELEPHONE SERVICE COMPLAINTS
  IMMIGRATION INQUIRIES: TELEPHONE SERVICE COMPLAINTS
  JUSTICES OF THE PEACE: APPOINTMENT
  JUSTICES OF THE PEACE: APPOINTMENT
  WARSHIPS: ORDERING POLICY
  WARSHIPS: ORDERING POLICY
  EUROPEAN COMMUNITY: U.K. CIVIL SERVANTS' POSTS
  EUROPEAN COMMUNITY: U.K. CIVIL SERVANTS' POSTS
  SHIPBUILDING: THE BOOZ-ALLEN REPORT
  SHIPBUILDING: THE BOOZ-ALLEN REPORT