Sitting of 22 June 1973

Preamble
The House met at Eleven o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRAYERS
  ORDERS OF THE DAY
    NATIONAL INSURANCE AND SUPPLEMENTARY BENEFIT BILL
    As amended (in the Standing Committee), considered.
    NATIONAL INSURANCE AND SUPPLEMENTARY BENEFIT BILL
      New Clause 1

        AMENDMENT OF NATIONAL INSURANCE ACT 1965
        "In section 36 of the Insurance Act 1965, there shall be added the following subsection:
        "(8) For each unit of graduated contributions paid or treated as having been paid before 6th April 1972 in respect of which graduated retirement pension is payable to any person under subsection (1) of this section, additional graduated pension shall be payable to him at the following weekly rates:

        Income tax year in which payment of the unit of graduated contributions was completed

        Weekly rate of additional graduated pension

        1961–62

        3½p

        1962–63

        3½p

        1963–64

        3p

        1964–65

        2½p

        1965–66

        2p

        1966–67

        2p

        1967–68

        2p

        1968–69

        1½p

        1969–70

        1p

        1970–71

        1p

        1971–72

        ½p"

        —[Mr. O'Malley]

        Brought up, and read the First time.
        11.5 a.m.
        Mr. Brian O'Malley: I beg to move, That the clause be read a Second time.
        The graduated pension scheme introduced in legislation by the Tory Government in 1959 is as mean, unjust and unfair a scheme as anything that could be found in pensions anywhere. Although pension schemes, both public and private, are not well understood by large sections
        1004
        of the community, there is clear public awareness of the essential nature of the Boyd-Carpenter scheme. Throughout the country it is known as "the graduated pension swindle", and with some justice. The purpose of the clause is at least partly to try to rectify what is a public scandal. Its purpose is to increase the return on graduated contributions in a manner consistent with good pensions practice.
        Before explaining the amendment and the background to it, I want to make one request of the Under-Secretary, arising from the clause. When I was considering the subject matter and the drafting of the clause, I turned for information, as one always does, to the latest annual report of the Department of Health and Social Security. The latest report is that for 1971, published as Command Paper 5019 in July 1972. In that report there is practically no information a bout the operation of the graduated pension scheme. There is a brief description of the scheme, but in the statistical tables in the appendices there is no information about the operation of the scheme—for example, the levels of pensions being paid out to pensioners as a result of their payments into the graduated part of the scheme. I am not surprised at that, because it is such a bad scheme. One finds from figures which one can work out for oneself just how meagre are the benefits in the graduated scheme for the contributions that are made.
        I put in a very strong request on behalf of the Opposition that when the next annual report of the Department is published it should contain full statistical information about the operation of the graduated pension scheme introduced by the Conservative Government in 1959.
        If the flat-rate national insurance pension, which is partly paid out of graduated contributions, had been set at a reasonable level by the present Government to meet the problems of pensioners at a time when prices were rising steeply day by day, it would have been possible to argue that the return on graduated contributions was being met in that way. But that is not the case. The background to this amendment is that throughout this Government's period of office they have handed hundreds of millions of pounds to the better-off—to surtax payers—and have

        1005
        done very little for pensioners. In the Budget debate on 8th March of this year the Secretary of State was forced to admit that if the 1971 and 1972 upratings brought any improvement at all to pensioners, that improvement was, at best, marginal.
        The proposed 1973 increase for retirement pensioners, which forms part of this Bill, is being eroded even before it is paid by rises in food prices, currently running at more than 20 per cent. a year. By October 1974, before the uprating that one would expect in the autumn of that year, it is likely that the flat-rate retirement pension at the level proposed in this uprating will represent the lowest percentage of average national earnings at any time in the post-war period.
        We can look forward further than that. The Social Security Bill has a financial structure that offers a flat-rate pension to retirement pensioners at only about current levels, in real terms. In those circumstances, we are entitled to examine and try to improve the graduated pension scheme to give better benefits to people who are expected to manage on a flat-rate national insurance pension which, in real terms, is being eroded and reduced in value day by day.
        I am not proposing a formula that was not put forward by the Labour Government. Indeed, in the National Superannuation and Social Insurance Bill in 1969 there was a firm proposal to dynamise the graduated contributions.
        I shall explain the purpose of the clause for the convenience of the House. Currently, men and women making graduated contributions receive, on top of their flat-rate national insurance pension, an additional pension of 2½p for every £7·50 paid by a man and 2½p for every £9 paid by a woman.
        The purpose of the clause is clear. It aims to provide some dynamism along with the movement of male average earnings, which is in accord with good pensions practice. For example, for contributions paid in 1961–72 there would be a payment of not only 2½p in graduated pension but an additional 3½p, which represents an upward movement with average earnings during those years. The House does not need to be reminded that the value of the pound has dropped
        1006
        enormously in the period between 1961 and 1973. Indeed, in 1973 the pound, in real terms, compared with 1961, is worth only 57p. Putting the equation the other way round, in 1973 one would need £1·75 to buy what could be bought for £1 in 1961. So, unless we dynamise these graduated pensions, the 2½p in 1961 is worth less than l½p in 1973. It is likely, on any reasonable estimate of what will happen in future, to be ½p by 1985, and by the 1990s, when large amounts of graduated pensions will still be being paid out, the old sixpence in the 1960s, or the 2½p in the early 1970s, will be worth a quarter of 1p or even less.
        Clearly, there is a need to give pensioners who have an entitlement for their graduated contributions a better return on their money. Indeed, because there was such a bad return on their money, the public quickly realised that the Boyd-Carpenter graduated pension scheme was rightly described as a swindle.
        We should be concerned particularly with those who have already retired and have tiny pensions from their graduated contributions, and those who are near retirement and have no occupational pension whatsoever. We must give first consideration to that large group of men and women who are not contracted out of the graduated pension scheme and who, for any little addition to their national insurance pensions, have to depend on the contributions that they have paid from their incomes of between £9 and £18 a week during their working years.
        It may be useful to give some examples of how small are the pensions which can be and have been earned under the Boyd-Carpenter scheme. Taking the 11 years covered by the clause, a man who was not contracted out and was therefore making contributions of over 4 per cent. from his reckonable earnings of between £9 and £18, would today he in receipt of a graduated pension of about 80p. The situation is worse for a woman. She would be receiving about 62p. The widow of a man who had paid such contributions would receive half of what the man received—about 40p.
        Another example is that a man who had been on average male earnings throughout the period 1961 to April 1973

        1007
        would be entitled to an additional pension of £1·17 per week, and his widow would receive only 58p. The effect of the clause would be to give an extra 60p to the man on average male earnings paying into the scheme from its introduction until April this year.
        11.15 a.m.
        In good private occupational pension schemes there is always provision both for pre-award and post-award dynamism. Therefore, we are bringing into the graduated pension scheme the better features of good occupational pension schemes and introducing the same kind of dynamism that we want to see in the flat-rate national insurance scheme.
        It is good that even this Government have been driven to abandon the graduated pension swindle by 1975; but merely to abandon it is not enough. Far into the future large numbers of men and women, many of whom have not been contracted out and had the good fortune to be in good occupational pension schemes, will be dependent on the graduated pension scheme which, as it stands, will give small or even smaller benefits by erosion of the value of the fixed pension that they have earned. Therefore, there is an urgent need to help both the present generation of retirement pensioners and those who in future will have to depend largely on this graduated element for a small addition to the flat-rate national insurance pension.
        Mr. Sydney Bidwell: I rise briefly to support my hon. Friend the Member for Rotherham (Mr. O'Malley), to seek to anticipate the kind of reply that I think we shall get from the Government, and, I hope successfully to puncture it and get serious consideration of the proposed clause.
        It is worth recounting the history of the graduated pension scheme. After a speech by my right hon. Friend the Member for Coventry, East (Mr. Cross-man) at a Labour Party conference in the 1950s, we had, during the pre-1694 period, what my hon. Friend has described as the Boyd-Carpenter scheme in an answer to the national superannuation ideas then current in the Labour Party. I recall that my right hon. Friend the Member for Coventry, East had a tremendous ovation at that conference for the ideas that he was then expounding, because he showed that two-thirds of our
        1008
        old people had virtually been shut out of decent occupational pension schemes. Thus, we had the graduated pension coming in and, as my hon. Friend said, it was an absolute swindle.
        Why did it earn that title? It was because the benefit was so poor in relation to the amounts paid in. If we compare the value of the contributions with the extraordinary rises in the cost of living we see that it is an even bigger swindle. The Under-Secretary will no doubt ask why we consistently refer to this as a swindle, since a Labour Government operated it between 1964 and 1970. All I can say is that we were conscious of the swindle, and on the back benches, at any rate, were aware of the delay in getting down to the brass tacks of introducing new pension arrangements.
        I hope that the Minister will not clutter up his mind with this kind of political argy-bargy. The present pensions are quite inadequate—£6·75 rising to £0·75. They are particularly inadequate in view of ever rising food prices, especially protein foods.
        The Conservative Government's scheme was designed to pressurise employers and employees to opt out of the graduated pension swindle and get them into better occupational pension schemes. Such schemes may be the music of the future but the next Labour Government will put the emphasis on State provision based on earning entitlement. We may not go along quite the same path as West Germany and other European countries.
        The comparable economy is that of West Germany, and that leaves us standing.
        The Under-Secretary of State for Health and Social Security (Mr. Paul Dean): The hon. Member for Rotherham (Mr. O'Malley) began by speaking of a swindle in describing the graduated pension scheme. His hon. Friend the Member for Southall (Mr. Bidwell) repeated the phrase. I remember very well the reprimand which those using that phrase received from the right hon. Member for Sowerby (Mr. Houghton). No one is more expert on pension matters than the right hon. Gentleman. What he said was that any politician who uses the word "swindle" was doing grave damage to pensioners, because they were confusing the issue. I much regret that the hon.

        1009
        Gentleman has not succeeded in getting out of his old ways and has not taken the wise advice of his right hon. Friend.
        Mr. O'Malley: The hon. Gentleman is right—and I admit it at once—that my right hon. Friend the Member for Sowerby (Mr. Houghton) said that he had never described this as a swindle. What he did say was that if anyone in the City had tried to run such a scheme he would have found himself in prison.
        Mr. Dean: The right hon. Gentleman made it quite clear, as have Governments of both parties, that every penny that goes into the scheme through graduated contributions is used for the direct benefit of pensioners and other beneficiaries. To describe that sort of arrangement as a swindle does not help pensioners to understand the real problem.
        One of the objects of the scheme was to try to ensure that more money came into the scheme, so that higher pensions could be paid. One of the fairest ways of doing that was to ask those with a higher level of earnings to pay rather more than those with a lower level. It is sad to hear the Labour Party arguing against that. We have carried that a stage further in another Bill going through Parliament. This will mean a much fairer distribution of the cost of pensions among the working population. It will remove the regressive element, which means that the lower-paid pay into the scheme a greater proportion of their earnings than do the higher-paid.
        I am surprised to hear the Labour Party arguing against what I would have thought was an elementary aspect of social justice—they would probably prefer to call it redistribution. The hon. Member for Rotherham went on to say that the Government had done little for pensioners. He knows that that is unfair. This Government introduced annual reviews of pensions—the first Government ever to have done so.
        Mr. Dennis Skinner: Under this Government there should be a review every month.
        Mr. Dean: For the first time ever, each winter pensioners will know that their pensions will be increased at least enough to compensate for the rise in prices over
        1010
        the past year. I need not labour the record——
        Mr. Skinner:No.
        Mr. Dean: —except to quote the figures. I am sorry that the hon. Member for Bolsover (Mr. Skinner) does not want to hear them. When this Bill comes into operation the rate of pension will have been increased by no less than 55 per cent., while the figure for the cost of living increase is 26·3 per cent. This is a substantial improvement in the value of the pension. The hon. Member asked me for further information about the graduated pension scheme. The annual report is now a document of formidable length. We must be careful not to get it so big and unwieldy that it no longer serves the purpose for which it was intended.
        The amount of graduated pension earned by a man reaching the age of 65 at the end of April 1973 and having paid the maximum rate of contributions throughout would have been £1·30. In November 1972 the average weekly amount of graduated pension received by persons entitled to it was 25½p for men and 11 p for women. This is in addition to the basic level of pension which, if the Bill is passed, will rise to £7·35 at the beginning of October for a single person and £11·90 for a married couple.
        The proposal in the new clause is broadly to dynamise the graduated pensions.
        Mr. Bidwell: Are the figures that the Minister has just given related to what the single and married pensions will be October? If so, his figures are not correct.
        11.30 a.m.
        Mr. Dean: The figures that I have just given are what the pensions will be when the increases in the Bill come into operation in October.
        The proposals in the new clause to dynamise the graduated pensions cannot be considered in isolation. We have to consider the background against which the contracting-out arrangements were formulated, and clear statements made by Ministers at that time. It was on the basis that graduated pensions would continue to be paid in the money terms in which they were earned that employers decided whether their employees should

        1011
        be contracted out. It would be wrong to change the terms retrospectively.
        When graduated pensions were introduced the undertaking was given that no employee who was contracted out would be worse off as a result. To increase the graduated retirement benefit now would be to break that undertaking and would be unfair to those employees who were contracted out.
        It is true, of course, that some who were contracted out at the time and who are contracted out now are members of occupational schemes that provide some increase in the pension after award, but this is certainly not the case by any means for all these people and there is therefore no guarantee that these occupational pensions would be increased, if at all, to the extent proposed in the new clause.
        The hon. Member referred to an earlier Bill produced by his Government, but the original decision of that Government was precisely the decision that this Government have made. It was only after outside pressures were exerted on them that the previous Government changed their plans in this respect. So it is significant that their first proposals were exactly those that the present Government have introduced.
        Mr. O'Malley: The pressures on the last Government, when I was in the hon. Member's job, were strongest from some people who were running poor schemes, who objected to the Government's political decision to dynamise the graduated contributions—precisely what the new clause would achieve. Some of the representatives of those schemes, of which any decent employer would have been ashamed, came to see me on precisely this matter. They were the people who were putting pressure on. The conclusion to which we had to come was that the prime responsibility of the Government was to give justice to the people who were still in the Boyd-Carpenter scheme and were being given an appalling return on their money.
        Mr. Dean: Whatever the reasons for the previous Government's change of policy, I am merely saying that they changed their policy. Their original decision was the one that we have made, for the reasons that I have explained.
        1012
        The Government clearly stated their policy nearly two years ago in the White Paper "Strategy for Pensions". That policy was then formulated in the Social Security Bill at present before Parliament; the reasons for the policy were clearly set out at that time, and many occupational pension schemes have of course planned accordingly.
        Whatever anyone may feel about the pros and cons of the argument, to go back on a decision clearly announced nearly two years ago and put in legislation now well on its way through Parliament would be extremely bad and unsettling for occupational pension schemes which have now made their plans and arrangements on the basis that the Government will do what they said they would do.
        Stability in occupational pension schemes is badly needed and has been badly lacking in recent years. That is another strong reason against this eleventh-hour proposal. Planning in occupational pension schemes is very much a long-term business. One cannot expect them to be able to plan improvements for their existing pensioners and for the members of their schemes who will become pensioners in future if the Government are constantly changing their minds and unilaterally changing the contracts that they made earlier on the basis of which schemes made their decisions. These are powerful reasons against the new clause.
        Another reason is the cost. It is estimated that the new clause would cost £30 million in 1974–75, rising to £45 million in 1980. This, of course, would be on top of an additional cost for pensions and other benefits of about £570 million, which has to be found by the contributor and the taxpayer. All this would go to the better-off pensioners—those with earnings above a certain level who have been contributing to the scheme. Here, also, one has to consider priorities when dealing with such large sums. It is for these reasons that I recommend the House not to accept the new clause.
        Mr. William Hamilton: I was not on the Committee and therefore did not hear the arguments there, but I have listened carefully to the Minister and my hon. Friend the Member for

        1013
        Rotherham (Mr. O'Malley), and on balance I thought that my hon. Friend had the better of the argument.
        Whenever I hear any Government plead in aid the cost of a proposal, I try to put it in other perspectives and think of other things that have cost much more than the proposal would cost and are far less worth while. I need not name them now, but I could give a long list of things on which the Government have not hesitated to spend £30 million, £40 million or £50 million and which are much less worth while than this proposal.
        We have heard ad nauseam the argument about the alleged swindle that was maintained by the Labour Government. We regret that we did not produce our scheme much earlier in the 1964–70 Parliament and get it into law before the 1970 catastrophe. But that is past history. We still believe that it is a swindle and we maintain that when we get a Labour Government, as we shall at the next election, we shall take steps somehow to absorb this into our new scheme.
        It is not realistic to talk of abolishing a scheme that has been in existence for 12 years or so, but how the Government can defend a scheme in which the benefits and contributions remain the same after 12 or 13 years, when they have been at great pains to shout from the rooftops how they have sought to protect all sections of the community from inflation, astounds me. It does not stand up to rational argument.
        If one works out the simple arithmetic, a contribution of £7.50, giving 2½p per week extra pension, means that a person has five years or so of pensionable life before he even gets his £7.50 back. These sums are derisory. Inflation has meant increased wages—and the Government quote as a merit the fact that wages have gone up more than food prices and more than the retail price index as though it were their declared intention to see that that happened. In fact, they do all they can to stop from happening what they quote as an example of their success. They say to the unions, "You must not have this substantial wage increase, but we accept all the plaudits going because we can prove by statistics that wages have gone
        1014
        up a lot more than prices in the period that we have been in office." Higher wages are what the Government's whole policies are designed to stop.
        Meanwhile, however, the pension situation has remained static. As wage levels rise, more and more people are brought into the graduated scheme and more cash is collected. Yet the 2½p remains the same. So the sums are getting more and more indefensible.
        Mr. Sydney Bidwell: With the average male expectation of life, an enormous number of people will never live the five years to get their contributions back.
        Mr. Hamilton: Of course that is why from the beginning we called the scheme a swindle. It was blatantly apparent that the scheme was simply another tax to finance the existing national insurance scheme without increasing contributions sufficiently to maintain the increase in pensions in the way that pensioners needed. This was an ill-concealed additional tax taken from the higher-paid workers rather than surtax payers and the rest. The more honest thing would have been to increase direct taxation on the higher income groups. In fact, the reverse has happened under this and previous Conservative Governments.
        When the Government talk about sanctity of contracts one need not remind them that I criticised the Child Poverty Action Group on one occasion after the last election because it was so naïve as to believe what Conservative leaders were saying—that they would increase family allowances. The Child Poverty Action Group said in 1970, "We believe Mr. Heath—he is a jolly good lad. We will see he gets power." He got power but did not do what he promised. Let us have no talk about the sanctity of contracts or promises. We shall debate next week in another context another legal provision whereby we shall retrospectively renege on a contract made to certain individuals.
        11.45 a.m.
        The Government will have to think about how to protect pensioners. It is not a sufficient argument to say that this provision will benefit the higher paid. Since when was this Government's conscience troubled by the fact that more help was going to those who deserve it

        1015
        least? That is what all the Budgets since 1970 have been about. They all gave help to those who needed it least. That is the great trouble. That is why the country is in such turmoil.
        For the Government to parade figures attempting to show that old-age pensioners have never had it so good and that they are better off than ever before is contrary to all the post that I get on pensions. I do not think any Member on this side of the House gets any letters from pensioners saying how well off they are under this Government and long may it last. On the contrary, one gets letters pleading poverty from people scraping around and trying to get another 10p or 20p from the Supplementary Benefits Commission.
        All we are trying to do by new Clause 1 is give protection to a relatively small number of our people who have been badly treated and have had no account taken of their position in the last 12 years, when every other section of the community has had some steps taken either by their trade unions or by the Government to protect them from inflation. These people have not had such steps taken for them and it is time something was done for them.
        Mr. Marcus Worsley: Hon. Members opposite have frequently used the word "swindle". The pension scheme introduced by the Conservative Government in 1958 was, I believe, based on a false premise—that one could have a viable national insurance scheme with a procedure for opting out for some members of the scheme into occupational schemes. The Labour Government, when they eventually produced their pension scheme in 1970—the hon. Member for Fife, West (Mr. William Hamilton) was right in saying that it took them an eternity—fell into precisely the same error. The Crossman plan, as it was called, tried to do precisely the same thing.
        The great merit of what the present Government have done is to break away from the opting-out provision. We have two pensions now, the basic State pension without opting out, and a pension above that, either occupational or under the funded State Reserve Scheme, which does not merit the criticisms which have been made of it.
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        I have a great deal of sympathy with what the hon. Gentleman said about what has happened to the graduated element under the 1958 Act. But once a bargain has been made—and my hon. Friend the Under-Secretary of State was right to say this—when one has built up all sorts of expectations and when the opting out and opting in have taken place on a definite and stated principle, which was the case, one cannot retrospectively change the basis. This is why the Government are right, despite forceful arguments to the contrary, to stick to their guns on this matter, and it is why the Labour Government initially were right in taking the same line.
        Mr. O'Malley: I would like to correct one error which has crept into the debate. The Under-Secretary of State made the same comment as the hon. Gentleman has just made. The 1964–70 Labour Government did not originally make the decision that the graduated pension arrangements should stand. They drafted a completely new pension scheme in which the graduated pension scheme was considered with all the other alternatives. They then decided to do two things—first, to abolish that scheme and, secondly, to provide dynamism for the people who had to depend on that scheme for a little additional income on top of their flat-rate benefit.
        Mr. Worsley: Of course I understand that the Labour Government wished to abolish the scheme, but originally they did not wish to "dynamise the bricks"—I am glad that the hon. Gentleman did not use that jargon. I understood that the initial proposition was that it should not be dynamised. If I am told that I am wrong, I accept the correction. It was my understanding that the Labour Government changed their attitude under pressure.
        I return to my point that once a bargain of this sort is struck it must be kept. However, looking back on it, I believe that it was an error to have made a bargain quite of this kind. I repeat that the Labour Government, in the plans that they stuck to, the plans that they eventually put to the House, intended to make just such a distinction once more, just such an opting out.
        Therefore, all of this debate underlines the Government's wisdom in the basic

        1017
        structure of the new two-pension scheme. Therefore, the real moral of the tale is that the Government have got their pension structure right and that the Labour Party continues to make the mistakes of the past which occurred in the Crossman scheme.
        Mr. Michael Meacher: The core of the argument in this debate is that the 2½p payments per unit of graduated contribution will be so decimated by inflation that, as my hon. Friend the Member for Rotherham (Mr. O'Malley) has put it, it will be down within a decade from 2½p to probably less than ½p and to a miniscule amount by the time that the final recipients get this graduated pension.
        To that argument—it is an argument which the hon. Member for Chelsea (Mr. Worsley) said is entirely justified as it stands—the Under-Secretary has made no reply. I will come on to what the Under-Secretary said, but what he said did not relate to this crucial point.
        The first point the Under-Secretary raised was that earnings-related contributions were being introduced entirely for flat-rate benefits. As the hon. Gentleman knows perfectly well, that is totally irrelevant to the point of the amendment. Moreover, he should know perfectly well, if he is challenging us on redistribution, that the redistribution formula within the Crossman scheme would have been a great deal more distributive. That is entirely irrelevant to the point of the debate.
        The Under-Secretary went on to talk about the annual review, which is a further red herring drawn across the trail. However, as the hon. Gentleman mentioned it, I put it to him that he knows full well that the Government reluctantly introduced it only when we had reached a sky-rocketing level of inflation and no other course was open to them. The hon. Gentleman knows that. It would not have been introduced had we not had a level of inflation going up to 10 per cent. and more and the Government would not have protected pensioners otherwise.
        The argument was made for us by the hon. Gentleman when he said that the average level of the graduated pension
        1018
        payments was 25½p for men and 21p for women. That is a very forceful point. It is of course a point for us, a point which makes clear how minute this already is, what an extremely poor scheme it was, what a swindle the scheme was, and, unless this kind of protection—inflation-proofing—is introduced, what an awful swindle it will be as the rate of inflation has increased in the 1970s over the rate in the 1960s.
        The main argument which the Under-Secretary saw fit to introduce in resisting the amendment was that the dynamising of the Boyd-Carpenter scheme could not be taken in isolation. He said that some employers at least would be in difficulties if the undertaking were broken that members of their schemes would get only the money value for the contributions paid in under that scheme.
        That is precisely the argument which sacrifices the Boyd-Carpenter pensioners to the interests of the private schemes. That is precisely what the hon. Gentleman is saying. It is precisely the argument against a structure with a very poor State scheme to induce reluctant employers to set up minimum benefit private schemes. This situation arises. It has arisen again under the Social Security Bill. There is some minimal protection there.
        Under this scheme, which was the first time that this was tried, there was no protection and we are unable to have retrospective protection on the grounds that it would damage sanctity of contract, that it would embarrass some employers who have set up very poor schemes and if the State scheme were even minimally improved it would mean that those employers would be in difficulties: either they could not pay out or they could not pay out in full the small extra payments which would have to be given in all fairness, as the hon. Member for Chelsea said, to those whose payments are very small now and are getting smaller every year.
        The only other point that the Under-Secretary made concerned the question of cost. He said that the cost would be £30 million now rising to £45 million. He also made the rather curious remark that the benefit would go only to the better-off pensioners.

        1019
        I point out to the House that this is a totally inaccurate argument. As the scheme was originally introduced, graduated contributions were paid on the earnings range of £9 to £15. It was raised to £18 and then to £21 and it has been successively raised since. In other words, it is precisely the broad bracket of virtually the whole of the working class up to the level of the average pay of higher-paid skilled workers and excluding only a few of the lowest-paid unskilled workers that this scheme has been deliberately aimed at, and contributions were not demanded on a graduated basis from salaried workers who were at a much higher salaried level. It was precisely the broad bracket of ordinary workers who paid towards this. It is they now, if they were not contracted out, who are to be deprived.
        The essence of the debate centres on the inadequacy of a pension structure which is geared to a very poor State scheme which cannot be improved because of the fear of undermining minimum benefit private schemes. The pensioners who are locked into this poor State scheme are sacrificed in the interests of getting more employers to set up more private schemes because that is in the interests of the private insurance industry. That is the key to the debate.
        One can see the Government's embarrassment. They are locked in a situation where they admit the justice of the argument, but for the sake of their friends in the private insurance industry they cannot get out of this situation. It is a situation which will recur under the Social Security Bill where the dynamising formula for minimum benefit private schemes under that Bill is almost certainly inadequate given the levels of inflation which we have been having in recent years, and I predict that we will be having this kind of debate in future years over the next decade if that Bill comes into operation.
        Therefore, it is quite clear that the Boyd-Carpenter pensioners are being swindled out of a decent pension scheme because the Government have locked themselves into this extremely unsatisfactory pension structure. It was a swindle before. It is becoming an even bigger swindle as a result of the Government's failure to accept this moderate amendment.
        1020
        Although I can see the Government's difficulties, given what they have done, I hope very much that they will be prepared to reconsider the fact that they can at least provide some improvement—some uprating—for those who have found themselves in this situation, which is not of their own making and which they were not warned about.
        The Bill was not introduced in 1959 on the basis that there has to be stability in the Government's thinking on pensions and that there would be a Social Security Bill very many years later. The Government should not have got themselves into this situation in the first place. This is the real pith of the argument.
        Even if this formula, which would give minimum protection to the Boyd-Carpenter pensioners, cannot be accepted, I hope the Government will be able to think of other ways in which they can protect the pensioners whom they are sacrificing to their own political interests.
        Question, That the clause be read a Second time, put and negatived.

      Schedule 4

        AMENDMENT OF SCHEDULE 2 TO MINISTRY OF SOCIAL SECURITY ACT 1966
        12 noon
        Mr. Alec Jones: I beg to move Amendment No. 1, in page 15, line 28, at end insert:
        '3. After paragraph 5 of the Schedule there shall be inserted the following:
        "5A. In determining whether benefit shall be paid under section 7 of this Act to meet the whole or part of the cost of a funeral, no regard shall be had to the duties of local authorties under section 50(1) of the National Assistance Act 1948.".'
        I prefer the Under-Secretary in his more conciliatory mood when he is in Committee to his more public mood on the Floor of the House.
        This amendment relates to the death grant—a subject that many people find distasteful, but that nevertheless is of great importance to so many people. The death grant is one of the two lump sum benefits paid under our National Insurance Scheme. The background to this amendment is that the lump sum payments, the death grant and the maternity grant have not retained the value that they had when they were introduced in 1948. The Minister is aware that he, I

        1021
        and many other hon. Members participated in a series of debates in Committee dealing with this problem of the death grant. In our deliberations in Committee two issues seem to have arisen concerning the death grant—first, the completely inadequate level of the grant at the moment and, secondly, the diverse powers of local authorities and the Supplementary Benefits Commission in meeting or helping to meet funeral expenses.
        In this amendment, which is a modest one, we are not seeking to increase the level of the grant. The purpose of the amendment is to allow the Supplementary Benefits Commission to make payments to cover funeral expenses without having regard to the powers of local authorities, so that the commission will not be inhibited by the fact that local authorities have certain powers concerning the disposal of bodies.
        A death in the family or, indeed, in a close circle of friends is usually a time of considerable grief and distress, but for many of our fellow citizens, especially the poorer members of society, to this grief we add considerable financial hardship, because for many of these people the cost of a funeral is more than they can bear. We have to accept that many such people find difficulty in meeting funeral expenses. The exact numbers are not known, but in trying to estimate numbers we should have some regard to the fact that there are about 3 million people on supplementary benefit and about 2 million marginally above the supplementary benefit level
        In Committee hon. Members on both sides gave examples of cases, from their own constituencies, of people having to make a choice. Either they were trying to meet excessive funeral costs, which were running them into considerable debt with undertakers, or they were forced to accept the pauper's funeral which hon. Members on both sides of the Committee agreed was more in keeping with Dickensian times than with 1973.
        The fact that clearly emerged—the Minister conceded this point in Committee—was that the present death grant just will not meet the cost even of a minimum standard funeral. The grant was £20 in 1949; it rose to £25 in 1958 and £30 in 1967, and there it has re-
        1022
        mained frozen. Whilst the grant has remained at the ridiculously low level of £30, the agreed maximum charge for funerals of a minimum standard—the figure was given by the Minister—has risen, in 1972–73, to £69·75, which means that the present level of grant is less than half the cost of a minimum standard funeral. This example is used to illustrate the considerable hardship that such a situation imposes on many people.
        In Committee the Minister said that in cases of death the family and friends are often willing to help pay such funeral expenses. That is true in many cases—probably in the vast majority of cases—but, nevertheless, I believe it is the responsibility of this House to cater for those cases where the family or friends with the best will in the world, cannot meet the normal funeral expenses. It is that group on whom we are concentrating our attention this morning—the small group who genuinely cannot meet normal funeral expenses.
        If relatives of the deceased do nothing about arranging the funeral, they can rely on Section 50 of the National Assistance Act 1948, which empowers local authorities in such cases to arrange funerals and meet the costs. If the death occurs in a hospital, similar powers can be exercised by hospital management committees. But I think we should take into account the fact that such a procedure ignores the natural reluctance of relatives or friends to accept such a burial or cremation, for it means a pauper-type funeral.
        In Committee my hon. Friend the Member for Battersea, South (Mr. Ernest G. Perry) told us that from his knowledge, paupers' funerals in London still meant that 10 or 12 bodies were buried in the same grave and that there was no provision for a memorial stone. Such a means of disposing of a body is completely insensitive to the feelings of relatives, and it lacks any dignity and respect for the deceased.
        If relatives make a claim for supplementary benefit they are advised to go to the local authority. In fact, paragraph 108 of the Supplementary Benefits handbook, Administrative Paper No. 2, clearly states:
        "If therefore the Commission are approached for help before a funeral is arranged the person concerned will be told of the responsibility

        1023
        placed upon local authorities and hospital management committees so that he can consider making an approach to the appropriate authority."
        In other words, if such relatives, feeling that they cannot meet funeral expenses, make a claim for supplementary benefit, if they make it before the funeral is arranged they are immediately back to the pauper-type funeral, which lies within the jurisdiction of local authorities.
        This amendment is a modest one. It does not seek to increase the death grant, much as we on this side of the House would like it increased. It does not seek to alter the criteria for judging a claim for exceptional needs payments by the Supplementary Benefits Commission. It would merely enable the commission to entertain a claim for exceptional needs payments for funeral expenses without taking into account the powers of local authorities or hospital management committees.
        We are trying to make clear that the power of the commission to assist in the payment of funeral expenses should take precedence over the duty of the local authority to arrange a pauper's funeral. Our amendment would leave the commission entirely free to decide whether to help in a particular case, but it would, we hope, prevent the commission from refusing help on the grounds that the local authority has the duty to bury the person.
        I recall that in Committee the Under-Secretary indicated that he felt that it was more important to give extra cash and a greater degree of priority to making provision for the elderly during their life. I accept that that is true to some extent, but it ignores the great importance that old people attach to having what they describe as a decent funeral. I know from my own family experience how the thought of having a decent funeral looms large in the minds of elederly people. Moreveover, I remind the Under-Secretary that the provision that we propose would make extra financial help available to people who are living at the moment—the relatives of the deceased, who are forced to bear an unreasonable burden.
        It is not an earth-shattering amendment, but it would remove some of the heavy pressure upon our poorest people at the time of a death in the family and
        1024
        would introduce more humanity and compassion not only for the dying but for the relatives who are left.
        Mr. Ernest G. Perry: I am sure that the Under-Secretary of State realises that there is a good case for this proposal. As my hon. Friend the Member for Rhondda, West (Mr. Alec Jones) said, there is a long tradition in ordinary working-class families that when someone dies it is the family's duty to provide a decent funeral, and everyone clubs in, so to speak, to provide it. But I have in mind the position of the elderly childless couple who are over 75 years of age. They may have taken out small insurance policies many years ago—now paid-up policies, which will give the widow or widower a strictly limited sum in the event of the partners's death.
        In such cases, the amount available from that source may be as low as £10, £20 or £30, which, together with what comes from national insurance, will not be enough to meet the cost of a funeral. I urge the Under-Secretary of State to pay particular attention to the position of elderly people with no children and to make an exception so that the Supplementary Benefits Commission may take such circumstances into account, without reference to what the local authority may do.
        The Government have introduced a pension scheme for the over-80s. I am asking them to give special consideration now to elderly poor people in the circumstances that I have described, so that the Supplementary Benefits Commission will have power to provide the extra money that will enable people to avoid having to "go to the parish", as we used to call it, for a funeral. This still happens today, and it is not unusual for the body to be buried with several others in what is called a common grave when the widow or widower cannot afford a decent funeral. This may happen only where people are childless, but it is nevertheless a serious problem. I appeal to the Under-Secretary of State to ameliorate the sense of inferiority that is felt by the surviving partner in these circumstances.
        Mr. Dean: When death occurs in a family, it not only casts a shadow of

        1025
        sorrow but entails extra expense. We all understand that. In moving the amendment, in his usual responsible and moderate way, the hon. Member for Rhondda, West (Mr. Alec Jones) emphasised that factor, and added that his present proposal was far more modest than was the amendment moved in Committee. All he wishes to do today is to concentrate on the powers of the Supplementary Benefits Commission and local authorities.
        In the circumstances, therefore, it is not necessary for me to say much about the wider issues, save to remind the House of the resources—including insurance of one form or another—that in many cases, though not all, are available within a family to ensure a decent burial.
        12.15 p.m.
        I fully accept the point made by the hon. Member for Battersea, South (Mr. Ernest G. Perry), that every family attaches enormous importance to ensuring that the burial and the associated arrangements are done in a decent and dignified manner. In most cases, fortunately, there are resources within the family. There are savings. There are insurances of various kinds, though admittedly at different levels. Here is one figure to illustrate what I mean. In 1971, no less than £245 million was paid out on insurance policies as a result of death. Over and above that, in many cases the younger members of families, especially when one of their parents dies, not only are able but positively wish to make a contribution towards the funeral expenses.
        There is also the death grant through the National Insurance Scheme, to which the large majority of people in the scheme are eligible. As the hon. Member for Rhondda, West said, it has been the practice of Governments of all political colours to improve the death grant only at irregular intervals. One of the reasons why they have done that is that they have felt that, certainly on a regular basis, while people are alive it is better to improve the level of pension than of the lump-sum death grant.
        This clash of priorities has considerable relevance, since the large majority of deaths occur among people over pension age. Inevitably, therefore, we have to
        1026
        face the problem of priorities in this respect.
        I turn now to the amendment itself, and I hope that what I have to say will assure the hon. Member for Rhondda, West that the purpose lying behind it can be met under existing arrangements. The intention of the amendment is that the Supplementary Benefits Commission should be required to ignore the duty laid upon local authorities and should consider making an exceptional needs payment in every case where help is sought, whether before or after funeral arrangements have been made.
        The amendment is not necessary to achieve that result, since the terms of Section 7 of the Ministry of Social Security Act 1966 are very wide. The Act does not refer to the types of payment that may be made or to the circumstances in which they may be made. It gives the Supplementary Benefits Commission a general power to meet an exceptional need where it seems reasonable to do so. Thus, the Act does not refer specifically to funeral expenses, nor does it require the commission to have regard to Section 50(1) of the National Assistance Act 1948. It may well be that the hon. Gentleman had not appreciated quite how wide are the powers of the commission.
        What is needed is a system that ensures that, in comparatively few cases where there is inability to meet funeral expenses, there should nevertheless be decent, humane and acceptable arrangements for the funeral. One way to achieve this is through local authorities. The hon. Member for Battersea, South pointed out the disadvantage of those arrangements. In few cases today does this happen; they are very much the exception rather than the rule.
        Mr. Alec Jones: If the Minister is saying that Section 7 of the 1966 Act is sufficient for this purpose—and reading this on its own would tend to support what the Minister says—will he say why it is necessary to have, in paragraph 108 of the handbook—which is an interpretation—that before approaching the commission for help in respect of a funeral the relatives should go to the local authority? If that instruction could be deleted I should have more confidence in the ability of Section 7 to meet the point.
        Mr. Dean: I shall come to the hon. Member's point when I describe the changes that are envisaged. One course of action is through the local authority, but the commission has very wide powers to help where it considers it appropriate to do so. Therefore, where local authorities do not in practice help, the commission is certainly prepared to step in.
        The hon. Member has asked whether the relationship between what the local authority does and what the commission does is right and, above all, sufficiently clear to the people concerned. I take his point on this. I shall draw the attention of the commission to it. However, the commission has been considering its arrangements, partly in the light of debates that we have had on earlier occasions, and, as a result, has recently reviewed the arrangements under which it helps in the unfortunate circumstances where this type of help is required. It has made a number of improvements.
        For example, the commission will no longer expect relatives to help where one partner of a married couple dies. Nor will it expect the surviving spouse to seek the help of voluntary or charitable organisations before approaching the commission. So the commission has responded with these new arrangements. It is too early to say how they are working in practice, but I hope—and I can express a fairly confident hope—that they will go a long way towards dealing with the understandable anxieties that have been expressed about these difficult matters. I repeat, however, that I shall draw specifically to the attention of the commission the valuable points that have come out today as to the means of getting the right relationship between what the local authorities should do and what the commission should do, and also of trying to ensure that those people who might require the help of one or the other have information available to them when the critical moment comes.
        Mr. Bidwell: I think I can sum up the feelings of myself and my hon. Friends by saying that what we have heard from the Minister provides a little ray of light and goes some way towards breaking the ice. We are grateful for even the smallest of mercies. My hon. Friend the Member for Rhondda, West (Mr. Alec Jones) spoke about the mood of the Minister
        1028
        in the last debate, but on this occasion I found him at his cooing best. But if what he has told us about a re-think in the discretionary action of the Supplementary Benefits Commission were to lead to a re-wording of the hand-out booklet—which is the interpretation of the enactments and the powers of the commission—we should express our thanks.
        Mr. Dean: The handbook to which the hon. Member refers is revised regularly because the scheme is changing and, we hope, being improved all the time. I have little doubt that when the handbook is revised the commission will wish to reflect in it the improved arrangements to which we have just referred.
        Mr. Bidwell: I am grateful for that, but I underscore what I consider to be the weakness of the existing situation. The commission virtually requires an indication of moneys actually spent. I echo what my hon. Friend the Member for Battersea, South (Mr. Ernest G. Perry) said about the aged couple. It is also often the case that a long-lost relative who has not had contact with the family circle for many years—perhaps because the family is scattered, for example, in New Zealand or Canada— may have lived a life apart, yet may have a circle of friends who are anxious about the situation. It might be well-nigh impossible immediately to make contact with the remaining members of the family. In such a case, if the friends were in poor circumstances, what would happen about making provision for a decent funeral?
        My hon. Friend the Member for Rhondda, West spoke clearly and pleadingly and alluded to the current rate of benefits for the death grant. I fear, however, that he did not show sufficiently clearly that in many cases the grant does not amount to £30, but varies considerably. For a child under the age of three it is about £9; for a child of three to five years, inclusive, it is £15; and for six to seven years, inclusive, £22·50—until one reaches the position of a man aged 18 or over, born on or after July 1893, who gets £30.
        I accept that there may be criticism of both Governments that they have not kept pace with the Beveridge principle, which is that the rate of benefit should equal the basic rate for the minimum standard of funeral, which has been

        1029
        accepted to be the cost laid down by the Funeral Furnishers Association. Certainly the figures quoted by my hon. Friend are very much out of date. I do not know what the funeral furnishers are currently charging, but certainly the figure he gave—£69.75—is not the current cost.
        That is not the rate that has been charged to people of very slender means. The two things go together. The grant has not kept up with the Beveridge principle or with the cost of living. Anxieties have increased because, in the old monetary terms, the pound is now worth 15s. 10d. compared with its value three years ago. For this reason the Government must be prepared to provide help, in the matter of both the death grant and ensuring that the numbers of paupers' funerals do not increase.
        The Minister has quoted a global figure of about £240 million paid in insurance death benefits under private insurance schemes. But an extraordinarily large number of people have turned in life insurance because they cannot afford to keep up the premiums. Bearing in mind the rate of inflation, I imagine that this is now happening on a growing scale.
        12.30 p.m.
        I am glad to hear what the Minister has said. I hope that this debate will lead to a wider interpretation, and a virtual instruction to the Supplementary Benefits Commission.
        Mr. Alec Jones: In view of the conciliatory mood and words of the Under-Secretary, I beg to ask leave to withdraw the amendment.
        Amendment, by leave, withdrawn.
        Mr. Meacher: I beg to move Amendment No. 2, in page 16, leave out lines 22 to 42.
        The amendment is concerned with the anomalous and unfair position whereby, until early this year, it was normal practice for the special allowances granted by the Supplementary Benefits Commission to be offset against the long-term addition. A scandalous situation had prevailed for too long, in which a penson—often a pensioner—was told that he was entitled to, and in need of, extra allowance, whether for heating, diet,
        1030
        laundry or some other purpose, and then told that if this was less than 50p—or 60p as it now is—it was already being received by him through the long-term addition.
        This was changed as a result of the Simper case, which came before the High Court. Part of the judge's judgment in that case was:
        "My interpretation of these regulations is that paragraph 4(2)(a)"—
        that is, of Schedule 2 of the Ministry of Social Security Act 1966—
        "means that a discretion is to be exercised; that is to say it is intended that the person making a determination of the sum of money due should exercise a broad judgment to ensure that in fact there is no overlapping, but that he ought not to proceed simply on a rule of thumb that exact deductions should be made."
        Despite that case, that has not so far happened. The Bill abolishes the long-term addition and creates three new rates in the schedule. So to include the long-term addition, paragraph 4(2) provides for the automatic offset of any exceptional circumstances addition against these two rates except in three cases.
        I understand that this is entirely in line with the circular which the commission had previouly sent out to staff. The first is in regard to heating allowances; the second is in respect of non-householders who contribute more, in rent, than the 80p allowed in benefit; and the third is in respect of children who are awarded the exceptional circumstances addition. It certainly appears that once again the commission is operating a rule-of-thumb method, even though the High Court judge explicity recommended that that method should not be adopted.
        By deleting paragraph 4(2) and (3) we seek to ensure that any award of an exceptional circumstances addition will increase benefit for the claimant, that diet allowances, laundry allowances and other special allowances, as well as heating allowances, will not be offset. I am sure that all hon. Members will agree that that is a very reasonable request.
        The Government have been somewhat maladroit in their handling of the situation following the High Court case. First, they were pushed; they did not initiate this change. Schedule 4 is a reaction to external pressure. Secondly, they have done the absolute minimum that they

        1031
        were virtually bound to do as a result of that case.
        Will the Under-Secretary confirm information that has been given to me that the current practice of the commission following the High Court decision is to continue to offset even heating allowances against the long-term addition up to October this year? For reasons that need explanation and justification, it seems that even the decision of the High Court has been set on one side, at least till October.
        Whatever the explanation, the Government have done no more than an absolute minimum. By making the change, with which we agree, they have opened up a glaring anomaly. Those that are awarded special heating allowances are in effect given preference over those awarded special allowances because of dietary needs, laundry costs due to incontinence, immobility, or anything else. There seems no clear argument in equity for the special heating needs being given that kind of priority.
        That is the first argument for the amendment—that the Government are trying in the schedule to make a division where in equity no reasonable division can be made.
        The second argument is that the freeing of the special allowance is limited to heating, and therefore only supplementary benefit claimants with extra heating costs alone will gain as a result of the Bill. Yet it is well understood by all persons who deal with the kind of claimants who repeatedly come before the commission that their needs are not so neatly compartmentalised as the change which the Government are making appears to indicate. They often interlock.
        There is often a division of needs, especially among elderly pensioners, such as those suffering from incontinenece and a digestive disorder. Such people, who are in the greatest need, will gain nothing from the Bill, because the removal of the offset is limited to heating allowances.
        To make the point forcefully it is worth giving a particular example. It is one that Members who served on the Committee will recognise, but I give it again because it illustrates the point very well. Mr. Clark, who is 78, and his
        1032
        wife, aged 68, have been receiving supplementary pension since 1965 in addition to their retirement pension. Mr. Clark suffers from bronchitis, and also has a fractured spine. It was considered that the extra cost of a special diet was 40p a week, and that amount was regarded as a special expense. His wife suffers from bronchitis, asthma, emphysema and arthritis. In 1971 she suffered a coronary thrombosis. It was accepted that she should have a more expensive diet, the cost being 92p a week. This amount has been regarded as a special expense.
        Secondly, Mr. and Mrs. Clarke are unable to do their own laundry, and they send it out at a cost of 40p per week. The normal requirements figure is intended to cover the first 10p of such a charge as all claimants have minor laundry expenses and only the balance of 30p has been regarded as a special expense. Mr. and Mrs. Clark are in poor health and need constant room temperature to be maintained day and night and the 90p extra heating allowance is regarded as a special expense. Their exceptional circumstances addition totals no less than £2·62 a week of which 50p is now offset. Mr. Clark has said,
        "I would appreciate a visit so that you could see for yourself the fix I am in".
        He is particularly worried that he is unable to afford the fresh fruit and vegetables that his wife is meant to have.
        The Bill as drafted gives Mr. and Mrs. Clark no relief. As the offset remains on their special diet and laundry expenses, the so-called freeing of their heating allowance is illusory. That is the powerful argument in favour of the argument.
        The third argument for the amendment is that the Bill worsens the situation for those with special needs because the High Court ruling gives the Supplementary Benefits Commission and the tribunals discretion to ignore the long-term addition when awarding the extra weekly allowance, but the Bill places a duty on the commission to deduct the equivalent of the long-term addition. Now the commission will acknowledge, even more than before, that there is a special need to be met and then compel denial of full special relief.
        I quote briefly a further case to show how extremely limited is the concession

        1033
        made in the Bill and how those in considerable need will get no relief. Mrs. Lamb is a house-bound widow of 77. She used to receive heating allowance of 40p a week, but this was withdrawn after a home visit by an officer of the commission. She suffers from a bad heart and arthritis. She has had 12 pacemakers inserted in her heart in the past eight years and has to have a high protein diet—eggs, cheese, meat, fish and so on. When she was visited last year her legs were swollen. Since the commission does not state how much of the basic living allowance is allowed for food costs, it is normally difficult to argue about the adquacy of the diet allowance. I stress that problem. We should know much more about how much of the basic allowance is allotted for particular conditions so that we may know how much extra people are getting.
        Mrs. Lamb receives only 40p a week extra for an expensive diet and another lop for laundry. The long-term addition is offset against the exceptional circumstances addition, and that situation will continue under the Bill. The result is that in comparison with a healthy pensioner of the same age who does not suffer from the severe afflictions of Mrs. Lamb her extra needs are not catered for.
        12.45 p.m.
        Those are powerful arguments for the amendment. I put forward one more argument, which the Government have sought to make their own in their handling of social security matters in the last three years, namely, the concentration of the greatest help on those in greatest need. It is difficult to think of people in greater need than the people in the cases that I have quoted. Yet, in many cases, if they have diet or laundry needs which are no greater than those allowed for in the 50p allowance per week, they gain nothing. The freeing of the heating allowance under the Bill aids them not at all, as there continues to be an offset against other exceptional circumstances additions.
        In view of the Under-Secretary's ideological position and the argument which he has tried to make his own, but which he puts forward sincerely, I hope that he will agree that to allow the Bill to go through in its present form will
        1034
        deeply contravene the principle that those in greatest need should receive the most help.
        I turn to the arguments put forward in Committee, designed to show why an amendment of this type is not acceptable. The first was that in allowing the removal of the offset for heating allowances the Government are going for priority needs. I hope that I have said enough to make it clear that, because needs are interwoven and are not compartmentalised in the way that the Under-Secretary may like to make out, the assertion that the Government are giving priority to those in greatest need does not apply, as many people with heating needs will also have other needs and other exceptional circumstances additions and, as a result, will gain nothing. Therefore, the priority argument is entirely inapplicable because of the interlocking of needs, as is often the case among those in greatest need and the most elderly pensioners.
        The second argument put forward was that the initial concession would provide leverage for further changes in later years. This is only the second social security Bill since the main 1966 Act. If we continue at the present rate without a precise commitment to make a change of this kind next year—and, if there is such a commitment, why not make it now?—many of the people who are the object of the amendment will no longer be with us. Therefore, the argument that a certain leverage is provided is unsatisfactory when we are dealing with those in greatest need who have not many years of life left.
        The third argument concerns the issue of priorities. The Under-Secretary of State said in Committee that the cost of accepting an amendment similar to this would be about £10 million. For those with the degree of need about which I have been speaking, £10 million is a small sum. In case the hon. Gentleman seeks refuge behind that figure, I should like to spell out the priorities that the Government have adopted in other respects.
        On the disaggregation of children's investment income—and it is only the children of the very rich who have investment income—the Government have made a concession costing £12 million a year. Giving the option of separate

        1035
        taxation for women, which is not of value to a married couple whose joint income is less than £5,600 a year, the Government's concession costs £15 million a year. The Government have removed at a cost of £38 million a year the ceiling on earned income relief which goes exclusively to those with incomes of over £9,945 a year. They have removed the notional capital gains tax on disposals at death at a cost of £15 million. They have raised the limits at which estate duty is paid at a cost of £20 million.
        In the current year the Government propose to give £300 million each year in reduced tax on unearned income, more than a third of which will go exclusively to those with incomes of over £5,000. The Government are giving £15 million to the building societies to reduce the increase in mortgage rates, the benefit of much of which will go to those on a reasonably high level of income and certainly will go to those with vastly higher levels of income than the people who are the object of this amendment. Therefore, I submit that this is a very reasonable amendment. We are concerned with some of the poorest and most helpless people in our society. All that we seek is the ending of a patent anomaly, which I am sure all hon. Members will agree exists. If we merely remove the offset for heating and not for diet, laundry, and other expenses, it will cost only £10 million.
        I hope very much that the Under-Secretary will look favourably at this proposal.
        Mr. Joseph Harper: If the Minister has not already done so, I urge him to read page 12 of this morning's Guardian. There, he will see an article headed "Poor Law", and there is a very apt photograph accompanying it.
        For the information of hon. Members who are too young to remember, the Poor Law was the forerunner of supplementary benefit. We moved from the Poor Law to local assistance on the rates, to national assistance, and now to supplementary benefit.
        Anyone wanting to understand the distress caused to a person on the Poor Law, who is among the poorest in the community, could not do much better than to look at the new television series
        1036
        entitled "Sam". This week's programme was dedicated to the Poor Law as it affected people in the North West, the Midlands, and Yorkshire.
        We have travelled a long way since the days when, if anyone wanted to apply for Poor Law and went along to the local office where it was paid out, he rapidly discovered that the faster people went in, the faster they were thrown out. For 90 per cent. of those who went in there was no Poor Law.
        To a great many people it was known not as "the Poor Law" but by the name of the Gentleman doling out the pittance. I could give the name of the person who operated in my own area, where the Poor Law is still known by that name——
        Mr. J. D. Concannon: Scrooge.
        Mr. Harper: No. His name was not Scrooge, although he epitomised Scrooge in all that he did. I do not intend to embarrass his family by naming him, but he is remembered well in my part of the world.
        Perhaps quite unintentionally, this part of the Bill overrides the recent High Court decision which has been referred to by my hon. Friend the Member for Oldham, West (Mr. Meacher). What happened was that a young single mother in charge of two children and therefore not required to register for work drew an exceptional circumstances addition allowance. Her entitlement was 35p a week, or seven shillings in old currency. When she had been in these distressed circumstances for two years she became entitled to the long-term addition of 50p a week, which has now risen to 60p. However, immediately her 35p was taken away, leaving her with an additional 15p. She was not over-enamoured with this arrangement, so she appealed and eventually her case went before the High Court.
        I have always thought, rightly or wrongly, that whenever the High Court gives a decision everyone has to obey it. Apparently, that does not apply to this Government, or to the Supplementary Benefits Commission. The High Court decision said that the commission should not apply the rule of thumb that where a person was given one amount and then

        1037
        got a larger amount, one should be subtracted from the other. In the face of that decision, apparently what the Supplementary Benefits Commission did was to circulate all its local offices telling them that they must not follow the High Court decision too closely and that apart from what the High Court specifically laid down—for children and help with heating——
        Mr. Dean: The hon. Gentleman is being very unfair to the Suplementary Benefits Commission. I shall explain the point when I reply to the debate but let me say straight away that the Supplementary Benefits Commission will observe the law of the land like anyone else. It is doing just that. I shall explain the significance of the Bill in a moment. But it is quite unfair to say that the commission is not observing the law of the land.
        Mr. Harper: In that event The Guardian should be submitting an apology, although The Guardian is a reputable newspaper which does not lightly print incorrect information.
        Mr. O'Malley: It is the considered opinion of some people who are legally qualified that the Government and the Supplementary Benefits Commission are manifestly not obeying the law of the land and are completely ignoring the Simper decision in current instructions to officers of the commission to offset heating allowances against 50p of the long-term addition until October of this year.
        Mr. Harper: I quite agree with my hon. Friend. The High Court made a clear decision. Immediately the Supplementary Benefits Commission found a way round it and decided not to abide by the spirit of that decision.
        I have the feeling that this will not be the last decision of this kind. As soon as the Child Poverty Action Group finds a suitably aggrieved person there will be another High Court case, and it may be that this decision will be the better for it.
        My hon. Friend the Member for Oldham, West quoted the case of a housebound widow of 77 who was in receipt of a heating allowance. I do not want to go into the details. My hon. Friend has explained the position fully. But there
        1038
        are countless other cases, and to support what I say I draw attention again to today's article in The Guardian:
        "Hundreds of thousands of other claimants will find themselves in the same position as the Bradshaws, Mr. Bradshaw, who is 78, suffers from a prolonged intervertical disc and is registered disabled."
        It is easier to find out what is right with him than what is wrong.
        "He has to wear a corset and is also recovering from pleurisy for which he receives an ECA for diet of 40p a week. His wife, who is 60, is suffering from terminal cancer."
        The article goes on to list her other ailments. It is cases like that where people need all the help that we can give them. They are not receiving that help.
        We seek to get the Minister to act in the spirit of what The Guardian describes as the "Poor Law" and what today is known as supplementary benefit to help unfortunate people who fall within this category. They should be helped with laundry, diet and heating costs. If it had not been for the recent High Court case, we should still have been in the same position. How many more High Court cases will there have to be before something is done for people in this category?
        1.0 p.m.
        Mr. Dean: In this debate we are dealing with people who have special needs and who require special help to meet them.
        The Bill improves the arrangements in a number of respects which I shall describe. Understandably, the Opposition say that it does not improve them enough and that we ought to go still further. But there is no doubt that the arrangements are being improved in this Bill, as they have been on earlier occasions.
        One of the earlier improvements which helped substantially in this area was the introduction of an annual review of both national insurance benefits and supplementary benefits. As a result, we got rid of the ups and down which used to occur in years when benefits were improved. It was quite impossible to explain to anyone on supplementary benefit how it was right that when his national insurance pension was increased his supplementary benefit was reduced. This change, introduced a year or two ago, has been a substantial improvement

        1039
        for a number of people, including those about whom we are now talking.
        The Bill also includes provision for the higher increase for those on long-term benefits—pensioners and others who have been on supplementary benefit for two years or more. The increases of £1 for a single person and £1·60 for a married couple bring the rates respectively to £7·75 and £12·50. When I quoted the rates earlier I underestimated. In fact, I quoted the lower rate of increase for the short-term beneficiaries, whereas I should have quoted the figures that I have just given of £7·75 and £.12·50. Those are the improvements which are made earlier on in the Bill.
        I turn to the more detailed provisions. The first concerns paragraph 4(2) of the Schedule. This reflects the decision to incorporate the long-term addition into the new higher scale rates being introduced for long-term beneficiaries. This change enables the differential increases in long-term cases to be reflected fully and effectively in the supplementary benefit scheme. It is intended to remove the confusion and misunderstanding to which the long-term addition, as a separate element, has given rise and of which hon. Members are aware. In other words, what was thought to be an improvement in the arrangements in 1966 has in practice turned out to be a source of confusion, difficulty and misunderstanding. As a result, we are merging the long-term addition into the long-term scale rates and improving the 1966 arrangements.
        The first result of the amendment would be to put us back to the disadvantages of the system that the 1966 arrangement was thought to be removing. It would result in a proliferation of small discretionary additions to benefit of the kind that existed before 1966 with all the detailed examination of individual circumstances which that would entail. The intention in 1966 was to get away from that, and the intention in the new arrangements is to keep away from that, but with the improvements that I have outlined.
        The main change concerns heating. First, I should like to deal with the legal position. I repeat what I said to the hon. Member for Pontefract (Mr. Harper). It is most unfair to suggest
        1040
        that the Supplementary Benefits Commission has not been observing the law or has been trying to get round High Court judgments. That is not so. The position is that until October—that is the date when the Bill comes into operation if it receives the approval of Parliament—heating additions will be offset. The Supplementary Benefits Commission has decided to do this as a matter of discretion following the Simper case in which it was decided that the commission should exercise its discretion. If a tribunal has decided that there should be no offsetting, the commission will implement the decision of that tribunal as required by law. From October there will be no offsetting. In other words, the present uncertainty will be clarified.
        Mr. O'Malley: It is true that in the Simper case Mr. Justice Cusack decided that discretion was to be exercised. He said:
        "My interpretation of these regulations is that Paragraph 4(2)(a) means that a discretion is to be exercised"
        —and he went on to define the discretion—
        "that is to say, it is intended that the person making a determination of the sum of money due should exercise a broad judgment to ensure that in fact there is no overlapping, but that he ought not to proceed simply on a rule of thumb that exact deductions should be made."
        The commission, presumably at the wish of the Government, is to exercise not an individual discretion on the lines of Mr. Justice Cusack's decision but a blanket discretion or decision that it will continue with the old method of offsetting where the whole of the first 50p of any heating allowance is set against the long term addition.
        Mr. Dean: The commission, following this judgment, is to exercise its discretion. That is the position which now obtains and will continue to do so until October when the Bill clarifies the position in law. 'The quotation made by the hon. Gentleman supports that position. It is said that the commission must exercise its discretion. It is true that in the exercise of its discretion the commission lays down broad guidelines for its officers to follow, and so on. Surely this is in the interests of claimants, because they have an indication of the way that the commission will exercise its discretion in certain cases.

        1041
        Were this not so, not only would it be intensely difficult for the scheme to be administered by local offices, but people would have no indication before they went to the commission about the type of help available and the circumstances in which they would get it.
        Mr. O'Malley: The Minister has not answered my point at all. It is our view that the Supplementary Benefits Commission's current instructions to its local officers does not meet the requirements of the law as a result of the Simper case. May we get away from legal niceties? If it is morally right not to offset heating allowances against the long-term addition in October this year, and since it is possible for the Government and the commission to give instructions at the moment that the discretion is to be used and the result is that there is to be a complete offsetting, why are the Government and the commission persisting in maintaining their old attitudes, which have been knocked down by the decision of the court, when it is felt necessary to change the law in October? Why are they not meeting the just case of this poor group of people receiving these benefits before October? They have the power to do it. Why are they not doing it?
        Mr. Dean: I shall be coming to the improvements in the heating arrangements provided in the Bill. Perhaps I may deal with the legal niceties. I am not a lawyer, but I am advised—I accept the advice—that the commission is acting within the law. It is acting entirely appropriately. Furthermore, where decisions have been made by tribunals that there should be no offsetting, the commission will abide by such decisions and carry them out until such time as the law is clarified in the way set out in the Bill.
        Mr. Skinner: I should not like to accuse the Government of double standards—anyway, not on a Friday. Has the Minister considered that recently a matter which will be debated on Tuesday next—the question of illegal immigrants—has been brought before the courts and that the net result of that legal tangle is that the law will be used retrospectively? All that my hon. Friend the Member for Rotherham (Mr. O'Malley) is saying is that, as this decision has been made, and taking into account that the Bill becomes
        1042
        law in October, if the Government find it necessary to use the law retrospectively against these so-called illegal immigrants, why can they not use it retrospectively for old-age pensioners?
        Mr. Dean: I had better not get involved with debates which may take place next week. It is sufficient to concentrate on the present debate.
        I come to the improvements which the Bill will bring about in the heating arrangements. The new arrangements will mean that from October additions for the exceptional heating expenses of long-term beneficiaries will always be met without regard to the special expenses margin in the long-term rate. We expect that over 400,000 people will receive some increase in benefit on this account alone. It is because of the concern expressed on both sides of the House and by people outside who are concerned about the welfare of the elderly and chronic sick that the Government have decided that this special measure should be taken so as to improve speedily the provision for heating expenses made in the supplementary benefits scheme.
        When the Government are introducing an advance of this kind about which concern has been expressed on all sides I should have thought that there might have been just a little word of praise for them. For the hon. Member for Oldham, West (Mr. Meacher) to suggest that the Government have been shoved into this by legal action is totally untrue. It is typical of the hon. Gentleman never to give credit where it is due.
        In Committee the hon. Member for Rotherham (Mr. O'Malley) accepted that there must be priorities. He said that his order of priorities would be heating, diet, laundry. I accept that he went on to say that the Government ought to do more than they are doing but we are all agreed that there have to be priorities. If we were to go beyond the £6 million or so which the improved heating arrangements involve and on to what is proposed by the Opposition we would need about £12 million. This has to be considered in the light of priorities.
        Mr. O'MalleyI know that the hon. Gentleman would not wish to misquote me. When I laid down an order of

        1043
        priorities I did not say that the first should be heating, the second special diet and the third laundry. I said that these three types of expenses were part of an integrated problem and should be considered together.
        Mr. Dean: I am in no sense seeking to misrepresent the hon. Gentleman but he must face the issue. He knows as well as anyone that there is a tremendous demand upon resources in the social services. A good case can be made out for improving any of them and therefore priorities have to be allocated. I accept that it is right to put the improvement of heating arrangements at the top of the list. It is what the Government have done.
        Coming to the point about diet I would point out that any special need costing over 50p is usually met up to a standard amount. The Supplementary Benefits Commission has a discretionary power which is used to pay more where necessary. When an expensive diet must be followed because of kidney failure, for example, the commission will, on medical advice, pay the full cost however high. It is important to stress how wide the powers of the commission are and the way in which it exercises them over and above the normal amounts laid down.
        1.15 p.m.
        We accept that there are people with multiple needs. They will benefit from the improvement in the rates of benefit. The hon. Member for Oldham, West is wrong to say that they will not. They will get the benefit of the improvements in the basic rates. If their special needs are more than 50p they will get the benefit of anything over and above that and there is the discretionary power of the commission where additional help is required. I am sure that these improvements will be welcomed by the House. The Government and the commission will watch the way in which they work out with care. I hope the House will feel that we have made an advance in this matter.
        Mr. Alec Jones: Those of us who have served in Committee with the Under-Secretary know that he is always using his weakest argument when he turns to personal attack. When he attacks my hon. Friend the Member for Oldham, West (Mr. Meacher) I suspect that his
        1044
        argument is very weak. He told us that the Bill dealt with the special needs of people and the special help given to them. This is not how I see it. As I see it the Government are proposing to use the long-term addition, specially designed to meet the needs associated with a long period of supplementary benefit, for special needs such as diet and laundry.
        When the Minister talked about the need to lay down broad general guidelines he was not answering the point that in practice the Supplementary Benefits Commission is continuing to offset the heating allowance against the long-term addition. We can find no justification for continuing with this after the High Court decision. The commission and the Government should be more concerned with the principle of social justice and fair play for these people rather than sticking to the strict letter of the law.
        The hon. Gentleman talked of the benefits that would be going to these people. He mentioned the annual up-rating. Such items as long-term additions, disregards and aggregations are seldom included in the annual uprating. The Minister said that 400,000 people would benefit as from October from the new arrangements for the heating allowance. Of course we are all pleased at this, but it is stretching imagination too far to suggest that this improvement was brought about solely by the Government's kindness and had nothing to do with the High Court judgment and the activities of the Child Poverty Action Group.
        The Minister did not deal fairly with the question of priority or answer the forceful point about those with a combination of need, for special diet and special laundry facilities as well as for heating. Payment for laundry or diet may be more important to some than a heating allowance. Each case should be judged on its merits. If we suggest that the next priority is diet, we are forgetting those with different needs or combinations of need.
        We have ignored the strong feeling among the experts who deal with these cases all the time. Hon. Members on this side have had considerable correspondence from the CPAG, giving details of many cases which will not be materially affected by the Bill. The Minister said that there will be an improvement in

        1045
        cases of multiple need. Of course there will, if that need includes heating, but if the multiple need is laundry and diet, there will be no improvement. Anyway, the improvement will be marginal and is not worth much praise to any Government.
        The British Association of Social Workers has written to Members:
        "…the time to legislate is now in order to bring a little immediate relief to some of the poorest and most handicapped in the country."
        Task Force has written:
        "It is unfair and illogical to ignore exceptional circumstances additions for heating when assessing a claimant's benefit and not to ignore them for special diets, laundry and most other exceptional costs. The vast majority of the 16,000 pensioners in regular contact with Task Force volunteers have interlockng needs of which heating is one."
        I have also had a letter from the Social Services Department of the East Sussex County Council, in which the Director of Social Services says:
        "Great anxiety has been expressed about the hardship that this"
        —the provisions of the Bill and the failure to improve the situation—
        "will cause to our clients, especially those with exceptional needs regarding diet and laundry."
        So far as the Bill deals specifically with exceptional needs, we have missed the boat and failed to satisfy the needs of the most deserving and poorest sections of the community.
        The Minister's reply was disappointing to us; it will disappoint the social workers and distress those whom we are trying to help. The Under-Secretary is usually far more generous than his words today suggested. I should like to think that his words came not from his own heart but from the restrictions imposed by the Treasury. I hope that he and the Secretary of State will stand up for these needy people.
        We accept that there must be priorities in every service, but there are priorities among all aspects of Government policy and we want to be sure that the Government get their priorities right. How can we say that this is a reasonable order of priorities when we know the vast sums of money that have been handed over to surtax payers and the building societies? This debate has shown that we need a complete redefinition of the exceptional needs and the
        1046
        Long-term additions. Our next debate will show that we need a similar review of disregards for supplementary benefits.
        Amendment negatived.
        Mr. O'Malley: I beg to move Amendment No. 3, in page 17, line 43, at end insert:
        `8. In paragraphs 24 and 25 of the Schedule there shall be substituted—

        (a) for each reference to £1·00, a reference to £1·75.

        (b) for each reference to £2·00, a reference to £3·50.'

        I understand that it will be convenient also to discuss at the same time the following amendments: No. 4, in page 17, line 43, at end insert:
        '8. In paragraph 25(i) of the Schedule there shall be added:
        "(g) any retirement benefit arising from the payment of graduated contributions under the National Insurance Acts".'.
        Amendment No. 5, in page 17, line 43, at end insert:
        '8. In paragraph 24 of the Schedule:
        (a) in sub-paragraph (1) (f), for"£0·38"there shall be substituted £1·50;
        (b) in sub-paragraph (1) (g), for"£0.28"there shall be substituted £1·50;
        (c)in sub—paragraph (2) (a), for the words "widow's allowance or widowed mother's allowance" there shall be substituted the words "benefit at the weekly rate of £3·80 or £2·90"; and
        (d)in sub-paragraph (3)(a), for the words "Widow's allowance, widowed mother's allowance or child's special allowance" there shall be substituted the word "benefit at the weekly rate of £2·80".'.
        The simple purpose of these amendments is to raise the level of special disregards for a wide range of categories of income received by recipients of supplementary benefit. One amendment seeks to include benefits from graduated contributions for disregard purposes.
        A good example to illustrate this point is the position of retired miners and their widows as a result of the increased pensions that have been negotiated by the National Union of Mineworkers from the NCB. There is deep anger and resentment in the coalfields at the way in which retired miners and miners' widows are being treated by this Government.
        Earlier this year, with the Government's consent, the NUM and the NCB negotiated an improved miner's pension,

        1047
        increasing it from £1·50 to £3 for retired miners and from 75p to £1·50 for widows. Immediately, many of these people lost all, and all of them lost most, of their increase if they were dependent on supplementary benefit. The amount of benefit was knocked down in the very week that they received their increased pension.
        So the NUM negotiated an increase of 75p for the widows of men who had worked down the mines, not the most pleasant job in Britain, all their lives, and the maximum that such a widow can receive of that increase is 25p because the present disregard for supplementary benefit is £1. Many of the men whose pension was raised from £1·50 to £3 got nothing at all.
        What is so sad about the situation, apart from the change in the value of money, is that, both in Committee and at Question Time, when the Minister answered a pointed question from my hon. Friend the Member for Pontefract (Mr. Harper), he showed that he did not even understand the position or know what is happening in the coalfields.
        I come from a mining village and my hon. Friends are from such areas, too. We can tell the hon. Gentleman what is happening because every week we have cases by the dozen concerning old ladies and elderly retired miners who simply do not understand what is going on and who lose virtually all their benefit. They resent it bitterly.
        Mr. Harper: Does my hon. Friend realise that the Under-Secretary of State contested the by-election at Pontefract in 1962, when we tried hard to educate him in such matters?
        1.30 p.m.
        Mr. O'Malley: All I can say is that places like Pontefract understand the hon. Gentleman. That is why they never sent him here.
        Mr. Dean: I remember the incident to which the hon. Member for Pontefract (Mr. Harper) refers, but it is particularly unfair to claim for the Opposition a monopoly of understanding of these matters. I happen to have coal miners in my constituency, and so do many of my hon. Friends.
        Mr. O'Malley: The hon. Gentleman may have coal miners in his constituency
        1048
        but I am sure that none of them votes for him. I never assume that the Opposition has a monopoly of wisdom or virtue, although there is precious little sign of wisdom, virtue, humility or any other better qualities in the conduct of the present administration. If it were not for what the hon. Gentleman has on the record I would not have made a claim like that. But in Committee the Under-Secretary said:
        "Many of the retired miners concerned will, in fact, be better off financially in the future, unless their rent is high, by forgoing supplementary benefit and claiming a rent rebate or allowance instead."
        That is not true, and I will tell the hon. Gentleman why. First, the assumption he makes is that unless the rent is high there will be circumstances in which the Supplementary Benefits Commission can refuse to pay the full rent because it only expected to pay a reasonable rent. But it is in only 1 per cent of cases throughout the country that the commission exercises its powers, and that 1 per cent is largely centred in London, particularly central London. But we are not talking about S.W.1 when we get to Pontefract, Rotherham, and Mansfield, and the towns and valleys of South Wales.
        The hon. Gentleman also said, in Committee:
        "This is because recent increases in the needs allowances in the rent rebate allowance scheme have altered the relationship with the comparative supplementary benefit scale rates so that people with small amounts of occupational pension are better off financially after paying rebate and housing costs than they would be on supplementary benefit."
        That is not true either in cases where rents are low, or comparatively low. The situation is the opposite of what the hon. Gentleman said. In the mining areas many retired miners and their wives and miners' widows are living in low-rent houses, because in such areas rents are traditionally nothing like they are in the south of England. They are also often in older-type properties—smaller, cottage-type properties, as they were called by 19th century rate officers. They do not stand to benefit by asking for supplementary benefit in addition to rent rebate. Large numbers of retired miners and widows, taking into account any rent rebate arrangements that may exist, will, if they have a pension increase of £1·50, lose the lot. Others will not lose the

        1049
        lot, as there will be some kind of benefit accruing from rent rebates.
        But when the Government introduced the Housing Finance Act they never said that they were introducing rent rebates because they would have to do something about disregards. That is a post facto argument. The hon. Gentleman has already given the game away in Committee. I cannot quote him because the proceedings are not available, but he said that he accepted the case for improvement of the disregards.
        Let us be clear that the only valid argument from the Government's point of view, although I do not accept it, is the cost. It is against the background outlined by my hon. Friend the Member for Oldham, West (Mr. Meacher) that our belief in this amendment follows the money being doled out by the barrel load to the wealthier sections of the community while the mining areas get nothing in terms of disregard changes.
        Yet the Government's attitude towards disregards and their refusal to raise them are in clear opposition to their stated pension policy. What is the point of unions and employers discussing occupational pensions—particularly when they are very small—if the only result is that the men and women receiving such small pensions are no better off? That is the difference between half pay on retirement, for example, for executives and the very tiny occupational pensions, even at the level of £3.
        The case of the miners illustrates the general argument for increasing the disregards. They have not been put up since 1966. The disregard was set at £2 a week for supplementary benefit purposes—for example, for the disablement pension, for compensation under any enactment relating to workmen's compensation, and for disablement benefit under the National Insurance (Industrial Injuries) Act 1965.
        We are talking largely about a group of people which includes pneumoconiosis victims. They are not all recognised as such, but when they are it is this type of category that we are dealing with when we consider the increase. The £1 disregard is for other categories of income. The £2 disregard, set in 1966, in today's terms is worth about £1·20. The £1 dis-
        1050
        regard in 1966 has fallen in value to about 60p. The value has fallen steadily over the years, dramatically so as a result of the inflation produced by the policies of the Government. I examined the movement since 1966 in basic scale rates, including the present up-ratings of 76·5 per cent. for the single person and 75·2 per cent. for married persons and concluded that it was reasonable therefore to increase disregards by 75 per cent. Therefore, our first amendment would increase the disregard of £1 to £1·75 and the £2 disregard to £3·50. This movement would bring some benefit to the mineworking community, which many Opposition Members represent.
        I wish to refer to the case which my hon. Friend the Member for Oldham, West brought to the Under-Secretary's attention in Committee. My hon. Friend the Member for Glasgow, Springburn (Mr. Buchanan) told me in a letter that the National Union of Railwaymen had negotiated ex-gratia payments for a number of elderly railwaymen who were too old to enter the pension scheme. In the case quoted to me by my hon. Friend the Member for Springburn no disregard was being given.
        I am grateful for the information the Under-Secretary gave me in a letter that I received this week. Will he confirm that the general situation is that, when applications for supplementary benefit are made to local officers, if there are such ex-gratia payments the applicants are entitled under the general rules of the scheme to the disregard in just the same way as any other income.
        In Amendment No. 4, my hon. Friends and I raise the question of the treatment of
        "retirement benefit arising from the payment of graduated contributions under the National Insurance Acts."
        At present, any income accruing from graduated contributions is not disregarded for supplementary benefit purposes. The reason the Government, despite representations made to them, have refused to amend this situation is that they say that graduated benefits are an integrated part of the national insurance system.
        There is one group of recipients of graduated pensions who must be given special consideration. For workers whose firms decide not to opt out of graduated contributions between £9 and £18 there

        1051
        is no alternative open to people paying contributions within that earnings band but to be in the graduated system. At present, those who are contracted out pay only 0·5 per cent. contributions between £9 and £18, whereas those who are not contracted out pay 4·75 per cent.
        The graduated pension for that group of people is as much an occupational pension, albeit a State occupational pension, as that of their workmates down the road who are in a private occupational scheme. There could be two brothers, one working at one factory, the other at another factory down the road, on identical incomes, but with one brother paying his contribution, between £9 and £18 and 4·75 per cent., into the State scheme. When he retires he cannot get any of that disregarded for supplementary benefit purposes. The other man is with an employer who says "We will provide an occupational pension in that range of £9 to £15. We will stop the same percentage—4·75 per cent.—from the employee." The difference is that when he gets the pension that income can be disregarded. The man in the State scheme is not in the same position.
        Unless the Government are prepared to do something about this, it is another clear indication that they always put the interests of the private occupational schemes first. It is another piece in the saga we saw enacted when the Secretary of State survived by only four votes after saying, "We will give tax relief if you are a member of an occupational pension scheme, but a member of the State reserve scheme cannot have such treatment."
        1.45 p.m.
        I recognise that the amendment as it stands is probably defective, but the Under-Secretary must recognise the justice of the claims of this section of non-contracted out workers within the Boyd-Carpenter scheme. There is no reason why the Government, if they were prepared to do so, should not introduce an amendment in another place to meet the point.
        As for the third amendment, it will be seen that disregards in respect of widows are being increased substantially up to the level of £1·50. The present disregards of 38p and 28p per child for widows goes back to 1964 when the pre-
        1052
        ferential national insurance rate for widows' children which had been 10s. above the normal children's rates was increased by another 7s. 6d. each for the first two children and 5s. 6d. each for the third and subsequent children. This increase was disregarded for national insurance purposes and the same disregards were carried over in the Ministry of Social Security Act 1966.
        However, since 1966 there have been further increases in the gap between allowances for widows and for children. In 1971 the preferential rates were extended to retirement and invalidity pensioners. Since 1968 the gap has been the same for the third and subsequent children as for the first two. The gap, which was 17s. 6d. in 1968 and 18s. in 1969, went up to £1·10 in 1971 and £1·50 in 1973. The effect of our amendment would be to disregard the whole of that £1·50, not only for widows, but also for retirement and invalidity pensioners.
        It is inconceivable, when the Government have been able to give the massive financial hand-out that they have been doing to wealthy sections of the community, that they should not be able to afford to bring up to date levels of disregards which were set almost in another world nearly eight years ago in 1966.
        I therefore hope that the Under-Secretary will have the example of retired mineworkers in the forefront of his mind and will realise the general implications throughout the country for many poor people. They would have to be poor to fall within the range of supplementary benefit. It would be intolerably unjust in a time of unprecedented inflation such as this not to increase these disregards as we suggest. Our suggestions are modest. They would bring the disregards only up to what they were in 1966. I hope that the Under-Secretary will be able to accept them.
        Mr. Concannon: On Amendment No. 3, I thank my hon. Friend the Member for Rotherham (Mr. O'Malley) for putting the case so well on behalf of the miners whom he represents to a great extent around the Rotherham area in the South Yorkshire coalfields.
        When the National Union of Mineworkers was negotiating early this year

        1053
        for a wage increase, it was tied to the norm of £1 plus 4 per cent. To a great extent the union and those working in the industry were bought off by the addition of certain fringe benefits, one of which was the offer to increase pensions by 100 per cent. from £1·50 to £3 a week.
        It has always been very difficult to discuss pensions in the mining industry, and there is a reason for this. When one enters the mining industry, usually not through choice but because of economic necessity, there is little point in talking about pensions because many miners never expect to live long enough to draw one. I am thankful for the fact that the National Union of Mineworkers and the National Coal Board decided to sort me out at an early age. That fact, which is to their great credit, will put another 10 or 15 years on my life. I imagine that my hon. Friend the Member for Pontefract (Mr. Harper) is now approaching the age when he is living on borrowed time.
        In such debates it is as well to reflect on one's own family. My father never made it; he died at the age of 57. My father-in-law packed up work at 60 and died when he was 65 years. For his last five years he could hardly walk, let alone work. I now have two miners' widows in the family. So we know the problems involved, and if the subject of pensions is ever raised in the mining industry one is always up against the problems of which I have spoken.
        That is why pensions in the mining industry are disgraceful. They are still disgraceful, even though the weekly pension is now £3. To compare it with the old age pension of 30s. is really shameful. At the time of the l00 per cent. pension increase offer, some of us stood our corner and said that we should accept the increase. We had to argue against people who said that if it were increased in the same way as it was increased the last time, many of our members would lose on it, and the only thing we would be doing would be to subsidise the Government. That is the kind of attitude that some of us had to talk down.
        At the end of the day, after the miners discussed whether to take strike action or
        1054
        accept the offer, it was felt that to a great extent many retired mineworkers and their widows would be helped if the offer were accepted. Now they are bitterly resentful at what has happened. Morally we have got to increase the pension, but I expected, and I still expect, the Government to look at these disregards so that some benefit can be obtained.
        I am more fortunate than my hon. Friends the Members for Pontefract, for Bolsover (Mr. Skinner) and for Rhondda, West (Mr. Alec Jones). The Nottinghamshire coalfield is the only one in which an extra pension is paid. A Nottinghamshire miner of any standing gets two pensions. I do not know about the mail bags of my hon. Friends, but I am inundated with letters. The percentage of people in my area who are caught in this trap must be only a half or a quarter of those caught in other coalfields.
        I received a letter this morning, not from an ordinary mineworker but from one of the top mining engineers in my area. He was talking about his widowed mother. This is the kind of thing that is happening in the coalfields at the moment:
        "To hear the Tory Government speakers these days, shouting about how much they have given to pensioners, you would think that they have given them the whole world. It may be that they have lifted the basic pension, but it appears that when some organisation such as the N.U.M. lift their pension to help the elderly, then the Tory Government, far from being so benevolent, as they seem to wish their image to be, promptly grab anything which is given to help".
        He adds a postscript, as follows:
        "Since I wrote the letter, a man from the Social Security office has been to see my mother to tell her that it is the Government's policy to reduce supplementary benefits, if any other income is increased."
        The social security office in Mansfield is staffed to a great extent by people with whom I am proud to associate myself. They do a great deal of social work and they have a social conscience. The manager of the establishment is absolutely first class, and most of the people working under him are like that. They are bound to be, when they have to deal with injured mineworkers and such people. I only hope that my reference to this manager does not have any detrimental effect

        1055
        on him. I should hate to see him hammered.
        Let us take the case of this widowed mother. Her pension was increased by 75p a week. On the very day when the pension was increased, the National Coal Board increased the rent of her property. The two days are the same—2nd April 1973. She was receiving £8·60 per week from the Department of Health and Social Security. After the 75p. increase her pension was reduced to £8·10, so straight away she lost 50p of the 75p. She then lost 20p of her rent allowance supplement. So this widowed pensioner has 5p left from the 75p increase.
        The man who wrote to me also wrote to the Department of Health and Social Security about this case stating that it is grossly unfair for widows to be treated in this fashion, in this day and age when we have the scandals of Lonrho, Ferranti, Slater-Walker and John Bloom. I completely agree. We do not want to go back to our people and be asked "What kind of society are we living in at the moment?" But while the Government are getting up to tricks like this it is very hard for us who represent these areas to talk rationally about these problems.
        If the Minister wants to get these pension schemes going in certain industries, the very way to kill them is to continue with tricks like this. The people whom we hit the hardest are the people who can least afford to be hit hard. Those who are not well off by any standards, who are not drawing supplementary benefits and who are right on the breadline, expect some kind of increase, and then when they get the increase their order books are taken away, a mathematical shuffle goes on, and they get nothing. There is great bitterness and resentment, and I give full backing to my hon. Friend the Member for Rotherham (Mr. O'Malley) on his admendment.
        Knowing where my hon. Friend comes from, I have every confidence that, had he been the Under-Secretary of State in a Labour Government, this improvement would have been made, though I can tell him—he will understand this—that we should not have let him out of Rotherham if nothing had been done. If nothing had happened we should probably have tied him on the end of the string with which we measured pit shafts. However,
        1056
        as I say, I have all the confidence in the world that this matter would have been properly dealt with by a Labour Government, and I only hope that it is not too late to persuade a Tory Minister to sort something out so that the disregards are raised.
        2.0. p.m.
        Mr. Skinner: The argument has been well put, but a few points need embellishing so that the Minister may fully understand what is in issue and, in his wisdom, sympathy and compassion tell us that he will accede to our request for an increase in the disregards. I am sure that he will.
        It is worth remembering that the loss of supplementary benefits, distasteful though these benefits are in themselves, may mean the loss of a passport to a good many other forms of social assistance. For example, if a miner has been retired disabled before the age of 65, with his miner's pension, previously £1·50 and now increased, the result of his increase in miner's pension whereby he loses £1·50 from supplementary benefit is that he loses free prescriptions as well. Also, it may affect him in a good many other services administered by the local authority.
        I do not think that the Minister fully understood this the other day when my hon. Friend the Member for Pontefract (Mr. Harper) put it to him. It is not a matter of transferring £1·50 in the case of the retired miner, and 75p in the case of a miner's widow, from one pocket to the other. There is far more in it than that, though that is bad enough. We expected that anyway. I forecast it in the coal industry debate on 21st December last year, when the Minister for Industry, waving his arms about and acting as though he thought he was Santa Claus, told us that he would assist retired miners. We knew then what would happen, that there would be a transfer of money from one Department to another, but, as I say, the matter is worse than that.
        The Minister and his right hon. and hon. Friends constantly talk about the underprivileged, the poor old ladies in the supermarket looking about for two slices of meat loaf. They may well be the widows of retired miners, and they know what happens. When the books are returned to the social security or

        1057
        supplementary benefit offices, along comes an official—he has got his job to do—to examine what people have been getting. He finds that there has been £1·50 or 75p extra in the form of the miner's pension, and he may find other discrepanies. There may have been a rent rebate by the local authority. The sort of rebate I am thinking of would not happen where I live, because the Housing Finance Act has not yet been implemented; though that will, no doubt. be sorted out shortly in the courts.
        Where this diligent official finds that 20p too much has been paid out by the local authority in rent rebate and 20p has been paid out by the Supplementary Benefits Commission, that sum is lost as well. The net result is that, not just on the basis of technicalities which come to light but as a result of the system itself, miners and the widows of retired miners end up worse off than they were before, and in some cases, as I say, they lose the passport to various other services which go with the payment of supplementary benefit. We are talking here of sums as large as £2 a week. That is the immensity of it. I do not say that that is so in every case, but that is the way things go.
        In the coal industry debate in December last year, we forecast what would happen, and then, when it happened, we had the appalling experience of having the miners' wages negotiation mixed up with it.
        It is no good the Minister saying that what the Government are doing now is like what the Labour Government did in 1969. It is not. In 1969, when pensions were increased, it was a joint exercise by the NUM and the NCB. This occasion is quite different. The Government in the form of the Department of Trade and Industry, transferred a certain sum of money—£25 million up to 1976, rising to £40 million by 1978—to the NUM and the NCM and said, "Here is something to provide a pension increase for all your retired miners and miners' widows". Therefore, this is not like the last exercise in 1969, although the Minister pretended that it was at Question Time on Tuesday. This is money from one Government Department taken back by another, the Department of Health and Social Security, through the supplementary benefit offices. That is the scan-
        1058
        dal of the situation, and that is why I have a Question down to the master himself, the Prime Minister, for Tuesday next on the lack of co-ordination between these two Departments. Unfortunately, the Table Office has not been able to give me No. 1 on that occasion, so a Written Answer may have to suffice. However, as I say, the situation here is entirely different from that in 1969 when the Labour Government were in power.
        By the way, where are the Liberals? This is an important issue affecting the whole question of pensions and supplementary benefits, not just the disregards, yet not a single Liberal Member has been here all day to represent his party. But I suppose that no Liberal could represent his party, because it has so many different policies. What is its policy on pensions? Not one Liberal Member has been here to tell us.
        What about the Press, too? The Press often talks about the way Members attend for various debates. I remember the debate on pensions not long ago when the man from the Daily Mirror was running about up there taking a count every 20 minutes because, he said, there were not enough Members in the Chamber. Where is the Press today? There is not one. They have left it all to the Press Association fellow. He will have to write it for them all because there is not one representative of the Press or the Lobby——
        Mr. Deputy Speaker (Mr. E. L. Mallalieu): Order. It is not in order to take note of persons in the Gallery.
        Mr. Skinner: I am not supposed to notice a lot that takes place here, Mr. Deputy Speaker. I am not supposed to notice, but in fact I do, and what I am saying is of importance in relation to debates in the House. At some time, somebody ought to say it.
        Mr. Deputy Speaker: Order. The hon. Gentleman cannot have understood what was said from the Chair. The Chair will have to take other measures in due course if he does not get back to his speech on the amendment.
        Mr. Skinner: We fully expected that the Chair would have to take measures but it must be said nevertheless. Perhaps on some other occasion it will be gone into in much greater detail when perhaps it will be explained why the Leader of

        1059
        the Liberal Party can introduce a Bill providing for an employees' charter on one day yet not be here to discuss the very important question of old-age pensions the next, and when others can talk about inquiries into the Poulson affair, putting down Questions for Written Answer day after day when they are not even in the place, and are not even prepared to express concern for the old-age pensioners who are reduced to shameful circumstances as a result of the Tory Government's actions.
        Perhaps I should pass on to more important people. It is a shameful situation where the Prime Minister can have an increase in pension of £3,500 without paying a penny, a non-contributory increase which brings his pension up to £7,500, and yet thousands of miners and others, including, it seems, the railway-men, having been given a paltry pension increase in order to buy a few scraps at the supermarket, are now having it taken away from them by another Government Department. This is the scandal of the situation and that is why it is important for some of us to be here today to make the point—not that the Minister is here to listen to it anyway.
        But the case is an important one. It is different from those we have had on previous occasions. It is not merely one is which a pension scheme has been devolved by the employer and the employee, and in which the supplementary benefits have been taken away. It is more than that. It means that on this occasion the Government have granted a sum of money to the Coal Board and the NUM to provide a pension increase, paltry though it is, and another Government Department has taken it away. That is why we feel that it is high time that the Minister should introduce very quickly, if he cannot accept the amendment, an increase in the present level of disregards of £1 and £2 in order that some or perhaps all of the benefits can be felt by the people who have suffered from them. I hope that the matter has been put into perspective and I hope that my hon. Friends will say a few more words on the matter.
        Mr. Alec Jones: I rise to support the amendments, particularly Amendment No. 3. I suppose that after the speeches
        1060
        by my hon. Friends the Members for Mansfield (Mr. Concannon) and Bolsover (Mr. Skinner), and now by myself representing Rhondda West—all mining areas —the debate might appear to be turning completely into a case of special pleading on behalf of the miners. If that were so it would be justified because, irrespective of the general problem contained in the Bill and the proposals in the amendments, the specific case of the mine-workers and the way in which their recent pension increase has been affected deserves special consideration by the Government.
        We are here concerned with more than just a specific case, however. There is a general problem. I am sure that my hon. Friends have no greater difficulty than trying to explain to constituents who come to their surgeries what on earth the disregards are all about. I find it impossible to justify to people many of the problems they incur over the disregards. The pamphlet SBI issued by the Department explains their rights to supplementary benefit. It includes the calculation of resources and it explains how to treat different income in different ways dependent upon how it was earned. A sum of £2 is disregarded for part-time earnings; £2 of any earnings of the wife are not counted; however, if it is other income, such as the income of an ex-miner, only £1 is disregarded. People generally find it extremely difficult to understand the justification for the different treatment of the different incomes. If we are to have disregards we should disregard sums of money, not apply a different type of disregard to suit the way in which money was earned.
        The other problem is that the disregard has lost its 1966 value. The Library of the House has given us valuable information showing how unemployment benefits, retirement pensions, and supplementary benefits have risen since 1948. The supplementary benefit, or national assistance as it was then, was £6·65 in 1966 for husband and wife. It is now £11·65, which is a substantial increase. Yet, the disregard, which was an integral part of the 1966 Social Security Act and which was put into it for a specific purpose to meet a specific need, has remained exactly where it was. The pound in 1966 is a pound in 1973. The £2 is still the same.

        1061
        2.15 p.m.
        I would have thought that the Government would have to consider seriously whether the disregard was necessary in 1973. If they conclude that it is, as I believe it to be, then it is vital that it should be uprated. To leave it at its present level is dishonest. It means not only that it has lost its value but that we are merely playing with the idea of disregarding. The purpose of the disregard was to provide that supplementary benefit claimants should derive some benefit from any small outside income. We are not here concerned with people in the middle or higher bracket. We are dealing with the poorer sections of the community, the people who by the very nature of things are forced on to supplementary benefit, and the present level of the disregard is certainly not sufficient to meet its original intention.
        My hon. Friends are right to emphasise the effect which the disregard has at its present level on the mineworkers' pension. Certainly, the miners and many of their union officials cheered and applauded when the pension was announced to be increased from 30s. to £3. They expected to derive some benefit from it, but now find that they are denied any benefit because the pension increase has been deducted from the supplementary benefit payment. That is no way to treat a poor and deserving section of the community and it is no way to encourage good industrial relations in the mining industry.
        If I were a miner and I were offered a similar deal by the Government on the next occasion I know exactly what I would tell them to do with it. To pretend that they are giving a pension increase of 30s. when all they are doing is giving it with the right hand and taking it with the left is the height of dishonesty. The least the Government should do today is to accept that the disregard is as necessary now as it was in 1966 and accept that it should be given equivalent value. I hope that the Minister will have the decency and commonsense to accept our amendment.
        Mr. Harper: When the Minister sits on the Treasury Bench, looks over at this side of the House and sees a few miners he can no doubt guess that we are going to talk about the mining industry and the
        1062
        people who work in it. As I have already explained, he contested Pontefract 11 years ago and no doubt he learned a lot from his three-week sojourn in that town.
        Mr. Alec Jones: Is that the length of time he was there?
        Mr. Harper: He was not there for much longer. I know that basically he is a compassionate man. In pressing these amendments, we are trying to say that the disregards should be increased. I shall not be able to contribute much more to what my hon. Friends the Members for Mansfield (Mr. Concannon) and Bolsover (Mr. Skinner) said. I disagree with one point made by my hon. Friend the Member for Mansfield. I always thought that he was a friend of mine. I object to his initial remarks, but on the rest I agreed with him 100 per cent. I do not feel as if I am creeping up to retirement age. No retirement age is laid down. We lay it down only for the heavy industries.
        But we take my hon. Friend's point. Many people do not live to the retiring age of 65 and so do not receive any benefit. What is the use of the best benefits in the world if people do not live to enjoy them? I am reminded of a visit I paid to the Soviet Union in 1956. During our three weeks there we had the splendid benefits pointed out to us, but I asked the naive and simple question "Does anybody ever draw them?"
        I should like to trump the ace that I am sure the Minister will play. He will say that when the miners' pension, which had been £1 a week for years, was raised to £1·50, the then Labour Government did not raise the disregards, although we asked them to, and the 50p was taken off. But times have changed since then. We were then passing through an economic crisis, and for the present the political scene seems calmer. We seem to be in the midst of a boom. Perhaps the slump is to come in a few years' time, though I sincerely hope that it never will.
        The disregards affect people who have worked in the mining industry for 51 years, and in some cases 52. They used to leave school at 13 years. Then the school leaving age was raised to 14. I left at 14, and I believe that my hon. Friend the Member for Mansfield left at 15. Now the school leaving age is 16.

        1063
        No doubt one day somebody will have the good idea of making it 18.
        After 52 years' service, 51 years of them underground, the miners are subjected to the sort of treatment we are complaining about. Money is given with one hand and taken back with the other. My hon. Friend the Member for Rotherham (Mr. O'Malley) said that they were very angry about it. I believe that they are not only angry but bewildered. When they come to my surgery and my home I get out all the literature that the Department sends me, and I have the devil of a job trying to explain what it is all about.
        My hon. Friend the Member for Rotherham said that the amendments, particularly Amendment No. 3, should be accepted for the simple reason that we are asking not for a rise but just for the reinstatement of the value of the pound as it was in 1966. Apparently, it needs to be raised to £1·75 to have the same value as it had in 1966. We on this side believe that in justice and fairness that should be done.
        What is being done in the Bill, and has been done ever since the Tory Government came to office in June 1970, is to transfer the responsibility which has always been the State's to the local authority. My constituents write to me saying, "I have had a £1·50 increase in pension, and they take £1·50 back." Others have had £1 taken back. Some have lost the whole and some have lost part. I have to tell them that they must apply for rent and rate rebates. They do that, which is transferring the burden from the State to the local authority. For authorities such as mine, with many retired and redundant miners, those under the age of 65, even the increased help under the rate support grant does not cover the situation. That is unfair.
        Another point concerns those miners under the age of 65 who have had an increase in what is known as the incapacitated pension. In future they will have to pay for prescriptions, and that should not happen.
        The Minister will reply that all these benefits cost money—I know that that is so—and that it is easy to say in opposition what we cannot say in government. Having been a member of the previous Government, I understand that. But the
        1064
        present Government have given tax reliefs to the tune of hundreds of millions of pounds. Members of Parliament have benefited a little from that as well, but we could do without it. The money should go where it really belongs, to the people in need.
        I ask the Minister once again to give serious consideration to the raising of the disregards, to give them the value that they had in 1966. We are not asking for an increase.
        Mr. Dean: I have listened with understanding to what has been said in the debate. Much of it I would not wish to contest, particularly when one considers it as a case in isolation. The hon. Member for Rotherham (Mr. O'Malley) well knows, because he has been through it himself, that in the now annual up-ratings every Government must make the difficult and often agonising choice of what should be in and what should be left out.
        Under the Bill and associated measures we have increases in benefits amounting in a full year to £570 million. There is for pensioners, both those on national insurance pensions and those on supplementary pensions, the biggest increase in pension in any 12 months period. The disregards, as the hon. Member for Pontefract (Mr. Harper) has just recognised, are a call on resources. The hon. Gentleman has also recognised, from his own experience in government, that this factor has to be taken into account. The Opposition's proposal in the amendments would involve an additional cost of about £16 million a year. That is the extent of the additional call on resources over and above what is provided in the Bill.
        An improvement in the disregards helps only those who have additional resources to be disregarded, whereas an increase in the basic rate helps everyone. A general increase in the benefit levels, such as we are making this year, helps all beneficiaries, whether or not they have disregarded resources. This is one of the factors which Governments have to bear in mind when deciding whether all the resources, as in this year's Bill, should go to all beneficiaries who can benefit through an improvement in the basic rates, or whether some

        1065
        should go to those people who have additional resources and therefore in respect of whom the disregard operates. That is one side of the equation which has to be considered.
        On the other hand the Government fully accept that there is a case for improving the disregards. The Government have frequently said this. The case gets stronger each year, because the disregards have not been improved since 1966.
        We are anxious to encourage savings and to see that those people who have put something aside for a rainy day are not penalised for doing so. We recognise what the hon. Member for Mansfield (Mr. Concannon) put so forcefully, that it would be exceedingly difficult to persuade people to join occupational schemes, and to persuade those who run the schemes to improve the level of the pensions, if the effect will be that there will be no additional improvement for the people concerned. I recognise the strength of that argument and therefore that there is a case for an improvement in the disregards and that the time will come when rightly it appears at the top of the list.
        2.30 p.m.
        I turn to the argument about the mineworkers' pension which was put so strongly and understandably by the hon. Members for Rotherham, Mansfield, Bolsover (Mr. Skinner), Rhondda, West (Mr. Alec Jones) and Pontefract. Miners who are not on supplementary benefit will gain the full increase. We are talking only about some people who are on supplementary benefit. This applies not only to miners but to any occupational pensioner who receives an increase.
        But—and this is particularly relevant to the point mentioned by the hon. Member for Mansfield—I hope that hon. Gentlemen, in understandably advancing a powerful case, will recognise that this is not a new problem which has suddenly arisen. The same situation arose when the Labour Government were in office. When the mineworkers' pension was increased from £1 to £1·50 in 1969 there were no offsetting factors, such as the rent rebate arrangements. As now £1 was the limit of the disregard which was allowed for the occupational pension.
        1066
        Therefore, on that occasion the increase of 50p was of no benefit to the miners who were on full supplementary benefit.
        Mr. O'Malley: In addition to the differences mentioned by my hon. Friend the Member for Bolsover (Mr. Skinner), it was accepted, and I think that it remains accepted, by both sides of the House that the disregards would not be improved every time that the scale rates were improved. In 1969 the disregards of £1 and £2 were far higher in real terms than they are now. We are four years of rapid inflation on, and, to that extent, the argument is stronger, as the Minister will recognise.
        Mr. Dean: I am not arguing that. I am reminding the House, I hope fairly, that this is not a new situation but one which arose under the Labour Government in 1969, when the mineworkers' pension was last increased. The Labour Government then took no action to alleviate the situation.
        Now the situation is not so difficult. Many of the retired miners concerned will be better off financially, unless their rent is high, by forgoing supplementary benefit and claiming a rent rebate or allowance instead, because the recent increases in the needs allowances in the rent rebate and allowance scheme have altered the relationship with the comparable supplementary benefit scale rates so that people with small amounts of occupational pension are better off financially after paying rebated housing costs than they would be on supplementary benefit. In effect, they are taken above the supplementary benefit level but none the less qualify for a rent rebate or allowance.
        The Supplementary Benefits Commission is in touch with the National Coal Board and the National Union of Mineworkers about the best way of informing the people concerned of the new situation. We are anxious that each individual—we are not talking only about miners—should know the position so that the right choice can be made for him. The hon. Member for Rotherham, in spite of the hard words he used, cannot deny that many of the miners concerned will benefit, either fully or partially, from the increase in the miners' pension as a result of the rent rebate and rent allowance arrangement.
        Mr. Coneannon: To save the Department and the National Coal Board time, may I point out that I come from one of the better areas of the mining industry and I do not know of one case where what the Under-Secretary said will apply. I am sure that Members representing more distressed areas and which are not so affluent would be hard put to find cases which meet what the hon. Gentleman is saying.
        Mr. DeanI assure the hon. Gentleman that I have gone into this matter and have taken advice on it. It is not an easy matter to decide. A decision must be made in each case. But the Supplementary Benefits Commission is in close touch with the NCB and the NUM about the best way of informing people how they can benefit from the improvements. An article will be published in the NCB journal "Coal News" which will help to convey the information to the miners concerned. I make this plea to hon. Members opposite: in view of their knowledge of individual circumstances, will they please help us, because we are as anxious as they are to ensure that the many people who can benefit from the improvement in the miners' pension by readjustment under the housing finance arangements should benefit.
        The hon. Member for Rotherham asked about the ex gratia payments on which we have been in correspondence. I glady confirm that an ex gratia pension is treated in the same way as an ordinary occupational pension—in other words, the recipient will have the £1 disregarded.
        Turning to Amendment No. 4, this proposal has been made before, but it has always been resisted by successive Governments. The increments relating to graduated contributions are an integral part of the national insurance retirement pension, and the supplementary benefit scheme has always been regarded as essentially complementary to the national insurance scheme. It follows that retirement pensions, including graduated pensions, should be taken into account in full and attract no disregard. To disregard any part of retirement pension in determining entitlement to supplementary pension would result in providing twice over through different
        1068
        parts of the state social security scheme for the same contingency, namely, income maintenance in retirement
        The arguments which I would use against Amendment No. 5 are similar, although there is a special additional point. The existing disregards were carried over into the supplementary benefit scheme from the national assistance scheme into which they had been introduced in special circumstances in 1964. The circumstances were that an increase in the benefit paid for the children of widows was being made at a time when there was no uprating of national assistance scale rates, and the Government were unwilling to countenance the fact that many of the widows on national assistance would receive no benefit from the increase if it were to be taken into account as would have been normal.
        They therefore decided that the amount of the increase then being made should be specially disregarded for national assistance purposes, although it was realised that this would create an anomaly. The present disregards of 38p and 28p are the same amount decimalised and rounded. These amounts have, however, no rational place in the present scheme of disregards, since they conflict with the principle that supplementary benefit should be complementary to national insurance benefit. As improvements in national insurance benefit result in its meeting more of a person's maintenance requirements, it is right—and generally accepted—that the rôle of supplementary benefit should correspondingly diminish rather than be maintained by the device of disregarding some of the national insurance benefit.
        I draw the arguments together by saying that the Government recognise that there is a case, which becomes stronger with each year that passes, for an improvement in the disregards. We understand the case which has been put on behalf of one group of occupational pensioners today, namely, the miners. I appeal to right hon. and hon. Members of the Opposition to do all that they can to help us to ensure that each individual miner has the situation which is most advantageous to him in the present circumstances. However, an increase in the disregards is a call on resources. The Government will consider it along with other claims on the resources available.
        Mr. Bidwell: I have been asked collectively to reply briefly to the Minister's remarks.
        What the hon. Gentleman said hinged mainly on the miners and what might he called "the Irishman's rise". But the principles go much wider. I ask the Minister not to disregard the fact that they would apply equally if there should be similar movements in occupational schemes affecting railwaymen in general and the Transport and General Workers Union catering for the ex-employees of nationalised undertakings. The miners' rate of pension which has applied since nationalisation is a rate which applies over a wide front of nationalised industry. In this connection the Minister's reply was totally inadequate, although it was not altogether surprising. But he cannot disregard what will be a continuing situation for his Department.
        When this Irishman's rise situation occurs, as it has in the past in the case of supplementary benefits versus standard rates of pension benefits by means of either a private scheme or the State retirement pension scheme, it always gives rise to a certain amount of disquiet. I understand that the majority of mineworkers are affected, which means that stories about how it does not affect some miners do not cut very much ice.
        As the House will know, I speak against a background of considerable experience as a railway worker. The Minister said that he was pleased to announce that the ex gratia addition for many railway workers would achieve the £1 disregard. However it has not been uprated as much as we would have liked. In a sense, it makes matters worse.
        If we accept the principle of such a payment for one section of nationalised industry to its old servants, as railwaymen used to be called, and this kind of situation arises where a contributory pension scheme is put up in more modern living circumstances, we do not ease the situation. On the contrary, we cause a great deal of disquiet because it does not apply universally. That is the difficulty.
        I need not emphasise to the Minister that I have devoted a lot of my time to pensions both in Committee and in introducing two Ten-Minute Bills in this House. This problem could be overcome by putting into effect what is cur-
        1070
        rently demanded by the Labour Party, which is a national retirement pension of £10 for a single person and £16 for a married couple. That would be a real advance when taken together with the new kind of nationalised industry payments which are emerging. What has happened in the mining industry will probably happen elsewhere, although it will not doubt require trade union negotiations. If that were to happen we should at last begin to get near a respectable sum for millions of our old people.
        This debate has simply underscored the strength of the argument of the Labour Party. Only the other day at Watford my right hon. Friend the Leader of the Opposition committed himself to a considerable volume of shifting resources that the State retirement pension fund will require if it is to pay out sums of the kind that we propose. We are pledged to do that, and there will be no hanky-panky about it when we get another Labour Government, which will be soon.
        Amendment negatived.
        Bill read the Third time and passed.

    INTERNATIONAL COCOA AGREEMENT BILL
    Order for Second Reading read.
    2.45 p.m.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I beg to move, That the Bill be now read a Second time.
    The purpose of the Bill is to give effect to the International Cocoa Agreement, which was presented to Parliament in April. This Agreement is the fruit of many years of effort by successive Governments of both parties.
    It has been the policy of Her Majesty's Government to support international commodity agreements where these are appropriate and are sought by the producing countries. Cocoa is certainly a commodity which justifies such an agreement. It is subject to severe price flucuations. In recent years the average monthly price has varied from under £100 per ton to some £500 per ton; such fluctuations are excessive by any standards. Moreover

    1071
    cocoa is a crop on which some developing coutries, and in particular the major producer Ghana, are heavily dependent. Some of these countries have for many years been seeking through UNCTAD arrangements to bring greater stability to the world cocoa market. Indeed, in recent years many developing countries have come to regard cocoa as a test of the ability of UNCTAD and of the willingness of developed countries to achieve positive solutions in the commodity field. For these reasons the Government are very glad that the United Kingdom was able to take a leading part in the successful conclusion of the negotiations last autumn.
    The Agreement seeks to reduce excessive price fluctuations and to assure supplies at prices equitable to both producers and consumers. It seeks to achieve this by means of two devices. The first is a system of adjustable export quotas which would apply to exports from member countries while prices were below a specified level. This level has been fixed at 29 United States cents per pound or about £250 per ton—well below current prices. Quotas would be adjusted during the year in accordance with movements of price below this level with the object of preventing the price falling below 23 cents per pound or about £200 per ton. Secondly, the agreement provides for a buffer stock to buy up cocoa in exporting member countries surplus to their export quota and domestic requirements. This cocoa is stored in order to be resold when the price reaches a maximum of 32 cents or about £280 per ton. Ideally, therefore, the Agreement would serve to keep prices within the range broadly of £200 to £280 per ton.
    This is not an immediately attainable objective with world prices currently substantially above the top of the range envisaged in the Agreement, and with no buffer stock in existence to draw on. Indeed, it is a common criticism of international commodity agreements that they are better fitted to moderate price falls than price rises. There is inevitably an element of truth in this criticism since surplus supplies can always be kept off the market by an effective export quota system, whereas in times of real scarcity supplies cannot be created if they do not exist. Nevertheless, the present situation might well have been somewhat different
    1072
    had this Agreement been in operation a year or two ago. The very low level of prices which obtained during parts of 1971–72 would have been moderated by the operation of export quotas under the Agreement. At the same time, the consequent sales of cocoa to the buffer stock could have provided a reserve which would have gone at least part of the way towards meeting the heavy deficit expected this year, which is a main cause of the recent very high prices.
    For this reason, whatever the current market fluctuation, I have no doubt that the Agreement is in the long-term interests both of producers and consumers. No one benefits in the long run from cyclical swings of very low prices, leading to falling production, followed by very high prices leading to falling consumption. It is therefore in the interests both of consumers and producers to provide, as the Agreement does, the assurance of reasonable price levels necessary to enable producers to develop production to meet the expanding world demand for cocoa and cocoa products. This assurance is particularly necessary in view of the fairly long-term cycle of cocoa production and the past history of cyclical price movements, which is bound to be very much in producers' minds.
    It is equally in the interests both of consumers and producers that there should be machinery to moderate, so far as possible, the inevitable price fluctuations caused by variations from one year to another in the relation between supply and demand—fluctuations due generally to the unpredictable vagaries of the weather.
    The Agreement is one, therefore, in which exporters and importers can work together for their mutual benefit. It operates initially only for a three-year period, but the concept is continuing and long-term and the Agreement envisages renegotiation before the end of its term.
    Under the Agreement both exporters and importers assume obligations. One of the principal obligations affecting both sides relates to the financing of the buffer stock. This is to be achieved by means of a contribution charged, at least in the first two years of the Agreement, at the rate of 1 US cent. per pound per annum —about £9 per ton—on cocoa and cocoa products first entering international trade.

    1073
    It is the responsibility of exporting members to ensure that no shipments of bulk cocoa leave their shores without the presentation of a certificate showing that the contribution has been paid or secured. Similarly, there is an obligation on importing members to ensure that all imports of bulk cocoa, whether from members or non-members, are accompanied by such a certificate.
    Mr. T. H. H. Skeet: The I US cent per pound per annum will not be payable by the Americans because American consumers are not signatories to the Agreement.
    Mrs. Fenner: No. We hope that the United States Government will consider this point and become members. The purpose of this Bill is to provide the powers to enable Her Majesty's Government to fulfil this obligation. The Bill accordingly provides that imports of cocoa beans and cocoa products—essentially cocoa butter and cocoa paste—would be authorised only under a licence granted by the Secretary of State—in practice, the Secretary of State for Trade and Industry—who may include among the conditions of the licence presentation of evidence to Customs that any contribution chargeable under the Agreement had been paid or secured. The intention is that imports of these products from member countries of the Agreement should be authorised under an open general licence. This means that imports from these countries, which provide directly or indirectly over 98 per cent. of our imports of cocoa and cocoa products, will continue to he imported without quantitative limitation or other restriction, apart from the requirement of evidence that the contribution due has been paid or secured. Under the proposed economic rules of the Agreement it will be for exporters to provide this evidence to importers along with the shipping documents.
    The open general licence would not apply to imports from non-member countries. These imports, which represent under 2 per cent. of our supplies of cocoa and cocoa products, would be authorised only under individual import licences. This is because imports into member countries from non-member countries will be subject to quotas based on past imports and which member states
    1074
    must observe when the world price is below 32 cents per pound—£280 per ton. A similar system has been operated in the case of coffee and sugar in the context of the International Sugar and Coffee Agreements. When the price is below this level the individual licences will be issued only within the limits of the quotas, but in all cases imports will be subject to the same conditions as operate under the open general licence.
    The administrative arrangements for applying the International Cocoa Agreement have been worked out in close co-operation with the cocoa trade and industry. I should like to pay tribute to the unstinting help they have given to the British Government over many years by way of technical advice and expertise, both in the long negotiations for the Agreement and, more recently, in the detailed preparations giving effect to its provisions. The success and effectiveness of the Agreement, when in operation, will be due in no small measure to their efforts. The House will also wish to know that Her Majesty's Government have offered London as the site of the permanent headquarters of the International Cocoa Organisation when it is set up. We very much hope this offer will be accepted.
    An interim committee, comprising representatives of all the signatory Governments, is meeting in London this week to conclude preparatory work for the coming into operation of the Agreement. The hope and aim of all the signatory Governments is that this Agreement can be set fully in operation in time for the beginning of the 1973–74 crop year on 1st October next. Only in this way would it be possible to maintain the impetus achieved at and since the negotiations and to enable the machinery of the Agreement to be established and settle down before it is subjected to the stresses which would arise with the downward phase of the price cycle. If this objective is to be achieved, however, it would be essential for Her Majesty's Government to obtain before that date the powers set out in this Bill. Meanwhile, the United Kingdom has undertaken to apply the Agreement provisionally. We hope that not only the United Kingdom, but the other member States of the European Economic Community and the Community as a whole

    1075
    will be in a position to apply the Agreement on time.
    The licensing provisions for which the Bill provides constitute the small contribution that the United Kingdom is asked to make to set on foot the first international agreement for a new commodity for over 10 years. The concept of international commodity agreements is currently passing through a testing time. The future of the International Sugar Agreement is currently under renegotiation. The International Coffee Agreement, which operated so successfully for nearly 10 years, has recently experienced serious difficulties and can be continued, at least for the time being, only at a much reduced level of activity. The successful launching of the International Cocoa Agreement at this juncture would therefore give a much needed fillip to the concept of mutual co-operation between exporters and importers on an international plane. I hope that the House will show support for this concept by giving this Bill a speedy passage.
    3.0 p.m.
    Mr. Eric Deakins: We on the Labour side of the House warmly welcome and support the Bill and the International Agreement to which it seeks to give effect. Perhaps I could express the hope that our provisional acceptance of the Agreement will become a definite acceptance as quickly as circumstances permit.
    The Minister emphasised the importance of this Agreement to some of the poorest countries in the world. Most of those producing cocoa have gross national products of less than 400 dollars per head per year, which is very low indeed. Some have even less than 100 dollars per head per year. Two of the major countries, Ghana and Nigeria, are Commonwealth members.
    The hon. Lady talked of price fluctuations from year to year and gave some appalling examples. It is a fact that cocoa appears to have had the most unstable price record of any major internationally traded commodity since the war. The Agreement obviously aims to reduce these fluctuations and to reduce them not only in the interests of consumers but also in the interests of exporters. These fluctuations must have had an adverse effect on the domestic
    1076
    economies of the exporting States, upsetting and probably inhibiting their medium-term planning for economic development.
    We must therefore look for some form of market regulation discipline and this the Agreement embodies, so that exporting countries can rely on a more regular supply of export earnings from cocoa. The Bill shows that as a major importer we are prepared for the necessary discipline to achieve that end. I believe that even the most ardent advocate of free enterprise in commerce must admit that poor States, almost entirely dependent on cocoa exports, cannot be left any longer to the tender mercies of the free market.
    The financial aspects of this Agreement are complicated. There is the financing of the buffer stock arrangement by three separate methods—partly levy, partly by deferred payment and partly by IMF support. It is interesting to note that the Explanatory Memorandum says that there is to be no financial burden on the British Exchequer.
    The Agreement ought to come into force at the end of this month. Time is pressing. It must do so, as the Minister pointed out, because the world cannot at this juncture afford another failure of an international commodity agreement. However, there seems to be some doubt about this. First the fact that the United States is not yet a signatory is a factor which could wreck the Agreement almost before it is started, unless the United States, without being a signatory, is prepared to co-operate with the member countries on the price that it will pay for cocoa.
    Can the Minister say something about whether the Government are putting mild pressure on the United States, asking it to abide by the principle of the Agreement even if technical and other domestic reasons prevent it from becoming a signatory at present?
    My second doubt concerns West Germany and Holland, both affected by the position of the United States. Are they, as partners in the Common Market, likely to ratify this Agreement by the end of June'? If not, I wonder whether the Government will make every effort, official and unofficial, to try to persuade

    1077
    them to do so. because it is very important.
    This raises the prospect of the Agreement coming into force at all. Perhaps the Minister will not want to say anything at this stage but I wonder what action the Government are contemplating if it does not. Would they, for example, press for a reconvening of the International Cocoa Conference under United Nations auspices? One thing is certain—if this Agreement does not work we cannot afford to wait another 16 years before there is a prospect of a viable international commodity agreement in cocoa.
    The Agreement is the test of international co-operation to help the poor countries. Ultimately, trade between rich and poor is much more important than any conceivable volume of aid from rich to poor. This Agreement is a major step forward to international sanity in trading relations between rich and poor states. We should use every endeavour on all sides, in the House and outside, to see that it begins to operate and that when it does it operates effectively.
    Even with the Agreement in operation for a minimum of three years, there will still be difficulties for exporters because of the vagaries of weather and disease, but this at least is a step forward to reducing and resolving their trade problems. The Agreement is an example of what should be done for other primary commodities which have also suffered wild price fluctuations in recent years. The United Kingdom has played a valuable part in the tricky and lengthy negotiations leading up to the conclusion of the Agreement. I hope that we will keep up this good work by expressing our independent views in negotiations for future international commodity agreements, without regard to our membership of the Common Market.
    The United Kingdom has much to contribute in these matters from its long experience as an international trading nation, and it is vital that in future our views continue to be expressel directly in the world-wide forums of the United Nations trading conferences and the General Agreement on Tariffs and Trade where these issues are discussed from time to time.
    1078
    Finally, I hope that we can speed the Bill on its way as a sign to the world that the United Kingdom at least is taking this important international obligation very seriously.
    3.7 p.m.
    Mr. T. H. H. Skeet: The Minister has made a very good case, which I support entirely, except for her reference to the Agreement being in the interests of producers and consumers. Certainly, it is in the interests of producers but not necessarily of consumers. Prices today are very high and this Agreement will do nothing to prevent them rising to excessive levels. It simply provides a bottom end below which prices will not fall, at which the stop will come into operation and buying will start on the open market.
    As prices rise higher, there will be no stocks available to sell, prices will continue to rise, so one must assume that the consumers, both in the United Kingdom and Western Europe and in the United States, will have to pay higher prices for their chocolate. We must expect higher prices for chocolate in the High Street in future.
    But having expressed some anxiety about the attitude of the United States, one has to look at their position and to ask why they have not come into this Agreement, when they control 25 per cent. of the importing market. They have adopted a rather curious line on the coffee agreement, the sugar agreement, and on tin. While it is sad that they have refused to participate in these arrangements, they have at least adopted an unofficial acceptance of at least two of these arrangements.
    They put forward in the negotiations support for what is known as sales quotas rather than export quotas. I should have thought that there was an argument for this proposition which takes into account the trade before exports arise and therefore the full operation of what is known as the futures market.
    The hon. Member for Walthamstow, West (Mr. Deakins) indicated that the hoped for ratification would be pursued by Western Germany and Holland and I share his hope. But because the United States is outside the Agreement, the non-signatories will be in a distinctly preferential situation. They will not pay the I

    1079
    per cent. levy and will have all the advantages of a free-market operation.
    In current prices, the spot price for cocoa now is 73 cents a pound, in the futures market in July 65 cents,. a pound and in September 63 cents. The figure for September, 1974 is 51 cents a pound. One is led to the conclusion that there can be a revision of quotas to take into account what may happen in the market. I consider that whether the prices rise or fall will depend on the availability of the cocoa bean in the market and we are painfully aware that in Nigeria there have been extensive fires in the Western region, which have savaged the crop, and that in Ghana and the Ivory Coast, which produce a large part of the crop, drought conditions have been the worst for the past seven years. In Brazil also there has been a partial failure of the crop.
    The Opposition will appreciate one point of economics—that where there is a shortage of supplies inevitably it affects prices. As there has been no sign of any abating consumption, prices will tend to rise quite dramatically. This is the most complicated commodity arrangement ever contrived in international markets and that must militate against its possible success. I am glad that we have subscribed to it. I sincerely hope that it will work.
    My hon. Friend the Parliamentary Secretary to the Ministry of Agriculture may consider that this is more successful than the OPEC arrangements, in which we do not participate and in which countries in the Middle East have been able to impose on the world the prices they think fit. In this case it is different and more equitable.
    Among consumer interests of the importing States, at least the EEC Commission has participated and Germany is a signatory. Indeed, all members of the Common Market have joined. I believe that the Soviet Union has done so as well, and Japan also, although Japan is a small consumer. In fact, the signatories total about 35 nations, representing about 69·83 per cent. of total importers. It is therefore rather unsatisfactory that the United States, with 25 per cent. of the market, has not come in. Perhaps my hon. Friend can give us some idea why Czechoslovakia and Poland are also in a recalcitrant mood.
    1080
    I fully endorse the argument that we have to do something for the developing territories, dependent as they are upon commodity prices. Six exporting countries account for 92·9 per cent. of basic quotas. Ghana accounts for 36·7 per cent.; Nigeria, 19·5 per cent.; the Ivory Coast, 14·2 per cent.; Brazil, 12·7 per cent.; the Cameroons, 8 per cent.; and Togo, 1·8 per cent. This makes a total of 92·9 per cent.
    Cocoa, of course, accounts for the principal part of Ghana's foreign exchange earnings and, therefore, the livelihood of the people of Ghana depends upon the product. Almost the same argument applies to the Cameroons and Togo. The West African producers account for about 75 per cent. of cocoa beans sent to the world market and Latin America and the Caribbean account for 25 per cent., half of which comes from Brazil.
    I therefore conclude that this is a most satisfactory arrangement. I see scope for many more in the future, because this is a sensible way of moving ahead in international trade. It operates in a rather neat way, as my hon. Friend the Parliamentary Secretary explained. When the price falls to 23 cents. the buffer stock, which will ultimately be very considerable, will begin to operate. The International Cocoa Organisation will begin to buy on the world market to sustain the price. When the price rises to 32 cents. and above, free market conditions will prevail because the buffer stock sales will begin to feed the market. Regrettably, at this stage there are no buffer stocks available. From 29 cents. and below there will be mild quotas or rigid quotas as the case may be.
    The purpose of the Agreement is to bring in export quotas, a buffer stock of 250,000 tons, arrangements for diversion to non-traditional materials such as raw materials for margarine, cooking fats and soap and mechanism to maintain prices between 23 and 32 cents.
    The House must welcome the arrangement. I hope that my hon. Friend the Parliamentary Secretary and her advisers will seek to ensure that the United States of America comply with the provisions, if not in the legal form, at least in the letter of the arrangement, because it is very important to the developing world that success should be achieved. I concur with the argument advanced from

    1081
    the Opposition that trade is the best way to sustain the livelihood of the developing economies and certainly not aid, which can be dissipated on so many occasions.
    3.17 p.m.
    Mrs. Fenner: I ask the leave of the House to speak for a second time.
    I am grateful to hon. Members for a brief but very interesting and constructive debate. To take, first, the point raised by the hon. Member for Waltham-stow, West (Mr. Deakins) and my hon. Friend the Member for Bedford (Mr. Skeet) about the non-participation at this time of the United States, the Agreement depends essentially upon controls at the exporting end. Exporting members together account for nearly 90 per cent. of world exports.
    The United States of America have declared their willingness to co-operate with the International Cocoa Organisation in any way they can. Nevertheless, Her Majesty's Government would greatly welcome a decision by the United States' Government at any time in the future to participate in the Agreement.
    The hon. Member for Walthamstow, West asked also about the situation with regard to West Germany and Holland. Both countries are seeking legislation, and both hope to ratify, or give an undertaking, or make a provisional application, by 30th June.
    I was also asked what would happen if there was no automatic entry. The Secretary-General of the United Nations would have to convene an urgent meeting to consider whether the Agreement could be applied in those circumstances.
    In answer to my hon. Friend the Member for Bedford, it is a fact that it is not possible for the United States to control prices under an agreement to which they do not adhere.
    Again, on the question of United States' non-participation, I remind hon. Members that the exporting members, who account for nearly 90 per cent. of the world's exports, will be determining market levels in accordance with the provisions and decisions of the Agreement.
    My hon. Friend took up the point that I made earlier about the Agreement not being able to create supplies that are
    1082
    not there. However, in the longer term it should lead to avoiding extreme price fluctuations. In times of surplus it should prevent prices falling dramatically and it should help to meet or to reduce shortfalls in later years. Secondly—the hon. Member referred to producers having confidence to plan in the long term—the Agreement should provide for necessary confidence to enable producers to develop production in line with the expanding demand to which my lion. Friend referred.
    Beyond those points—I trust that I have covered them all—there is little that I can add. Successive Governments have participated in all the major commodity agreements—sugar, coffee, tin, wheat, and even olive oil in which we have no significant interest as a consumer.
    We support the principle of international co-operation to tackle the problems of primary commodities. That support is particularly appropriate in the case of cocoa—a point that the hon Member for Walthamstow, West made—in which there is such a strong Commonwealth interest, and presents the first opportunity to all the members of the European Economic Community to give effect to the commitment in the Paris summit communiqué to the promotion, in appropriate cases, of agreement concerning the primary products of developing countries.
    For these reasons, I urge the House to give the Bill a Second Reading and a speedy passage.
    Mr. Skeet: Before my hon. Friend sits down, may I point out that according to Gill and Duffus,
    … continuing uncertainty about the dollar and a considerable increase in the dollar price of gold may have contributed to a rush into cocoa in New York."
    We have a bracket of 23 to 32 cents. May we not find that there will be a revision of the price range due to the weakness of the dollar, or would my hon. Friend be prepared to support that?
    Mrs. FennerThere is provision for a review of the price range before the end of the second year, under Article 29 of the Agreement. There is also provision for consultation in the event of the par value of the US dollar or the £ sterling changing. The exporting members of the interim committee have asked for this

    1083
    latter issue to be discussed at the first meeting of the council. In answer to my hon. Friend, I could not anticipate at this stage what the outcome of this discussion might be.
    Question put and agreed to.
    Bill accordingly read a Second time.
    Bill committed to a Commitee of the Whole House.—[Mr. Murton.]
    Committee upon Monday next.

    GUARDIANSHIP BILL [Lords]
    As amended (in the Standing Committee), considered.
    GUARDIANSHIP BILL [Lords]
      New Clause 1

        STAY OF EXECUTION
        Upon the making of an order for custody of a minor under any of the enactments referred to in this Act, the court may upon application of any of the parties before it or of its own motion make an order for a stay of execution in respect of the order for custody and separately or additionally make an order that the minor shall not be taken out of the United Kingdom without the consent of the court.—[Mr. John Fraser.]
        Brought up, and read the First time.
        3.22 p.m.
        Mr. John Fraser: I beg to move, That the clause be read a Second time.
        Mr. Deputy Speaker (Mr. E. L. Mallalieu): With this, we shall discuss the following amendments:
        No. 4, in Title, line 5, leave out 'section 9 of'
        No. 5 in Title, line 8, leave out 'section 4(2) of'
        Mr. Fraser: I have been asked by my hon. Friend the Member for Newcastle-upon-Tyne, West (Mr. Robert C. Brown), whose name appears with mine to this clause, to say that he is sorry that he can not be in the House today. He has been a persistent and dedicated proponent of the rights of parents when their children are removed from their jurisdiction, and one ought to pay tribute to that fact and regret that unavoidably he cannot be here today.
        This clause is modest, and I believe it provides the absolute minimum for deal-
        1084
        ing with the predicament which was widely publicised by the Desramault case. In that case an order was made for the custody of a child. That child subsequently went to four different countries where the custody of the child was fought. There were numerous court applications and eventually, happily perhaps, the child returned to this country.
        What the Desramault case illustrates is some weakness in our law. The magistrates, when they heard the case, failed to do two things. First, they failed to make an order for a stay of execution, and secondly they failed—indeed, they could do nothing else—to insert a clause in the order to prevent the child from being taken out of jurisdiction. Subsequently the High Court reversed this decision, but it was too late. The child had left the country.
        The problem about the stay of execution was this: no application was made to the magistrates. The magistrates at the time were not clear that they could make a stay of execution. That doubt has subsequently been dispelled in the case Smith v. Smith. The clause puts into statutory form the decision in that case.
        The second failure of the magistrates was to make no order that the child should not be taken out of the jurisdiction without the consent of the court or of the other parent. The problem here is that there was considerable doubt on the matter at the time, and, having done some further research myself, I believe that, in fact, the magistrates had no power to make an order restricting the removal of the child from the United Kingdom.
        The Desramault case was, perhaps, the widest known, but there are others. Recently, a child was removed from the jurisdiction and taken to Algeria, a country where, I understand, the rights of the father to have custody of a child are paramount, unlike the test in this country which is directed to the paramount interests of the child. This case received some publicity because the mother was able to fly promptly to North Africa and try to do something there, but there are many cases about which we read nothing in the Press, unpublicised and unhappy cases in which children are suddenly and permanently removed from the custody of or access by the other parent

        1085
        and in which, because of a lack of money and inability to fight matters in other countries, nothing happens and nothing is heard.
        Certain administrative actions could reduce the risk of the Desramault situation arising again—for instance, thorough checks on passports and observance of requests to the Passport Office that a passport should not be issued for a child without the consent of the other parent where there is an order of the court. But here we come up against the difficulty dealt with in the second part of the new clause, that at present magistrates cannot make an order that the child shall not be taken out of the jurisdiction.
        I am the first to agree that what is needed is international action such as we had on the Maintenance Orders (Reciprocal Enforcement) Act, and I was pleased to know from the Committee proceedings that the Minister is actively pursuing agreement of that sort with our partners in Europe and other countries which have laws similar to our own. But we must in the meantime try to prevent a situation in which one parent may all too readily remove a child out of the jurisdiction.
        At worst, the child disappears without trace. At best, the parent who has taken the child will play hide and seek with it, a child of tender years, dodging from country to country, choosing jurisdictions which are the most obstructive or which are the most favourable to the abducting parent.
        At the end of the Committee proceedings—this is column 40 of the OFFICIAL REPORT—the Minister gave an assurance that he would try to improve the situation. The new clause is the barest minimum legal protection to cover cases of this kind, and I hope that he will receive it sympathetically. The wording may not be perfect. If it is not, the matter can be dealt with in another place. If, however, the clause is not accepted, nothing can be done in the other place, since that is where the Bill started.
        3.30 p.m.
        The Minister of State, Home Office (Mr. Mark Carlisle): I listened with sympathy to all that was said by the hon. Member for Norwood (Mr. John Fraser), but I have to say that, on reflection, I cannot advise the House to accept the
        1086
        new clause. I fully understand what the hon. Gentleman said about his hon. Friend the Member for Newcastle-upon-Tyne, West (Mr. Robert C. Brown), who has been active in attempting to remedy what he believes to be a gap in the present law in this respect, arising out of the Desramault case which originated in Newcastle. I fully accept that there are good reasons why he cannot be here today to move the new clause.
        In Committee, I said that I would look again with sympathy at the problem. We have looked at it again, but, on further reflection, I must stand by the view which I then expressed, that, while appreciating the concern in this matter, I do not believe that an amendment to this Bill is the way to deal with it.
        I have a few comments about the intention behind the clause and about why I do not think it either necessary or desirable that it should come into force in this way. It has two purposes. First, it seeks to put into statutory form the fact that the court of its own volition has the power to make a stay of execution in a guardianship order. The second purpose is to provide a new power for the magistrates' court to be able to make an order that no minor should be taken out of the United Kingdom other than with the consent of the court.
        I am satisfied that the first aim is not necessary and might well have the effect of muddying the law rather than clarifying it. It is now abundantly clear that the court has the power to make a stay of execution in any application that comes before it. The hon. Member is correct in saying that at the time of the Desramault case no application was made for a stay of execution, and I understood, as he did, that the court, although mindful of the desirability of making a stay of execution in that case, felt that it had no power to do so other than on an application being made to it.
        However we now have the case of Smith v. Smith decided in 1971 where the divisional court made it absolutely clear that while the first responsibility for applying for a stay of execution rested on the applicant to ask for such a stay, if no such application is made the justices themselves should consider whether a stay is appropriate and apply a stay of execution on their own order. That was approved by the divisional court in that case.

        1087
        On the other hand if one were to make that clear statement of the existing inherent power of the court and put it into statutory form in the Bill, that might cause doubts as to whether there was an existing and clear inherent power in other areas of the law where it had not been stated in statutory form. Of course, I must make the point that we are dealing here, in spite of the ingenuity of the drafting of the clause, with applications for custody in guardianship proceedings and not the far wider applications in the matrimonial proceedings in magistrates' courts when the application for custody goes along with the claim for custody by the parent on his or her own behalf.
        To state specifically in statutory form that in applications under the Guardianship Act the court has the power to make a stay of execution might have the effect of throwing doubt on whether that power exists under proceedings brought under any other Act where it was not statutorily referred to. It might be said that there was a need to put it in statutory form in the Guardianship Act because of the doubt of the existence of the common law power to grant a stay of execution.
        Mr. John Fraser: I thought of it. That is why I have so drafted the amendment that it says:
        "Upon the making of an order for custody of a minor under any of the enactments referred to this in this Act".
        The 1960 Act is referred to in it.
        Mr. Carlisle: As I have said, I did not want to take technical drafting points, because it is unfair to do so, and the hon. Gentleman has made a brave attempt. I realise that presumably that phrase was intended to achieve his object. But I am not sure whether
        "the making of an order…under any of the enactments referred to in this Act"
        would have passed the scrutiny of parliamentary counsel if the Government had accepted the clause. We should have had to tighten it up, and then we should have had to decide whether to stick to the position that we have taken throughout the rest of the Bill, namely, that its purpose in so far as it affects previous legislation, as well as giving the wife equal rights of guardianship to those of her husband, was to bring into legisla-
        1088
        tion the existing law on guardianship applications, to coincide and correlate with those in matrimonial proceedings under the Matrimonial Proceedings Acts. It was not the intention in the Bill to change the substantive law as it applied in those Acts.
        Therefore, I do not feel that the first half of the clause is either necessary or desirable. But the point raised, and the purpose of trying to prevent children from being taken out of the jurisdiction of the courts while there is still an issue as to their custody is one which we have very much in mind.
        As I said in Committee, two working parties of the Law Commission are sitting, one of them dealing with matrimonial proceedings in magistrates' courts and the second dealing with jurisdiction and enforcement in relation to custody orders. We have drawn the attention of the Law Commission to the problem that was raised in Committee and what was said then. I also undertook to consider not only whether Smith v. Smith should be put into statutory form but what could be done to draw that decision to the attention of the courts. I understand that in the May edition of The Justices' Clerk there was a full article about the effect of the Smith v. Smith decision. We are also quite prepared to ask magistrates to be reminded of the existence of the power at any talks and training given to justices.
        I turn to the second part of the intention of the clause, which is to give what would be a completely new power to the lower courts to make an order that a minor should not be taken out of the United Kingdom without the consent of the court. It is not apparent how application would be made or how it could be altered later, but that is a small point. My general point is that no such power now exists in the magistrates' courts, and the clause would grant to lay magistrates a substantial new power that needs much wider consideration. The matter should be examined by the Law Commission working party in its review of the work of the magistrates' courts in this aspect of law generally.
        Secondly, there is the genuine practical problem of how to enforce the order. It is true that there is now procedure by which any person can obtain

        1089
        an order prohibiting the taking of a child out of the jurisdiction of the court without the court's consent by applying to have that child made a ward of court in the High Court. I should like to say two things about that.
        First, it is a relatively simple procedure. Legal aid is available in wardship proceedings. An emergency legal aid certificate can be obtained almost immediately in the event of need. The hon. Member, as a practising solicitor, will know that all that is necessary to bring it into effect is for the parent concerned to make an application to the High Court for an originating summons and, by virtue of the 1949 Act, the child becomes a ward of court immediately the summons is issued but ceases to be so unless an appointment for the hearing of the summons is obtained within 21 days. Therefore, the application is sufficient to render, for a period of three weeks, it unlawful to make any attempt to remove the child from the jurisdiction without the High Court's permission. Such an application can be made at once.
        We must consider the effect which widening the power of the magistrates' court would have on the arrangements made to enforce a High Court wardship order. We must face the fact that the number of people travelling in and out of this country has increased so enormously in the past 10 or 20 years that a stop order of this kind continues to be effective only if it is made in a limited number of cases. In 1970, 18·2 million British passengers moved in and out of the country and the number of aliens passing through the ports had increased to 10·6 million. With that volume of people, the effectiveness of the order depends on the immigration people having only a relatively few cases to watch out for, yet in 1972, under the High Court procedure, the Home Office was consulted about the institution of precautions in 330 cases. The new clause would give a wider power to magistrates' courts than exist in the High Court, because it refers to the United Kingdom, which includes Northern Ireland and Scotland.
        While being sympathetic to the purpose of the new clause, and assuring the hon. Gentleman that I shall draw the attention of the Law Commission to the
        1090
        points which he has made, I do not think that the Bill is the appropriate means by which to implement this change in the law. I do not think it desirable, within the parliamentary timetable, for the Bill to have to go back to the Lords and be amended in order to put the drafting of the clause in order and then return to this House when it is at the end of its passage through Parliament.
        Mr. John Fraser: We are always up against the difficulty that if the clause is in the right form the time is wrong. If the time is right, the place is wrong.
        However, I am comforted by the assurance that this matter is now under consideration by the Law Commission and that the point raised in Committee and today will be taken into account by it. I hope that eventually we shall find the right form, the right time and the right place to remedy this injustice. I beg to ask leave to withdraw the motion.
        Motion and clause, 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 Readings), and agreed to.
        Bill accordingly read the Third time and passed, with an amendment.

    GOVERNMENT TRADING FUNDS BILL
    Order for Second Reading read.
    Motion made, and Question put forthwith pursuant to Standing Order No. 66 (Second Reading Committees), That the Bill be now read a Second time.
    Question agreed to.
    Bill accordingly read a Second time.
    Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

    GOVERNMENT TRADING FUNDS BILL

      DOUBLE TAXATION RELIEF
      Motion made, and Question put forthwith pursuant to order [22nd March],
      That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Incomes) (Denmark) Order

      1091
      1973 be made in the form of the draft laid before this House on 1st March.—[Mr. Murton.]
      Question agreed to.
      Motion made, and Question put forthwith pursuant to order [22nd March],
      That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Corporation Tax) (Republic of Ireland) Order 1973 be made in the form of the draft laid before this House on 9th May.—[Mr. Murton.]
      Question agreed to.
      Addresses to be presented by Privy Councillors or Members of Her Majesty's Household.

      AFRICAN DEVELOPMENT FUND
      Motion made, and Question put forthwith pursuant to order [22nd March],
      That the African Development Fund (Initial Subscription) Order 1973, a draft of which was laid before this House on 18th May, be approved.—[Mr. Murton.]
      Question agreed to.

      ALKALI INSPECTORATE [MONEY]
      Queen's Recommendation having been signified—
      Resolved,
      That, for the purposes of any Act of the present Session to increase the powers of the Alkali Inspectorate in cities in order to reduce or eliminate the emission of all waste or toxic gases which pollute the atmosphere, it is expedient to authorise the payment out of moneys provided by Parliament of—

      (a)any expenses incurred by the Secretary of State or the Alkali Inspectorate under the said Act; and

      (b)any increase attributable to the said Act in the sums so payable under the Alkali &c. Works Regulation Act 1906.—[Mr. Murton.]

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

    HOUSING (RENTS)
    3.46 p.m.
    Mr. Hugh Jenkins: I wish to raise the subject of the consequences of Government policy on the rents of privately-owned dwellings. I apologise to the Minister for the fact that the subject of the debate has been changed, but I did my best to give him as much notice as possible so that he should not
    1092
    come here without being fully informed of the nature of what I had to say. I say that as a preliminary because I shall be severely critical of Government policy —there are times when it is one's duty to be severely critical, and this is one.
    I draw attention to the way in which property companies are using the Government's rent legislation to exploit their tenants. The examples that I shall take are from my constituency, though what is happening is widespread, as is well known, certainly all over London, and probably other great cities, too.
    One of the most unscrupulous—and that is the word I must use—of the companies exploiting the present situation is the Freshwater company. Among many others it owns blocks of flats in my constituency. One example is the block next to that in which I live, University Mansions in the Lower Richmond Road.
    The company uses rent officers as its agents as a means of extortion, so that the officials willy-nilly become, as it were legalised Rachmans. As they have the law on their side, they have no need of thugs or dogs to intimidate the tenants.
    In case that is thought to be an exaggeration, I should like to point out that there is no doubt that the tenants are intimidated. I take an example from this block. It is an oldish block and many elderly people live there, paying rents that have rapidly increased from the small rents that they have paid for 20, 30, or even 40 years.
    The lift in one of these blocks was out of order for six months. For four months it was locked so that it could not be used, and for six months an 84-year-old lady who lived in a top floor flat had to walk up and down 100 steps. That is not only intimidation; it is torture. That is an example of how people are being "encouraged" to vacate premises so that they may be let to people able to pay bigger rents.
    I take as another example the case of 78-year-old Mr. Thick of No. 7, University Mansions. He has lived there for more than a quarter of a century. His rent has been quadrupled, from £2 to £8 a week. Freshwaters fixed this with the full co-operation of public servants by the trick of getting one flat empty, doing it up and letting it to four men. A rent of £600—the market rent—was agreed

    1093
    and accepted by the rent officers as being the fair rent. In other words, the market rent has now become accepted as the fair rent, and that is precisely the opposite of the intention of my right hon. Friend the Member for Coventry, East (Mr. Crossman) when he introduced his Bill in 1965.
    The Under-Secretary of State for the Environment (Mr. Reginald Eyre): Did not the hon. Gentleman say that the tenant to whom he referred was paying a rent of £8 a week?
    Mr. Hugh Jenkins: Yes, I did. I see the hon. Gentleman's point, and I will come to it in a moment. The £600 rent was for a better flat than that presently occupied by Mr. Thick. But it set the standard, in that £600 has become the standard rent for flats in that block. This practice is being adopted widely. A single flat is accepted as the standard and all flats in that block and in the area are set against that standard.
    Mr. Thick, a spirited and intelligent man, appealed to the committee against his assessment. It seems to me that the rent officers betrayed the brief under which they were appointed and became the strong-arm men of the extortionists by co-operating with them. In this case the appeal committee, which is supposed to protect tenants, did no such thing. It, too, became agents of this near-Rachmanism.
    Alone, my constituent, with no knowledge of what was to happen, faced another battery of Freshwater stooges, this time a squad of four lawyers—people who apparently can be paid to do wrong as well as right. My constituent was given no warning that he would be faced with legal opposition. If he had been he would have applied for legal assistance.
    Mr. Thick went before the committee. The opposing team of lawyers placed upon the table a massive document of appeal setting out their case. My constituent had no warning, and the appeal committee made no attempt to protect him. Instead, it allowed him—a man of 78—to be exposed to this without any legal protection.
    As I say, Mr. Thick is a very intelligent man. He was intelligent enough
    1094
    to know that he was at a grave disadvantage in appearing against four lawyers. He tried to get the matter deferred. The appeal committee refused his request. At the end of the hearing, it increased my constituent's rent to £440 a year. If that is not acting as the agent of extortionists, I should like to know what is. By its action the committee volunteered to assist in the process that is developing all over London, and I have no doubt that the committee members went home feeling that they had done a good day's work in sending my constituent, for the first time in his life, to a local body with a view to trying to get some help to meet his rent.
    The rent will not go up immediately to £8-odd a week. It goes up in stages, and has now reached £4. Since my constituent is 78 years old, his income is hardly likely to increase. It means that he will get further and further into public debt, as he sees it.
    The Act ought to have a new Title:
    "A Measure for the further improverishment of the poor by the wealthy."
    It is no good the Minister's telling me that this system was invented by my right hon. Friend the Member for Coventry, East. Some of us told my right hon. Friend at the time that this bright notion of his would prove to be a stinker. That is just what it has turned out to be. But who can doubt that, if my right hon. Friend were still in office today, he would have seen and corrected his error? This Government's sin is that they appear to condone and encourage the exploitation which has come about as a result of my right hon. Friend's foolish error. My right hon. Friend no doubt thought that his measure would bring down rents. In fact, he said so at the time. However, some of us doubted it. When the contrary is proved—when the Act is proved to be increasing rents and not reducing them—to fail to take action and to allow it to continue is worse than error. Indeed, it is condonation.
    Freshwaters and others have exploited the Act, and the Government have done nothing. They have expressed regret, but the exploitation goes on. They know that rent officers have been bribed—no doubt with bottles of whisky to drown their twinge of conscience at having exploited the poor in a way that even Rachman

    1095
    would have regarded as heartless. A great deal of fuss has been made about this scandal. But what will be done about it?
    I have now finished the rough-words part of what I have to say. I think that these rough words are necessary. When one sees exploitation of constituents on this scale, whatever the excuse or reason, one has a duty to be rough on their behalf. Whether the landlords in these blocks of flats—many of them have changed hands recently—are called First National, Berger, Daejan, or whatever it is, makes no difference.
    I hope that we are seeing the death throes of private landlordism. However, in this process it is my constituents and not the landlords who are getting thrashed. My constituents need the protection of the law, and without further delay. What is more, they need it retrospectively, so that some of the grave injustices done in the name of the law, such as that to Mr. Thick, can be rectified.
    I hope that the Wandsworth Borough Council and other authorities—and perhaps the GLC—will expropriate the expropriators by compulsory purchase. Will the Minister agree to a compulsory purchase order in circumstances when a block contains only one or two unoccupied flats? Will he tell us whether, if Wandsworth Borough Council applies for a compulsory purchase order to acquire University Mansions, the Secretary of State will grant it? If he cannot commit himself completely, will he say whether there is a good chance that he will grant a compulsory purchase order to the council?
    What price, then, should the Wandsworth Borough Council have to pay, assuming the Minister agrees? Is it to pay Freshwaters and others a further reward for their Rachmanism, and thus be forced to compound it themselves? If the council pays a price reflecting the new unfair rents, it will have to continue them. It will not be able, except by a heavy specialised subsidy, to reduce the rents if the price for the block is the current valuation. What will the Minister do about that?
    I suggest that the price should not reflect scarcity value any more than rents were intended to reflect scarcity value. There should be a recognition of the
    1096
    undesirability of scarcity value not only in the ownership of property but in the rental value. If we do not recognise the scarcity value element in the price of property as a whole, it becomes hard to reflect it in the long run in the rental value of the property.
    I suggest that the Government should take a fresh look at this subject. The price for this property should be based on its value in 1965, or 1970 at the latest, plus an addition to allow for the increase in the cost of living. That would be a reasonable accretion instead of a Rachmanised accretion.
    Ways must be found for local authorities to purchase. I hope that the Greater London Council will find such ways—that the beneficent management of my wife, who is Chairman of the Greater London Council Housing Management Committee, will be extended over wide areas of London and that that management will be operated in the interests of the tenants and not the landlords. If local authorities cannot do this the companies will continue the process that they have already started, which is almost equally worrying, of avoiding the odium——
    It being Four o'clock, the motion for the Adjournment of the House lapsed, without Question put.
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]
    Mr. Jenkins: I was saying that companies are beginning to regard the position of landlord as one which has paid off handsomely in the past but is no longer paying off quite so handsomely. Landlords are beginning to adopt the practice of selling flats to tenants, whom they continue to exploit by imposing exorbitant service charges, over which there is no control—not even "phony" control. The long-term lease is sold to the tenant, service charges are paid, and the landlord derives the benefit of those service charges—which are greatly in excess of the cost of the services—without attracting the odium of being an exploiter of tenants.
    Mr. Thick's rent book and the record of the rent assessment committee's hearing tell a grisly tale, in which all concerned appear to have conspired to defraud my constituent by charging him a

    1097
    market rent and then calling it a fair rent. It is grossly unfair, and if I were a member of the Church I think I would call it sinful. In his rent book, Mr. Thick's new landlords are described as DAEJAN Properties. That is one of the many companies owned by the Freshwater family, who have acquired a personal family income beyond the wildest dreams of Rachman. It is over £500,000 a year. This one company of DAEJAN made a total profit of nearly £2 million in 1970.
    All this money comes from the pockets of the poor and medium-income people. My constituent can apply to the State or to the local authority for help. The local authority is already acting as the medium of State help. Why should my constituent be forced to do this after 78 years without asking anyone for anything? It is criminal. Wandsworth Borough Council has agreed to help with the aid of the provisions laid down by the Government. Even with a rent allowance of £1·91 my constituent's income will still be below subsistence level.
    The Chairman of DAEJAN is the Earl of Stradbroke. What does he think about it? A member of the board is Mr. D. M. Mountain, who is the managing director of the Eagle Star Insurance Company—the main backer of the whole operation. The original capital was found by Eagle Star, and it continues to be, because further profit is made from the estate by having mortgages on most of the properties.
    The Eagle Star gave £5,000 to the Conservative Party last year. To be allowed to fleece the public at this level it seems to be fairly cheap. To be allowed to go on doing it at public expense seems to be worth more than £5,000. I think that a contribution of at least £50,000 would be called for to show the company's full appreciation to the Conservative Party for its failure to take action.
    The company has had good value for money and it would be right for the Minister to tell us that he thinks the time has come for him to take action to bring this exploitation to an end. I talk of "public expense" because it is not my constituents and other Londoners whom Wandsworth Borough Council and the Social Security office are financing.
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    The money is going into the pockets of Mr. Freshwater and his friends. My right hon. Friend's Act has been turned into a gigantic dole, making the rich richer at the expense of the community and at the cost and humiliation of the poor. The State is now financing the Freshwater operation by finding part of the money that poor constituents have to pay.
    The latest news is that Freshwater has set up its own charitable body to help those that it has exploited, with the State's connivance, to such a degree that even the company is ashamed. The robbers and thieves have turned Samaritans, but it is a bit late.
    I should like to believe that the company really did not realise the consequences of its actions in terms of human misery and that, having made its pile, it is now willing to get out of the property business altogether. I am close to Wandsworth Borough Council and I know that if the company went to the council, the council would be willing to buy this block on the free market if the Minister would now allow a compulsory purchase order. But at what price? If there is reality in Freshwater's change of heart, let it sell at a reasonable price. The same applies to as many other blocks as the present property owners are prepared to sell.
    What will be done? This rather bare afternoon might be an opportunity for a startling pronouncement, which would come appropriately from the Under-Secretary, who I am sure does his best within the confines of his responsibility. It would be pleasant if he could announce that a real improvement will be made and that there will be no more talk. This has been going on year after year and this announcement will reward the gentlemen of the Press who are not normally here at 4.30 p.m. on a Friday.
    More is needed than just a charity action, or a further dole. Further action is needed against the property owners—against Freshwater and their like—because not all property owners have seen the light sufficiently to set up their own charity organisation, as Freshwater has done.
    I doubt whether capitalism has an attractive face. I have seen only one or two glimpses of it acting beneficently. It has happened in the theatre, but it is rare. I am surprised that the Prime

    1099
    Minister was astonished to discover that the face of capitalism was unattractive. I could have told him that some time ago. It has a very greedy face. The face of the property company is particularly ugly, and might give shudders to members of the Monday Club.
    If the Minister decided to take action here, he would be pleasing not just Labour Members and the tenants concerned but also his own hon. Friends, who must be as concerned as we are at some of the practical consequences of the use of this Act as its authors never intended it to be used and as I should have thought the present Government would not want it to continue to be used.
    I feel that the time has come for us to admit that, whatever may be said of the rôle of the landlord, the rôle of the large-scale property owners is one over which we should place a very large question mark. If they are to continue to be allowed to operate, they should not be allowed to operate on existing terms I sincerely hope that we shall hear something constructive from the hon. Gentleman.
    4.10 p.m.
    The Under-Secretary of State for the Environment (Mr. Reginald Eyre): I appreciate the prior notice which the hon. Member for Putney (Mr. Hugh Jenkins) gave me. The general answer to the question implied by the hon. Gentleman is that since Government policy for privately rented dwellings has been to uphold and support the fair rent system introduced by the Labour Government, the effect of the policy of this Government has been to keep privately rented dwellings under the control of the rent officer and the rent assessment committee.
    Indeed, the Government have extended the fair rent system by introducing a phased programme of decontrol of those properties which have had their rents controlled since 1957, and by bringing a number of higher rateable value tenancies within the fair rent system. The introduction of rent allowances has given for the first time generous and much-needed subsidies to a very large number of private tenants. In his speech, however, the hon. Member has shown that his interest in initiating the debate has
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    been to talk about the operation of rent officers and rent assessment committees, and the rents which they determine, as well as the broader subject he embarked upon.
    I must point out at once in the clearest possible terms that the operation of the rent officers and rent assessment committees is entirely independent of central or of local government. Once a rent officer, or member of a rent assessment panel, from among whom the members of rent assessment committees are chosen, has been appointed, he operates as an independent statutory officer whose conduct is governed by Act of Parliament. He is answerable for the legality of his decisions only to the courts. There is no scope in individual cases for an administrative review of the decision either of a rent officer or of a rent assessment committee.
    Having said that, I should add with equal emphasis that the Government fully endorse the way in which rent officers and rent assessment committees carry out their duties, and reject completely any suggestion, such as those that have been made by the hon. Member, that the operation of the system is biased against tenants or that it is resulting in the registration of rents which approach market rents.
    When one considers the pressure on on accommodation in London especially at the moment, and the rapid increase in property values which has taken place in the last year or two, the achievement of the rent officers and rent assessment committees operating in London in maintaining the balance of interests of landlords and tenants as they are required to do by the statutes has been considerable. They deserve our commendation rather than our criticism.
    Mr. Jenkins: Would not the hon. Gentleman at least admit that if an Act intended to hold rents down has had instead the effect of vastly increasing them, there is a case for an inquiry into how the officers and the committees are carrying out their duties?
    Mr. Eyre: I shall come to the very fair way in which they are carrying out their duties.
    I think it would be helpful at this stage if I were to read subsections (1) and

    1101
    (2) of Section 46 of the Rent Act 1968. This section sets out what is to be taken into account when a fair rent is being determined, either by a rent officer or by a rent assessment committee. It has proved a responsible and workable formulation. Subsection (1) says:
    "In determining for the purposes of this part of this Act what rent is or would be a fair rent under a regulated tenancy of a dwelling house, regard shall be had subject to the following provisions of this section, to all the circumstances (other than personal circumstances) and in particular to the age, character and locality of the dwelling house and to its state of repair."
    Subsection (2) says:
    "For the purposes of the determination it shall be assumed that the number of persons seeking to become tenants of similar dwelling-houses in the locality on the terms (other than those relating to rent) of the regulated tenancy is not substantially greater than the number of such dwelling-houses in the locality which are available for letting on such terms."
    It is subsection (2) which excludes scarcity value from the determination of a fair rent. It is the effect of this subsection which has been questioned by the hon. Member. He has suggested that this subsection has not had the effect of keeping rents below market rent level.
    I can think of two very clear and impressive pieces of evidence which make it absolutely certain that the scarcity element which is discounted in fair rent calculations is considerable. The first such piece of evidence is simply the figures for fair rents which have been registered on an application three years after the registration of an earlier fair rent, as the Statutes provide. Fair rents which were registered in these circumstances in the first three months of 1973 were on average 17 per cent. higher than those which had been registered for the same dwellings three years previously. This shows an increase of a little over 5 per cent. per year compound.
    When one considers that not only property values but also landlords' costs for maintenance and decoration have risen very considerably during those same three years, it becomes perfectly clear that no great change in the pattern of these rents has taken place. Indeed, when one considers that a market rent would represent a reasonable return of the sale value of a property, it becomes clear that fair rents are representing a
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    much lower rate of return than they were doing three years ago. This conclusion is inescapable from the evidence.
    The other piece of evidence I would cite is of a more direct kind. During the passage through Parliament of the Counter-Inflation Act, as the hon. Member will remember, the Government made an amendment the effect of which was to bring more tenancies within the scope of the fair rent system. The Government did this because they became convinced that the hardship which was being suffered by some tenants who were forced either to leave their flats and houses in London at the end of their leases or to pay market rents which—this is the important point—were generally around twice what the fair rent level for such property was likely to be, outweighed the likely adverse affects on the supply of such accommodation which would result from an extension of the Rent Act. In other words, for properties of almost identical rateable values, fair rents of around £800 to £1,000—I am referring to the higher rented tenancies—corresponded to market rents of £1,600 to £2,000.
    Mr. Jenkins: If the Under-Secretary believes this to be so, he could have no objection to an examination. My information is precisely to the contrary. The facts which support my information are that whereas the rent tribunals were originally used Quite a lot by tenants, nowadays they are used almost exclusively by landlords for the purpose of getting an increase in rent.
    On a point of fact, I do not recall that I supported my Government on the Bill to which the hon. Gentleman referred. Even if I did, it would be no excuse for the Under-Secretary not changing his mind.
    Mr. Eyre: This evidence is publicly available and is recorded in the report of the work of the rent assessment committees. The evidence in support of everything that I am saying is available to the public.
    All tenants of regulated tenancies pay the same rate if it has been set by the rent officer. Therefore, it is not true to suggest, as the hon. Gentleman said, that poor tenants are moved out and replaced by richer ones. The protection operates.
    When the hon. Gentleman's right hon. Friend was introducing the Act which

    1103
    is the basis of fair rents he did not make any provision at all for the rent allowances that are now there. This Government have done a great social justice in making rent allowances available in cases where tenants need help.
    From what the hon. Gentleman said I believe that the tenant of the flat to which he referred is receiving a rent allowance. Under the increased needs allowance which was introduced in April I am happy to think that this old gentleman will get specially generous help. The case cited by the hon. Gentleman appears to be a decontrol case.
    The hon. Gentleman referred to rents which had been paid for 20, 30 or 40 years and was sufficiently fair as to acknowledge that those are very low rents. There can be no justification for such rents being kept at the same level since 1957 as they have been in the case of controlled tenancies. That is why they are moving on to regulated tenancies.
    I stress that on the basis of 1957 rent values it would be impossible to maintain these properties in good condition. It would be impossible to maintain the lift to which the hon. Gentleman referred. The only way in which these properties can be kept in order, not only for the present generation of tenants but for the benefit of those who come in the future, is to see that resources are channelled to keeping these properties maintained properly and in good order. It would be irresponsible of the Government to take any other view.
    The hon. Gentleman made references to "well-known" case of bribery of rent officers. No such case has ever been proved, and I must strongly reject his allegation. The hon. Gentleman referred to tenants in a block and suggested that if the local authority took over the block there would be a change, but again the tenants would be paying fair rents which would be the same basis, for the same basis applies to tenancies in the public and the private sector. It is necessary that this should be so in order to preserve our housing stock, to see that it is available for those who come after the present line of tenants. The level of these fair rents is very carefully determined so that scarcity values are excluded.
    Having rejected firmly the general allegations of abuse made by the hon.
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    Gentleman on such inadequate grounds. may I go on to say that the decline in the supply of rented accommodation is yet another sign that fair rents represent much less than the market rate of return on the value of privately rented property It is common knowledge that the private rented sector is declining at the rate of some 150,000 dwellings a year, to a great extent as a result of the control of rents. The Government have said that they do not feel that it is realistic to attempt to halt this decline because the gap between fair rents and market rents has now become so large. This again provides the clearest refutation for the suggestions made by the hon. Member that fair rents are now approaching market rents.
    In his speech the hon. Member placed some emphasis on the way in which rent officers and rent assessment committees operate under the Act. He suggested that in some ways there might even be something amounting to a conspiracy between committee members and property owners. The House should know that each rent assessment committee consists of a lawyer, a surveyor and/or a layman, and that each committee is appointed specially to deal with a particular case. Amongst other things, this ensures that the standards applied by committees are constant throughout each panel, and that fair rent levels are consistent for the same type of property. This consistency is generally furthered by having rent assessment committees to deal with the cases in which there is an appeal against the findings of a rent officer, though rent officers themselves pay particular attention to comparable cases when they are determining fair rents, and it is very much to the point that on average rent officer and rent assessment committee determinations diverge by only some 5 per cent. in respect of the 4 per cent. of cases which go to appeal.
    There have, from time to time, been allegations that unduly high rents have been registered for property belonging to a specific landlord, but the evidence of the rent register has never borne out any of these allegations. The rent register, which contains all the existing fair rents for a particular registration area is open to public inspection. I stress this fact to the hon. Gentleman. Not only would any attempt to set a particular group of rents at artificially high levels involve the

    1105
    attempted corruption of a committee whose composition is unknown until the day on which it first meets if such a conspiracy had been successful, its results would have been available for all to see.
    These are the reasons which lead me to rebut so strongly the allegations of the hon. Gentleman.
    Mr. Jenkins: The allegations are, in fact, admitted.
    Mr. Eyre: No, I must reject that suggestion.
    Mr. Jenkins: I will send the evidence.
    Mr. Eyre: I was going on to say that I will, of course, look at this particular case in detail and write to the hon. Gentleman about it, but on the basis of this case, he has raised such a fantasy of allegations that I must say strongly that there is no evidence in support of his allegations. That is why I have gone to some length in explaining the system which applies and the public safeguards which operate.
    It has been suggested that landlords have been enabled to achieve very high rent increases because they can afford to be represented professionally at hearings before rent assessment committees whereas tenants are unable to do so. Once again, I can only say that there is no evidence to bear this out. There are obvious advantages in having a case presented professionally, not least for the committee itself, which is helped by having the evidence presented to it as clearly as possible. At the same time, I know that committees, and rent officers, too, go to great lengths to assist tenants and, indeed, landlords who are not represented professionally to present their cases as well as possible.
    1106
    The hon. Member has referred to the Freshwater group of companies. It is no part of my responsibility to defend this group or its business interests, but in fairness, I can only tell the House that on no occasion have allegations of illegal or sharp practices against it been supported by evidence on investigation.
    It is true also that this group of companies is almost alone in providing a large number of homes to let at fair rents —I believe, about 40,000 flats—despite the manifest fact that these rents do not provide an adequate return on the present investment value of the property. There may well be sound commercial reasons for this, but, in view of the shortage of accommodation, I suggest that it is unwise to make the sort of vague attack which has been made by the hon. Member and is only likely to encourage the selling off of the property.
    The hon. Member has suggested, on the basis of an isolated case—I have said that I shall be glad to investigate it if he will let me have the details—that something is seriously wrong with the operation of the fair rent system. I must tell him that I do not consider that he has supported that general case with anything beginning to look like adequate evidence. Rent officers and the London Rent Assessment Panel are independent of the Government. They operate within the strict limitation of the Act passed by the hon. Gentleman's Government, the material part of which I have quoted. I emphasise that the results of their deliberations are recorded and are open to public scrutiny, and it follows that the system has strong safeguards for the public interest.
    Question put and agreed to.
    Adjourned accordingly at twenty-seven minutes past Four o'clock.

CIVIL SERVICE
  Parliamentary Papers
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DEFENCE
  NATO Facilities (Orkney)
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  HMS "Royal Oak"
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NORTHERN IRELAND
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TRADE AND INDUSTRY
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WALES
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Preamble
The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Salisbury.

SANDFORD MANOR
11.6 a.m.
LORD STRABOLGI: 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 when it is proposed to renovate Sandford Manor in the London Borough of Hammersmith.
LORD MOWBRAY AND STOURTON: My Lords, this is primarily a matter for the local planning authority, who I understand are still negotiating with the owners. The Department of the Environment are willing to give any help they can, for example, through the Historic Buildings Bureau, if a new use is sought. I cannot comment further because some of the statutory procedures which could arise, such as a refusal of a further listed building consent, or compulsory acquisition, would involve my right honourable friend the Secretary of State.
LORD STRABOLGI: My Lords, I thank the noble Lord for that reply, but is he aware that this is now the third year that I have raised this matter? Will the Government urge the Borough Council to serve a repair notice on the developers, or at least to get the developers to grant a repairing lease, possibly to some other body, while the main planning application is being considered? Or are the developers interested only in the site value?
LORD MOWBRAY AND STOURTON: My Lords, I understand that the owners are having discussions with the London Borough of Hammersmith about stopping further deterioration of the building. The possibilities that the noble Lord mentions are, clearly, possibilities for the council
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concerned, but discussions are now going on about a use to which the building could be put and about who should operate the enterprise which might come out of this.
LORD STRABOLGI: My Lords, regarding the use, are the Government aware that, apart from the value and interest of the house, there is an extensive garden which, although now a wilderness, contains about 20 plane trees and a 500-year-old mulberry and an ancient pear tree which would be of great interest to the public because there is no other public garden in the vicinity? Is it not time the Secretary of State stepped in and did something?
LORD MOWBRAY AND STOURTON: My Lords, I must congratulate the noble Lord on the persistence and interest that he shows. I think that his persistence gets its reward because it keeps interest alive. The Secretary of State is well aware—as are also the G.L.C. and the Borough—that as the use that they are contemplating involves eating and drinking, the garden and the trees will no doubt be an added amenity.
LORD STRANGE: My Lords, the developers are interested only in money, not in pear trees.
LORD MOWBRAY AND STOURTON: That is what planning controls are for.

GATWICK AIRPORT
LORD BESWICK: 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, pending their promised consultation about technological developments in the aerospace and air transport industries, and until Parliamentary assent to the construction of an airport at Maplin, they will ensure that there is no further residential development in the area previously safeguarded for the possible second runway at Gatwick.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF THE ENVIRONMENT (BARONESS YOUNG): My Lords, my right honourable friend the then Secretary of

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State for Trade and Industry made it clear on April 26, 1971 that, for environmental reasons, it is not the policy of Her Majesty's Government to build a second runway at Gatwick Airport. Questions of development control are in the first place a matter for local planning authorities.
LORD BESWICK: My Lords, I thank the noble Baroness for that reply, but is she not aware that since the statement to which she refers there have been a good many developments? It is in the light o' those developments that her right honourable friend has promised to have further consultations about their possibilities. In the event of those consultations, promised more recently than the statement, showing that it would be possible to have more intensive use of Gatwick with a reduced noise, would not the Government be laying themselves open to a charge of bad faith if. in the meantime, they bring residential development nearer to the airport?
BARONESS YOUNG: My Lords, I cannot accept that statement. The Government have undertaken to review technical and other developments before reclamation of Maplin Sands, but this undertaking does not extend in scope to cover the construction of a new runway at Gatwick.
LORD BESWICK: My Lords, with respect to the noble Lady, what she is saying now is absolute nonsense. It is quite irrelevant to review the reclamation of Maplin Sands unless at the same time there is a review of other airport developments. As the right honourable gentleman's assurance given in the Commons last week carries that implication, I ask her again: are they not opening themselves to the charge of bad faith if, although having those consultations, they go ahead with the residential development around the airport?
BARONESS YOUNG: My Lords, I am afraid I cannot accept that statement of the noble Lord, Lord Beswick. I have re-read what my honourable friend said in another place and I give the assurance, which has been in the Press, that we have accepted the spirit of it and that we have undertaken to review the technical and other developments. It will be a matter of great interest to those living near Gatwick
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if the noble Lord, Lord Beswick, is saying that it is the policy of his party to build a second runway at Gatwick.
LORD NUGENT OF GUILDFORD: My Lords, is my noble friend aware that, despite the cogency with which the noble Lord, Lord Beswick, delivered his speech, the charge of bad faith has no substance at all? Indeed, is my noble friend aware that if there is to be any thought of bad faith, it would be if the Minister reversed his original decision that there was not to be a second runway at Gatwick? Is my noble friend aware that there are two substantial arguments for that point? The first is on planning grounds and the second on environmental grounds. Is my noble friend aware that the Minister should stick to his original decision?
LORD BYERS: My Lords, may I ask the noble Lady to recognise that those of us who live near Gatwick are very pleased indeed to have the reassurance that there will not be a second runway? Will Her Majesty's Government resist these demands from the official Opposition to reopen the whole matter and give us one?
BARONESS YOUNG: My Lords, may I thank both noble Lords who have asked these last questions? We are very grateful for their support, and I should like to give the assurance that there is no question of going back on the statement we have made about a second runway at Gatwick.
LORD BESWICK: My Lords, may I ask the noble Lady if she would congratulate her right honourable friend on his capacity of making speeches at the appropriate time? May I also ask her whether she does not realise that all of us, in all parts of the House, want to relieve the noise nuisance at Gatwick? The question is how we do it. Is she now saying that the right honourable gentleman in another place, was not serious when he put forward the proposition that it would be possible to reduce the noise nuisance by technical means now open to him?
LORD TREFGARNE: My Lords, when the noble Lady replies, would she include an explanation how it would be possible to reduce the noise at Gatwick by building a second runway?
BARONESS YOUNG: My Lords, the second question really answers the first. I should like to make it absolutely clear that we have accepted the spirit of the undertaking given in another place and we shall undertake this review. But there must be no question of indicating to anyone at Gatwick that we intend to build a second runway.
LORD BESWICK: My Lords, may I ask the noble Lady to tell her noble friend behind that it would be perfectly possible to reduce the noise at Gatwick by operating, for example, three Tri-Stars instead of one of the aircraft which he operates.
THE EARL OF LAUDERDALE: My Lords, there is a tendency for enthusiasts, including flat-earthers, to cite technical arguments for the purpose of reversing a political decision which was endorsed by both Houses of Parliament by a very substantial majority.
LORD CONESFORD: My Lords, might it not be a good idea to reserve some Questions for next Tuesday's debate?
THE LORD PRIVY SEAL (LORD WINDLESHAM): My Lords, we have seen considerable skill on both sides of the House in making statements in the form of interrogative questions, but in view of the business that we have later, I think we should now move on.

DIVER TRAINING AND PERFORMANCE STANDARDS
11.15 a.m.
THE EARL OF LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what conclusions they have drawn from, and what action they propose to take on, the Report on Diver Training and Performance Standards submitted by the Society for Underwater Technology one year ago.
THE EARL OF GOWRIE: My Lords, the Report has been studied by the Department of Employment and has been found most useful by the Department in its consideration of training and
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safety issues in the area of Diver Training.
THE EARL OF LAUDERDALE: My Lords, I thank the noble Lord. Can I ask him, in particular, whether the Department has given due attention to paragraph 16 of that Report urging some system of registration and enforcement to ensure the maintenance of adequate training and operation standards of deep-water diving?
THE EARL OF GOWRIE: My Lords, I can certainly say that the Department has considered that section of the Report.
THE EARL OF LAUDERDALE: My Lords, could the noble Lord also say whether, beyond considering, the Department is reaching a decision both on that and on the requirement, to which attention was drawn in the Report, that there should now be work on deep-water diving beyond 200 feet? In regard to the latter, the other day there was diving in 419 feet on Block 319 when divers went down and replaced the guidelines of a well-head; this has not been achieved hitherto. Is it not a matter of urgency that the Government should organise and study this situation?
THE EARL OF GOWRIE: My Lords, the whole Free World will have been made forcibly and tragically aware in recent days of the special perils of those who occupy their business in the deep. The Report recognised that more research was needed into the safety and training in this area. The Government accept this entirely and will press ahead with reviewing the situation.

DUKE OF EDINBURGH'S SPEECH
11.17 a.m.
LORD BROCKWAY: 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 what circumstances the distributed speech of the Duke of Edinburgh on his recent visit to Portugal was withdrawn.
THE MINISTER OF STATE, FOREIGN AND COMMONWEALTH OFFICE (BARONESS TWEEDSMUIR OF BELHELVIE): My Lords, the speech had

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to be translated for the Press, and an early draft was prepared for possible issue. Because of subsequent changes, this draft was not distributed to the Press. Copies of the speech itself were given to the Press after it had been delivered.
LORD BROCKWAY: My Lords, I thank the noble Baroness. Could she explain how it is that the Press received this early draft. Could she confirm that the original draft included the phrase—and I quote:
"differences in outlook on Colonial policy …"
as reported by the very well-informed diplomatic correspondent of the Guardian? Is it true that the early draft was submitted to the Portuguese Foreign Minister and that it was as a result of his protest that the early draft was withdrawn? Was this with the prior knowledge of the Foreign and Commonwealth Office?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, I am not aware that any member of the Press could possibly have obtained a copy of what was an earlier draft of the final speech. Therefore I cannot comment on speculation about an article in a newspaper. As is customary with speeches of this kind, it is a normal courtesy to compare notes of what will be said by both sides on such occasions, and this took place. No representation of any kind was made by the Portuguese on the material.
LORD BROCKWAY: My Lords, I thank the noble Lady. But does this not raise the whole issue of the Anglo-Portuguese alliance? Is it not the case that, whilst it was of historical significance, it is now illogical? There is the unprincipled alliance of Portugal in NATO. Is it not outweighed by the loss of confidence in the Commonwealth by our association with the only country in Europe which still retains colonial possessions in Africa?
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, the brief answer to the noble Lord's question is, "No". But I would remind him that the 600th anniversary was a ceremonial
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occasion with a very old ally. While we have differences together, which are well known, on colonial policies, they do not affect that particular light.
LORD HALE: My Lords, is the noble Lady aware, as on the occasion of this spurious fanfare for trumpets, it would be extremely difficult, even for such an accomplished orator as His Royal Highness, to say something that was felicitously in tune with the music and historically in accord with the facts?

OFFICIAL REPORT (HANSARD)
11.20 p.m.
LORD WINDLESHAM: My Lords, I must inform the House that we are without the assistance of the Hansard reporting staff to-day. As on the last occasion when the reporters did not come in for work, two weeks ago, the staff of the House will do their best, in the absence of the reporters, to produce a Hansard in due course from the tape recordings which are made of our proceedings. I undertook to keep the House informed of progress and can report that, as envisaged when we briefly discussed this matter following Lord Beswick's Private Notice Ouestiqn on June 14, the Clerk of the Parliament's and representatives of the union concerned have now made a joint approach to the Pay Board. On Monday of this week a meeting took place with officials of the Board. The object was to seek clarification of the effect of the pay standstill upon certain matters which are in dispute. We now await the ruling of the Board, which it is hoped will be available shortly.
LORD BESWICK: My Lords, while thanking the noble Lord the Leader of the House for that statement, may I ask whether he is aware—as I am sure he is —that timing in this matter is of great importance? Has that been impressed upon the Pay Board?
LORD WINDLESHAM: My Lords, I think we all hope that the ruling of the Pay Board will be available at the earliest possible moment.

REGULATION OF PRICES (TRAN- QUILLISING DRUGS) (No. 2) ORDER 1973
11.22 a.m.
THE CHAIRMAN or COMMITTEES (THE EARL OF LISTOWEL)THE CHAIRMAN or COMMITTEES (THE EARL OF LISTOWEL) had given Notice of a Motion, on consideration of the Special Report from the Special Orders Committee:

1. That there should be further inquiry by a Select Committee but that such inquiry should be limited to the issue whether the prices recommended by the Monopolies Commission make adequate provision for a proper allocation of group research and development expenditure in their sales of the reference drugs by the Petitioners in the United Kingdom; and, if not, what (if any) adjustment upward should be made of prices recommended by the Commission in order to make adequate provision for this expenditure:

2. That notwithstanding any relevant provision of paragraph 6 of Private Business Standing Order 216 the Select Committee may conduct their proceedings as they see fit:

3. That the Committee have power to appoint persons with specialised knowledge for the purposes of particular inquiries, either to supply information which is not readily available, or to elucidate matters of complexity within the Committee's order of reference:

4. That if any Order is made to continue in force the provisions of either:
the Regulation of Prices (Tranquillising Drugs) (No. 2) Order 1973 or
any subsequent Order having the same effect,

then the new Order shall be substituted for the previous Order for the purposes of proceedings under Private Business Standing Order 216 as modified by the Order of the House of the 20th of February last.
The Committee's Report was as follows:
The Committee, as required by Private Business Standing Order 216 have considered the Order and the Petition against it of F. Hoffmann-La-Roche and Co., A.G., Sapac Corporation Limited and Roche Products Limited, and report:
That having heard Counsel for the parties thereon and having considered the matters referred to in sub-paragraphs (a) to (d) of
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paragraph (6) of Standing Order 216 they are of opinion that there ought to be a further inquiry by a Select Committee, limited in accordance with the following paragraphs.
Paragraph (6) of the Standing Order provides that:
"the proceedings of the Select Committee shall be conducted in like manner as in the case of a Private Bill and shall be subject to the provisions of Part V of these Standing Orders relating to Committees on Private Bills, far as they are applicable".
The Committee recognise that a literal compliance with that paragraph might require the Select Committee to investigate what has already been investigated by the Monopolies Commission. This might in the Committee's view involve undue delay and expense. They therefore recommend that notwithstanding paragraph (6) of the Standing Order a Select Committee be appointed to carry out a further inquiry limited to the issue:—whether the prices recommended by the Monopolies Commission make adequate provision for a proper allocation of group research and development expenditure in their sales of the reference drugs by the Petitioners in the United Kingdom and if not what (if any) adjustment upward should be made of prices recommended by the Commission in order to make adequate provision for this expenditure.
THE CHAIRMAN OF COMMITTEES (THE EARL OF LISTOWEL): My Lords, in moving the Motion which stands in my name in the Order Paper, I think it might be helpful to the House if I said something first about the procedural background of the Special Report from the Special Orders Committee which the House is being asked to consider this morning. The Order which is the subject of this Report is what is known as a Hybrid Special Order; that is to say, in accordance with Private Bill Standing Order No. 216, it is an Order which would require, but for the provisions of the Act authorising the making of the Order—in this case the Monopolies and Mergers Act 1965—to he enacted by a Private Bill or a Hybrid Public Bill.
The fundamental purpose of the hybrid procedure in this Standing Order, which is peculiar to this House, is to safeguard the rights of the private citizen. The Standing Order confers on persons individually and adversely affected by a Hybrid Special Order, a right to petition the House against the Order. This is a right they would, of course, have had if the terms of the Order had been contained in a Bill instead of a Statutory Instrument. If a Petition is presented, as it was in this case, it is then for the

1587
Special Orders Committee to consider whether in the light of the criteria in the Standing Order there ought to be a further inquiry by a Select Committee. The purpose of these criteria is to ensure that the Special Orders Committee will not recommend that there ought to be a further inquiry unless they are satisfied that there is a substantial ground for complaint in the Petition, and that the matter has not been adequately dealt with by a previous inquiry. In simple language, they have to be satisfied that there is a prima facie case for a further inquiry.
That, my Lords, is the procedural background of the meetings of the Special Orders Committee, which sat to consider the Regulation of Prices (Tranquillising Drugs) Order and the Petition against it. I should like now to say something about the proceedings of the Committee and to try to explain the terms of my long and, I fear, rather complex Motion.
After the Committee had heard counsel for the Petitioners and for the Secretary of State during five days, and had studied' all the documentary evidence before them, they were in a position to reach a final decision. It was then decided, by a majority of 4 to 3 to recommend to the House that there should be a further inquiry by a Select Committee, but that that inquiry should be limited to the single issue set out in the first paragraph of my Motion. It might be to the convenience of the House if I were to read the terms of this issue:
"… whether the prices recommended by the Monopolies Commission make adequate provision for a proper allocation of group research and development expenditure in their sales of the reference drugs by the Petitioners in the United Kingdom; and, if not, what (if any), adjustment upward should he made of prices recommended by the Commission in order to make adequate provision for this expenditure:"
This limitation of the scope of the inquiry was proposed, the Committee say in their Report, in order to avoid a re-opening of all the matters which have already been considered by the Monopolies Commission. The first paragraph of my Motion contains the pith of what I am placing before the House. The rest of the Motion, which I shall deal with quite briefly, is procedural.
The second paragraph gives the Committee power to conduct their proceed
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ings as they see fit, notwithstanding the provisions of the Standing Order, which lay down that:
".. the proceedings of the Select Committee shall be conducted in like manner as in the case of a Private Bill …"
The Committee did not consider that the Private Bill procedure would necessarily be suitable for the proceedings of a Committee engaged on a limited inquiry. For instance, if Private Bill procedure were strictly followed, the Promoter of the Order—in this case the Secretary of State —would be obliged to begin by proving the need for the whole Order; that is to say, he would have to justify the Report of the Monopolies Commission in its entirety. It would also be necessary for the Committee to consider all the matters raised in the Petition against the Order. The Committee might consider that the limitation of the inquiry recommended by the Special Orders Committee placed a burden on the Petitioners proving their complaint, and they might therefore prefer to hear the Petitioners first. If the terms of my Motion are agreed to, the Committee will be able to conduct their proceedings as they think fit.
The third paragraph of my Motion is to ensure that the Select Committee will be able to call upon professional advisers, such, for example, as accountants. They would need to do so in dealing with the complex and technical subject, which is the subject matter of their inquiry. The last paragraph is necessary because this Order expires, unless it is aproved by both Houses, after 28 days beginning from the day on which it is laid. My Motion therefore provides that each Order which is laid on the expiry of the previous Order shall be substituted for its predecessor for the purpose of the Committee's proceedings.
My Lords, I commend the Motion lo the House, because I hope the House will follow its established practice of agreeing to the Report of the Committee that has heard the arguments of the parties represented by counsel, and arrived at a decision after considering all the available evidence. The House, of course, does not have the advantage of hearing the case submitted by the parties. In the nature of things it is not possible for parties to appear or to be represented by counsel in this Chamber, while the House is sitting. It is for this reason that the House

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has adopted the practice to which I have referred. My Lords, I beg to move.
Moved—

1. That there should be further inquiry by a Select Committee but that such inquiry should be limited to the issue whether the prices recommended by the Monopolies Commission make adequate provision for a proper allocation of group research and development expenditure in their sales of the reference drugs by the Petitioners in the United Kingdom; and. if not, what (if any) adjustment upward should be made of prices recommended by the Commission in order to make adequate provision for this expenditure:

2. That notwithstanding any relevant provision of paragraph 6 of Private Business Standing Order 216 the Select Committee may conduct their proceedings as they see fit:

3. That the Committee have power to appoint persons with specialised knowledge for the purposes of particular inquiries, either to supply information which is not readily available, or to elucidate matters of complexity within the Committee's order of reference:

4. That if any Order is made to continue in force the provisions of either:

the Regulation of Prices (Tranquillising Drugs) (No. 2) Order 1973 or any subsequent Order having the same effect,
then the new Order shall be substituted for the previous Order for the purposes of proceedings under Private Business Standing Order 216 as modified by the Order of the House of the 20th of February last.—(The Earl of Listowel.)
11.29 a.m.
LORD DIAMONDmoved as an Amendment to the Motion, to leave out the first three paragraphs. The noble Lord said: My Lords, I hope I may, first of all, have your Lordships' permission to thank the noble Earl, the Chairman of Committees, not only for explaining the matter in his usual clear and short fashion, but for the extraordinarily fair way, which we have come to expect of him, in putting a matter which, having read the Report—as all your Lordships will have done—has placed him in a position of unusual responsibility.
My Lords, I rise to move this Amendment with considerable trepidation. First,
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it is an Amendment in the name of my noble friend the Leader of my Party, an ex-Leader of your Lordships' House of great experience. In moving this Amendment, I hope your Lordships will permit me to say that you are listening to one who has great respect for the procedures of Parliament. This is a respect which has been confirmed by 10 years' service as a Chairman of Standing Committees in the other place, and by the experience which I have been privileged to gain as a member of your Lordships' Select Committees dealing with delegated legislation of which, of course, this is a particular element. I know very well that procedures are the result of the distillation of great experience, thought and wisdom, and that, therefore, when approaching a matter like this which involves a very unusual departure from your Lordships normal proceedings, one starts on the matter with considerable humility and great anxiety.
The matter before your Lordships' House is basically an order by the Government which results in a very severe reduction in prices of a manufacturing company—to make the matter more important, a Swiss company, not even an English company—a company which petitioned the Special Orders Committee. As your Lordships have heard, that Committee has reported that part of the matter ought to he examined by a Select Committee. As we all know, it is the normal practice for a Committee's recommendations to be accepted, yet I am moving an Amendment the short effect of which is that there is no need for further inquiry. My Amendment, in effect, leaves it open to your Lordships' House to decide what is right to be done in relation to the main order. It prevents our getting into difficulties owing to the lapse of time with an order running out and having to be replaced. This has already happened. It would leave it open to your Lordships' House to decide whether or not to approve the order, as the other place has done.
The matter started about 1966 when the Department for Health and Social Security drew to the attention of the Swiss corporation in question, Roche Products Limited, the fact that there was room for reduction in the prices, in particular, of two drugs which, because of their somewhat unpronounceable names I hope

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I may refer to by their more accepted names of Librium and Valium. I do not know whether I have pronounced them correctly; I doubt whether there is any particular authority for the correct pronunciation.
The Government, after long thought, decided to refer the matter to the Monopolies Commission. The Monopolies Commission gave the matter long and careful consideration. Your Lordships will know that their Report was published in April this year. If I may, I will trouble your Lordships with a very short extract from some of the recommendations of the Monopolies Commission. The Commission consisted of seven individuals fitted for the task, chaired by the then Mr., now Lord, Justice Roskill.
Tile LORD CHANCELLOR: My Lords, I misled the noble Lord, Lord Diamond. It is Ashton Roskill and not Eustace Roskill who is the Chairman of that body.
LORD DIAMOND: My Lords, then it is Sir Ashton Roskill who was Chairman. The Monopolies Committee have reported. On nage 69 the second recommendation is:
"For reasons we have given in detail... we are satisfied that some of the cost figures referred to—in particular those for research and promotion costs—grossly exceed the levels that should be taken into account to arrive at fair prices."
Recommendation (d) states:
"The excessive prices charged up to the present have already produced excessive profits on a very large scale …"
Figures are given in schedules annexed to the Report and I will quote only a few from Table 2 of Appendix 5, dealing with the combined costs and profits of these two drugs, showing that in the year 1970 the Commission conclude that the cost of manufacture of these drugs was £456,000 and that the profit, after taking account of the cost of manufacture and other overhead expenses, was just on £4 million. Those are the broad figures.
The Commission also conclude that the return on capital—I have not the exact reference with me, but no doubt this will be referred to many times during the course of our debate—was of the order of 70 per cent. I know from my own inquiries when I had certain ministerial responsibilities that the level of return on
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capital in industry generally in this country is of the order of 11 per cent. to 13 per cent. depending on the particular year which one is concerned with. At all events, sufficient for our present purpose is the considerable difference between the average return on capital regarded as reasonable by industry at large, and the return on capital involved in the manufacture and sale in this country of these two drugs.
The recommendation of the Report of the Monopolies Commission was that the prices of these two products should be reduced; first, as regards Librium, to not more than 40 per cent. of the selling prices in 1970; and as regards Valium, to not more than 25 per cent. of the 1970 selling prices. Paragraph 236 of the Commission's conclusions states:
"The prices we are recommending could be considered more than adequate in the light of the facts revealed in our report … We certainly see no room for argument that in recommending what may appear to be drastic reductions we are being unduly severe."
I have already referred to your Lordships the earlier paragraph which deals with research and promotion costs.
Upon receiving and considering that Report of the Monopolies Commission, the Government, through the appropriate Department, laid the Order which is under consideration, which provides that the maximum prices to be charged for these drugs shall respectively be not more than 40 per cent. and not more than 25 per cent. of their previous prices, in the terms of the Commission's Report. These are maximum prices. I draw to your Lordships' attention that the recommendation was that these prices should be reduced to "not more than" these figures. I think I have gone into the substance of the matter sufficiently to say why I invite your Lordships to reach the conclusion that the nature of the Report of the Special Orders is such that your Lordships cannot be relieved of the responsibility of considering whether to accept it or not.
It does not need anyone to say that a committee, however distinguished, is, by its nature, a committee of a major body, and it is for that body to decide whether the advice—which is what a committee's recommendations amount to —by its nature, by its circumstances, in the context of everything that ought to be considered, must be accepted. I

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cannot deny myself—and I cannot relieve myself of the responsibility of saying—that I have read this Report carefully and I have sufficiently read printed evidence of what took place. I am aware of precedents and the wisdom of precedents. Nevertheless, I have the responsibility of looking fully and carefully at the recommendation made. I have reached the conclusion—and I invite your Lordships to reach the conclusion—that the limited recommendation made is not necessary, in all the circumstances. I propose to give your Lordships the reasons that have persuaded me that that is so.
First, if I may deal with the commonsense matters, this is a distinguished Committee but a small one, and a small selection is never regarded, statistically or in any other terms, as conclusive. It is a Committee of nine, including the Chairman. In fact, the final decision was taken by seven members, including the Chairman—the assumption is that the other two members were not present. The voting, as we know, was four to three. In other words, there was a clear difference of view. A unanimous Report, and a Report which indicates that opinion is more or less evenly spread, are, in my view, two different things. One can he leaned on almost entirely, the other leaves one with the responsibility of coming to one's own judgment in the light of everything, including the Report.
My second point—and I hope that I do not embarrass any of your Lordships —is that the noble Earl the Lord Chairman of Committees, who has everyone's respect, appears in the "Not-Contents". There is no need for me to say more than that. The third point—a very important one—is that the Committee did not reach the conclusion that they ought to recommend a full review. They reached the conclusion that they ought to recommend, by this slender majority, a review of one limited and extremely difficult area—the allocation of group research and development expenditure. I am not wholly inexperienced in the problems relating to the allocation of group research and development expenditure. I suggest to your Lordships that this question could be put to a dozen able, experienced chartered accountants; they could work
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a long time, inform themselves fully, and produce a dozen authoritative, wise, different answers. It is a matter on which it is not possible to deny the variety of truth through the simplicity of figures. In our reaching this conclusion, it is most important to consider that the one area upon which the Committee thought that there was uncertainty is likely forever to be clothed in uncertainty.
That is not the end of the matter, however, because the Commission were obviously aware of this and took this aspect of the matter fully into account. By "this aspect", I mean the fact that it is not open to anyone or any body of persons to say with pervading permanent truth that this is the figure which ought to be allocated in respect of this kind of expenditure, in respect of research, development and promotion costs, to the sales of these particular two drugs, part of the total product of the company in this country, part of the area in which the company was trading.
The Commission, having taken that fully into account, conclude that the prices we are recommending could be considered more than adequate and the prices that they are recommending do not go beyond certain limits. The Order of the Government Department fixes those limits. The Commission themselves were aware of the difficulty and fully covered it, fully allowing for any flexibility of conclusion on it, and recommended that the prices should be not more than 40 per cent. off and not more than 25 per cent. off the selling prices of these two drugs. The Government, too, did not fix a figure below the maximum, which they might have done, but fixed the maximum. In those two ways, full tolerance and flexibility have been allowed for differences of view that might be expressed with regard to the proper allocation of group research and development expenditure, in respect of which one can never hope for finality and certainty.
I therefore reach the conclusion that there has to be a considerable area of doubt in one's own mind before one wishes to review a matter which has been so fully and lengthily reviewed by such a reliable and authoritative body as the Monopolies Commission. The whole of the circumstances, in particular the expressed differing views of the Committee, and the other matters I mentioned,

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are not sufficient to suggest to your Lordships that this matter should go before a Select Committee and have the whole of this difficult, unsatisfactory and, I regret to say, in my view, inconclusive, matter reviewed once more. Therefore, I think that the Amendment which would omit the first three paragraphs of the Resolution before your Lordships' House, and leave the matter before your Lordships to decide in whatever way your Lordships thought fit, is one which I hope will seem to your Lordships fair, just and appropriate in all the circumstances.
THE LORD CHANCELLOR (LORD HAILSHAM OF SAINT MARYLEBONE): My Lords, the original Question was that the Resolution in the name of the Lord Chairman of Committees which is placed upon the Order Paper, be agreed to, since when an Amendment has been proposed to leave out the first three paragraphs of that Resolution. The Question is that the said Amendment be agreed to.
11.52 a.m.
LORD STOW HILL: My Lords, I rise to support the Resolution and to invite your Lordships to reject the Amendment. At the outset, may I, in accordance with custom, declare a financial interest as a shareholder in the Beecham Group and in Imperial Chemical Industries? It goes without saying that I, as did my colleagues on the Special Orders Committee, at the outset of the aural hearing, declared our interest to counsel on both sides, and counsel on both sides were good enough to say that they had no objection to our continuing to hear the case.
Secondly, may I say that your Lordships have heard that counsel addressed us for five days. I should like on my own behalf—and I am quite sure that I echo the feelings of my colleagues on the Special Committee—to express our indebtedness to counsel on both sides, Mr. York, for the petitioning company, and Mr. Jupp, for the Department of Trade and Industry. Although they addressed us for five days, I do not think they wasted a single word, and they took infinite pains to lead us through this exceedingly complex matter. They placed a great deal of material before us, and they directed our attention to the important aspects of the matter which we had to consider.
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My Lords, there is one more matter by way of introduction: my noble friend Lord Stamp and my noble friend Lord Peddie have asked me to say on their behalf that they much regret not being able to take part in this debate, and I think that it is in accordance with your Lordships' custom if I may that they would have supported the Motion.
May I put my purely personal reaction to the issue that we had to decide? First, placing some reliance on what my noble friend Lord Diamond just said, this question of allocation of group expenditure is most difficult and complex. He said—and I was most interested to hear this coming from him, with all his professional experience—that if 12 skilled accountants were asked to consider the matter they might each give a different answer. So I hope your Lordships will not think that any public time would be wasted if this one aspect of the matter were given further consideration by a Select Committee. It is not as if they would be asked to consider something the broad outline of which is clear: it is a matter of recognised difficulty. I suppose one would not be human unless one approached a matter of this sort with the memory of the thalidomide tragedy in one's mind, and the consciousness that most of us have that perhaps further expenditure (and I make no criticism of anybody) on research in that particular case might have avoided that tragedy.
My Lords, we are not considering a case of a company with regard to which it is said that it distributed to its shareholders excessive profits made in the carrying on of its enterprise. This Swiss group—it is a Swiss-Canadian group, Hoffmann, La Roche, Sapac—distributed, so we were told, something less than 2 per cent. by way of dividends. It did recover its group research and development expenditure, and it is said against it, on that head of the case, that its expenditure should not in that measure have been recoverable out of English sales. I suppose that the implication must be—and I think it emerges from the Report that it is—that that research and development expenditure was carried out on a scale which was not justified in the circumstances.
That is what is said. Now, my Lords, we at the outset had to consider, and we did consider and counsel presented very careful arguments on the subject—what

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the exact terms of our reference were. I would remind your Lordships of the wording of Standing Order 216, to which reference has already been made. The relevant words were that we should consider in the first place:
"whether the Petition [of the petitioning company] discloses substantial grounds of complaint.…
Those are the initiating and guiding words. Then follow some paragraphs which I think are not relevant for this purpose, and then come the words saying that our consideration should be whether, considering the other circumstances of the case,
"there ought to be a further inquiry by a Select Committee. …"
If it were not for the words,
"whether the Petition … discloses substantial grounds of complaint"
being reminded, as we have been by Lord Diamond of the difficulty of this problem (and that being written all over the Report, as it were), and this being a typical case in which that problem was directly and immediately involved, I should have had no difficulty whatever in coming to the conclusion that a further look at the case on this limited aspect of it was very much in the public interest. It would be disastrous if discouragement were given to these companies which are research-based, as they are described, and in consequence they were not prepared to risk their funds on research which, in the nature of things, is largely unproductive and must be so. Only occasionally—
LORD BALOGH: Would the noble Lord forgive me? Appendix 7 of the Monopolies Commission Report gives quite different figures for dividends from the figures which the noble Lord has given, and I wonder whether he would enlighten us. I am referring to Appendix 7, Table 1 and Table 2. Could the noble Lord enlighten us as to how the discrepancy is to be explained?
LORD STOW HILL: My Lords. counsel addressed us for five days. I prepared an address which I think would have lasted three days, and I then proceeded to prune it to last about thirty-five minutes, and if I take that long I shall feel in danger of trespassing upon your Lordships' patience.
LORD SHACKLETON: My Lords, I appreciate that we do not want to take
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too long, but the noble Lord said when he read the relevant passage of the Standing Order No. 216 about substantial grounds of complaint that he thought that the words that followed were of no account, or something to that effect. I wonder why he thought they were of no account—namely, the fact that the matter had been dealt with by a Departmental Inquiry.
LORD STOW HILL: My Lords, I think I said, and certainly I intended to say, that they had no relevance in the present situation. The words in subparagraph (b) are:
"whether the matter has been so dealt with upon a departmental inquiry that further inquiry is unnecessary."
They are not applicable. The next subparagraph reads:
"whether the submissions in the Petition could have been brought before a local inquiry and were not …
That also is not applicable. Then subparagraph (d) reads:
"whether, having regard to the answers to the preceding questions"?—
and then it becomes relevant again:
"and to the findings, if any, of these inquiries and to the other circumstances of the case there ought to be a further inquiry by a Select Committee. …
I was intending to limit myself to what seemed to me to be that part of the Order which was relevant to this case.
My Lords, all I say with regard to the 2 per cent. is that that is what we are told in the Report.
LORD NUGENT OF GUILDFORD: My Lords, I wonder whether I might interrupt the noble Lord again, although I realise that I am taking his time. I am not clear about sub-paragraph (b). Am I to understand from what he said that what is called a "Departmental inquiry" is to be interpreted so narrowly that the Special Orders Committee were advised that the inquiry by the Monopolies Commission was not relevant in this context?
LORD STOW HILL: I so read the sub-paragraph. I read that part of it which refers to a Departmental inquiry as referring to some inquiry other than the inquiry which we were considering, namely the Commission's Report. That is how I read it. I hope I was right. But, as I have said, it was far from the case that simply because it would be in

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the public interest, if your Lordships think it would, that there should be a further look at this limited aspect of the Commission's finding, we ought to give the advice to the House which we are now giving, because we had in the first place to be able to apply the words,
"whether the Petition discloses substantial grounds of complaint".
May I just give my own reaction on that—and I think that this was the view broadly accepted by my colleagues. What we had to ask ourselves was whether when one looked at the Petition one could say, hearing the arguments and considering the material before us, that the matter in the Petition, on a balance of probabilities, showed that there was some substantial ground for complaint available to the petitioning company. If I may just anticipate for a moment, I myself took the view, in formulating the question to myself, that if on a balance of probability it appeared upon consideration of the Commission's Report and the supporting material that the Commission, by their finding and recommendation, had provided for less than a fair allocation of group expenditure on "R and D", that would constitute a substantial ground of complaint available to the petitioning company. That is the view I took. Merely a marginal under-allocation, I would have said, did not constitute a substantial ground of complaint; but if there was somethting which was more than merely marginal, I took the view that it would constitute a substantial ground of complaint.
Therefore, what I, and I think my colleagues, proceeded to do was to ask ourselves whether, looking at the whole situation, one could or could not say that on a balance of probability there was something more than a merely marginal under-allocation or under-provision of group "R and D" costs provided for in the Order. That was the question that we had to decide. Speaking for myself —and I confess that I found the answer to the question that was asked us exceedingly difficult. I gave it a great deal of anxious thought and I know I speak for my colleagues when I say that they equally were very anxious about it and thought a great deal about it. I came to the conclusion, on balance, that on this limited aspect the petitioners did show
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that, on a balance of probability, they had a substantial ground of complaint, in that something which exceeded a mere marginal under-allocation of group costs on research and development was the result of the Commission's recommendation.
My Lords, I am supporting the Motion. Therefore I suppose I ought to support that part of the Motion which limits this inquiry to the very narrow ground which the majority recommended. The Petition —and I shall not trouble your Lordships to go through it—is lengthy, and it contained a number of complaints to the effect that the way in which the procedure which was applied operated unfairly against the petitioning company. Mr. York developed that argument with great thoroughness and cogency.
I can only say that speaking for myself —I could give examples if your Lordships wished to hear them—that part of the argument carried no conviction to my mind. I did not think that the criticisms of Sir Ashton Roskill and his colleagues had been made out at all. On the contrary, I thought that if there were room for criticism the criticism should light upon the shoulders of the petitioning company which in some respects I thought had been uncooperative and I would even go so far as to say unhelpful. I use that language with hesitation because there was argument and counter-argument and it is not directly germane. I simply say that that part of the argument left me wholly unconvinced. I thought that Sir Ashton Roskill put the issue as clearly as he possibly could at the oral hearing to Mr. Hunter who was the financial director of the petitioning company. Mr. Hunter simply replied by saying that he could suggest no criterion as to the allocation of group "R and D" expenditure.
It is relevant, perhaps, to remember the dates in that context. The reference to the Monopolies Commission was in September, 1971. In May, 1972 the Commission sent out what was called a "public interest letter" setting out a large number of issues which they thought should be given consideration and on which they wished to hear the petitioner's views. Then, in October, 1972, there was an oral hearing and Sir Ashton Roskill—most clearly, as I have said—put to Mr. Hunter these issues and, in

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particular, the question as to whether a company was justified in incurring limitless "R and D" expenditure and then expecting to recover it out of current sales. That was put most clearly. Mr. Hunter was asked by Sir Ashton whether he could suggest any criterion. Mr. Hunter said, "No". The report was not completed until February, 1973. I asked Mr. York in the course of the argument whether, after they had had time to consider Sir Ashton Roskill's question, they had reverted to the matter and said that they would like to make some submission on this ground. The answer was "No". Therefore in a sense I think it must be said that the company brought this on itself.
But that is not the end of the question. It was simply, in the view that I took, one of the reasons why I thought that the complaints that the procedure operated unfairly miscarried. The procedure of the Monopolies Commission was formulated by the Commission under Section 8 of the Monopolies Act 1948. It was for them to formulate it. They carried out their own procedure perfectly accurately. It was perfectly open to counsel Mr. York to argue as he did that it was rather in the nature of a French inquisitorial procedure and that therefore great pains must be taken to see that it did not in the actual case operate unfairly. He so argued—very cogently, as I have said—but in my submission he did not make out a case on that ground. He had a number of other criticisms with which I shall not trouble your Lordships. He complained, for example, with regard to the Commission's view as to the promotion costs incurred by the company. I would simply say that as to all those matters of complaint taken as a whole, I should have regarded them as quite insufficient to justify the Committee on which I sat in making a recommendation for any further inquiry by a Select Committee.
That left open the question of this group expenditure. As I have said, I found that a very difficult question to answer. Ought Ito say to myself that on a balance of probability the petitioning company had a substantial ground of complaint in that there was something more than a marginal under-allocation of the "R and D" expenditure incurred by the
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group in Switzerland and America?—and there was also expenditure incurred in this country. How did the matter stand on that?
Perhaps I may remind your Lordships of the broad situation as it appears in these accounts. My noble friend Lord Diamond has referred to Appendix 5, which is headed "Roche Products Limited". Table 1, Statement of Sales: Estimated Costs and Profits for: A. Librium, B. Valium, C. Other Reference Products, and so on. It is an analysis of their situation. Appendix 6 explains that included in that analysis is what I could describe, so far as "R and D" expenditure is concerned, as a basic contribution of about 14 per cent. This is made up of a fraction derived from the relation of world costs to world sales. That is the basic contribution. Then there is what is described as un uplift which raises that basic contribution to about 22 per cent.
I draw from paragraph 137 of the Report the inference that there is a further ingredient, the size of which I do not know, by way of contribution to group costs of research, contained in the difference between the basic cost of the ingredients of Librium and Valium—£9 and £20—-and the very much higher figures in Appendix 5. The representative of the company said that that increase in cost was partly accounted for by some provision for research costs. So there are three ingredients.
The approach of the Commission, as summed up in paragraph 159, was as follows. It took that analysis of cost and substituted the arm's-length cost of ingredients of £9 for Librium and £20 for Valium for the many hundreds of pounds which are attributed under that item to the cost of ingredients. It then in effect said that it would take the 14 per cent. basic contribution towards group "R and D" costs. It made those two changes in Table 2 of Appendix 5, to which my noble friend Lord Diamond referred, and by those drastic reductions produced the result that the company's profit in respect of Librium was 55 per cent. and in respect of Valium was 61 per cent. I do not dispute that those are very high profits. In so far as the Report relates to anything else into which the Commission inquired, other than this

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allocation of group "R and D", I would not seek for a moment to advise your Lordships to challenge the Report. However, I submit to your Lordships that it would be right that there should be one more look at the allocation of group "R and D" expenditure.
I hope that your Lordships will not feel that I waste the time of the House if I cite from the Report in order to indicate clearly the contrasting views about this matter which are very clearly brought out. I should like to read from paragraphs 222 onwards of the Report and I hope your Lordships will bear with me, as I think these paragraphs bring out the issue very clearly.
"Roche Products has asserted most emphatically that every relevant authority in this country accepts that the whole current research expenditure of a pharmaceutical manufacturer, whatever its amount, is properly chargeable as a cost of current sales."
That was the company's argument. The Commission say:
"We accept that the Roche Group's practice in this respect is in accordance with the general practice of pharmaceutical manfacturers in this country and, so we understand, elsewhere. But while we also accept that there are, in general, sound reasons for adopting the practice, we think it can lead to abuse in extreme cases and that this point has been reached in the present case."
Then there are some rather important general reflections. The Commission say:
"Research is an essential activity in the ethical drug industry; but, except to a very minor extent, current research is not a cost of production or sale of the goods currently marketed. Research expenditure is largely speculative, being incurred in the hope of developing products for sale in future years. In general, it is financed out of the internal resources of the company, that is, from the difference between total revenue and the total costs of supply of current products.
It has accordingly been argued that in principle research expenditure, like expenditure on plant and machinery, should be capitalised and subsequently be written off as a cost of sales of the goods developed by the research over the years when they are actually marketed. But a high proportion of research in this industry is abortive, and it cannot be expected that successful innovations will be developed regularly over the years or have a foreseeable relationship with the research effort measured in terms of expenditure. We accept therefore that there is a practical case, on grounds of normal commercial prudence and perhaps also of encouraging innovation, for charging research expenditure against sales as it is incurred. But the effect of the practice
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is that current consumers pay for possible benefits which may be enjoyed by future consumers. If the practice is to be followed, either market conditions must be such as to bring sufficient pressure to bear upon the prices concerned to discourage any unreasonable and cumulative increase in research cost, or the pharmaceutical manufacturers concerned must exercise self-restraint in the pricing of successful products."
The Commission found, and I respectfully agree with them, that there were not adequate competitive conditions in the case of the pharmaceutical industry to cause restraint to be exercised. The situation was that Section 41 of the Patents Act enables compulsory licences to be granted to would-be manufacturers in return for a royalty to the patentee. Two companies, D.D.S.A. and Berk Pharmaceuticals, obtained licences to sell drugs manufactured in accordance with the petitioning company's patents. Berk Pharmaceuticals put on the market a drug called "Atensine". From May, 1972, the petitioning company reduced its prices in order to keep pace with the lower prices charged by Berk Pharmaceuticals for its drugs, to the extent of 36 per cent. By so doing, it managed to retain 99 per cent. of the market. So I think the Commission are right in saying that real competitive conditions did not exist.
The Department of Health and Social Services does its best to bring to the notice of doctors other possible drugs that they might use, but again it was apparent that that did not have any compulsive effect in this case. Adequate competitive conditions did not prevail. I should add that the patent for Librium runs out in 1975 and for Valium, which is the more potent of the two, in 1976.
That is the picture. The Report continues: "Where a company in a science-based industry exercises considerable power without restraint, that power may be manifested either in excessive profits or in excessive research expenditure, or in a combination of the two, depending on the preference and policies of the management. In the present case a large proportion of the high profits obtained appear to have been retained in the business and devoted, in part at least, to expansion of the research establishment."
That is a matter of criticism in the Report, but I doubt whether it should be a matter of criticism. The human body

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is so frail that it is in the general interest that more and more should be paid out in research by companies ready to risk that payment. I myself would have taken a different view from the Commission on this point. That influenced me in feeling that I should come to the conclusion that, on a balance of probability, there was more than a marginal under-allocation. I quote again from the Report, paragraph 224:
"Thus the current cost of research is higher than it would otherwise have been as a direct result of the high prices charged for the drugs currently marketed. We do not accept that, in the virtual absence of price competition, there is no limit to the price and profit levels a manufacturer is justified in setting himself, as long as he uses the proceeds to expand his research."
As a general proposition I would not seek to fault that observation. Clearly, there could be an utterly irresponsible board which might take unjustifiable risks and waste, in an irresponsible way, money on "R and D" expenditure. Nothing that I saw in what was placed before me seemed to make it clear that I should draw any such conclusion about the behaviour of the Swiss-Canadian board. I had no reason whatever to think that it did not exercise a sound judgment in trying to determine the proper level of "R and D" on which it should embark in the United States, in Switzerland and in Welwyn in this country.
LORD DAVIES OF LEEK: My Lords, I have listened with interest to the noble Lord, but he should turn to paragraph 156 of the Monopolies Commission Report on these two drugs. The noble Lord has spoken of research. The Commission were fully acquainted with this and that is why they asked for the following facts:

"(i) the value of world-wide sales of ethical products;

(ii) the value of world-wide research costs for ethical products;

(iii) the world-wide sales of chlordiazepoxide and diazepam respectively by value;

(vi) the world-wide sales of chlordiazepoxide and diazepam respectively by weight (kilograms)".

But they were refused. How, therefore, can we say that we know what part is being given to research? The research may be into cuckoo clocks for all we know.
LORD STOW HILL: My Lords, I went out of my way to say that I thought that the company itself was open to criticism. I accept at once that the information wanted was not given; I am only too conscious of that. I repeat that I think Sir Ashton Roskill showed the greatest patience and thoroughness and that none of the criticisms made against him stands up to inquiry. If there is room for criticism it should light upon the shoulders of this company. I repeat that. It is perfectly consistent with my argument. There was a great deal of criticism of the D.T.I. and of the Minister, but none of that criticism assisted me in the least, except to a very marginal extent in arriving at the conclusion which, rightly or wrongly, I thought I ought to reach.
If that is the issue between the parties —that is a misnomer because the Commission are not a party—but if that is the contrasting view, where does it leave one? The Commission say that there is a limit beyond which a manufacturer is not justified in embarking upon research expenditure. In this particular case, although the profits were retained in the group, they were used to some extent to expand the scale of research. It is a very good thing that they were.
There was a subsidiary argument, on which the Commission ruled against the petitioning company's view. The price of Librium and Valium in this country is just over one-half the price charged in other developed countries. I think we were told that Turkey is the only country in which they can be bought at a price less than the price charged in this country. The argument on behalf of the petitioning company was that the allocation of group R and D should be by reference to world average prices instead of world sales. I shall not go into the details of the argument one way and the other, but it was rejected by the Commission. I myself doubted whether they were right in rejecting it, at any rate without fuller inquiry. That is how the matter stood. The Commission said, "There is a limit beyond which you must not go, and in this case you have gone beyond it".
LORD HALE: My Lords. I have never interrupted the noble Lord before, and I hesitate to do so now, but there is an

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inevitable result of his argument. If the words, "substantial ground of complaint" are interpreted as he is interpreting them; namely, that it seriously affects the operations of the petitioners, then every Report of the Monopolies Commission which recommends restrictive action and which inevitably affects one company or another or one group, will, after a year of labour, be subject to review by the Special Orders Committee of the House of Lords who will find themselves constrained to appoint a Select Committee, thus defeating the object of the legislation.
LORD STOW HILL: My Lords, with all the emphasis that I can command I say that the answer to that question is, "No". I am saying that the substantial ground of complaint, if there is one—if I am right in my view that on balance of probability there is one—is that the Commission's recommendation makes more than a marginal under-allocation in the prices which they recommend for group "R and D" expenditure. If they made only a marginal recommendation, I would say that that is not a substantial ground; it must be more than a marginal allocation. In bringing out the profits, which they do, of 55 per cent. and 61 per cent., if I have understood their thinking correctly, they have taken only the basic contribution of 14 per cent. as being appropriate to inclusion for the purpose of computing the prices. I can only say to my noble friend, for whom I have a deep affection, that in this case my affection does not prevent me from saying other than a very brusque, "No".
That being so, what is the general situation that confronts us? It is common ground that this is a research-based group. If one looks at paragraph 44 of the Report, it says:
"According to the NEDO Report Focus on Pharmaceuticals, the Roche Group's R and D expenditure was estimated as amounting to some 590m (about £38m) in 1970."
That is a very large amount. If one turns to page 3 of the publication to which the paragraph refers, Focus on Pharmaceuticals, one sees where they get that statement. Page 3 gives a list of 41 of what are described as selected companies in the pharmaceutical industry ranked by pharmaceutical turnover in 1970. Roche is shown there as spending
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90 million dollars, as the Commission's report stated. It is fourth in "R and D" expenditure in that list of 41 companies. I notice that Imperial Chemical Industries spend more—I think 123 million dollars. So one starts with the position that this is an extremely soundly research-based group; it spends a great deal upon research. That is money out of pocket, and I assume that it is money that is not recklessly spent, as I have said.
I have already said that the sale price of Librium and Valium in this country is something not much above half the price charged in other developed countries. One then has this swingeing recommendation by the Monopolies Commission of a reduction of the 1970 prices to 40 per cent. for Librium, and 25 per cent. for Valium. One knows, from the approach of the commission to which I have referred, how it has reached the conclusion that the company made these profits of 55 per cent. and 61 per cent. in respect of these two drugs. If there had been a larger allocation the profits would have been proportionately less. Bearing in mind that one of the reasons for that is as I have stated—namely, that they used their expenditure to enlarge the spread of their research—and that this is a limit which is imposed upon a group which, so far as I know, is an active, commercially sound group of companies, I am told that it must have its profits assessed upon the basis that only the basic contribution of 14 per cent. is to be taken into account.
Other documents were put before us for consideration. One was that of the Committee of Inquiry at which my noble friend Lord Sainsbury presided. He, in Chapter 6, examined very carefully the character of the expenditure. I derived great help from reading what he said in Chapter 6. I should like to refer your Lordships to three short passages from Chapter 6. The issue is put very clearly in paragraph 180:
"We are aware that there arc those who feel that research expenditure is not always a valid reason for higher prices than can be justified by manufacturing costs because the 'research' in question is often undertaken with little therapeutic justification."
That is one.
"On the other hand the industry's research, at least that of the major companies, has not lacked defenders, including scientists of great eminence. They claim that the research efforts

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of the industry have resulted in the discovery and introduction into therapeutics of many if not most of the effective medicines now known. They also claim that research in this industry is exceptionally risky because only a small proportion of the many substances made and tested become successful products and because even these arc likely to be superseded by better ones before the research expenditure has been recovered."
My Lords, that is a statement of the issues. The Report covers the period 1965 to 1967 and was presented in September, 1967, and I infer that the situation has changed. Paragraph 188 states:
"Although the foreign-owned companies together account for over 70 per cent. of the sales to the National Health Service most of those companies carried out little research in the Unite.; Kingdom until comparatively recently. But in the last few years an increasing number of them have established research organisations in Britain. The leading foreign companies have, however, very large research establishments abroad. It has been stated that expenditure on research and development by United States companies amounted to well over £100 million per annum, and by Swiss companies to over £20 million per annum. These figures greatly exceed the research expenditure of British companies and there may he other countries which are spending more than the United Kingdom on pharmaceutical research."
Towards the end of that chapter there is a reference which I should like to quote. Paragraph 211 says:
"The idea persists that most research which leads to new medical products is done in the universities and that the pharmaceutical industry lives by exploiting other people's inventions. Although the drug industry has unquestionably carried out the commercial exploitation of a number of important medical discoveries made in the universities and similar institutions, it is far from being wholly or even largely dependent on the universities for basic research. The great advances in therapeutics during the past few decades have revolutionised the practice of medicine and it is important to recognise the major part played by the pharmaceutical industry in this."
I think I need read no more than that.
"The list of drugs in present use which have been discovered in university departments, although some are very important, is quite small, probably because research directed to this end is not regarded as one of the prime functions of a university department."
Against that background I came to the conclusion, on balance, that there was more than a marginal under-allocation of group "R and D", and that therefore there was substantial ground for complaint that that had been demonstrated on a balance of probability and that there
1610
fore, in all the circumstances, we should consider whether there should be a further inquiry—an inquiry limited to this very narrow aspect of the case, certainly not to reopen the whole issue.
The noble Earl, Lord Listowel, pointed out that the recommendation is so framed that the Select Committee can decide their own procedure, and arc in no way involved in anything except a limited inquiry into this particular aspect of the matter. I have not the least doubt in thinking that whether I was right or wrong in deciding, on the balance of probability, whether there was a substantial ground of complaint, such an inquiry, particularly in view of what my noble friend, Lord Diamond, said, would certainly he in the public interest. I feel that it is an excellent case in which the skill of accountants, in trying to work out some sensible formula—if it can he worked out—should be practised. My Lords, it is for those reasons—and I apologise for taking so long—that I support this Motion.
12.38 p.m.
LORD FLETCHER: My Lords, I thought that I had a duty to your Lordships to explain briefly the reasons which led me to a different view from that which has just been expressed by the noble Lord, Lord Stow Hill. If I may say so with great respect to him, nothing that he has said this morning—some of which I have heard before—has led me in any way to change the view which I expressed in the Committee. I felt that it was more incumbent upon me to express the reasons for coming to my conclusion, because the noble Earl, the Chairman of Committees, who took the same view as I did, is clearly inhibited from giving his reasons.
May I begin by saying that in so far as Standing Order 216 is a matter of comment, I take the view that whatever else may be said about the procedure under Standing Order 216 (and I leave open the question whether it requires any amendment) although in some senses it is a constitutional curiosity, it is a very useful piece of constitutional machinery which, in appropriate cases, which are few and far between, enable a subject—and not only a subject, because here we are dealing with a Swiss company—with a legitimate grievance to have that grievance ventilated in this House in a way that,

1611
for some reason, is not available in another place.
Having listened to the arguments for five days, I thought that the final question under Standing Order 216 was whether the Petition disclosed a substantial ground of complaint: that, and that alone. I came to the conclusion that no substantial ground of complaint, or, indeed, any ground of complaint, had been made out by the petitioners that would justify this House in referring the matter at large to a Select Committee, which is all that is contemplated by the Standing Order, or the particular aspect of it which, as the noble Lord pointed out, involves certain procedural difficulties if there were a Select Committee set up.
It became apparent during the course of those five days' argument that a great deal of the criticism made by the Roche company was due to the way in which the Monopolies Commission had operated their inquiry. I took the view that whatever one may think about the Monopolies Act and the way it operates, and if one concedes, as I concede, that there could be some technical objections to the procedure of the Monopolies Commission in general, one has to remember that the Monopolies Commission and their procedure is pursuant to an Act of Parliament. It does not seem to me right to use the opportunity of this Order to call in question the general operations of the Monopolies Act.
I first of all thought, that we were not supposed, in the Special Orders Committee, to go into the merits of the matter, but it was inevitable that counsel on both sides went most deeply into those merits. The longer the case went on I came to the conclusion, although it is probably not appropriate in this limited debate to say so, that when the Order itself came up for decision in this House, I should have no hesitation in supporting it.
LORD STOW HILL LORD STOW HILL: The Amendment?
LORD FLETCHER: My Lords, I am talking about the order made by the Minister. It also emerges, as Lord Stow Hill has quite frankly said, that the only possible point that could give rise to doubt was whether the Roche Company had allocated an excessive amount on research and development. I take the
1612
view that in the final analysis that is not a matter for judicial decision, but for political determination. I came to the conclusion that even if, following the majority recommendations of the Special Orders Committee, this House were to set up a Select Committee to inquire into that limited aspect of the matter, this would, under a procedure which is very difficult to visualise and which although designed to be limited, inevitably would lead to a very wide and prolonged debate before any Select Committee. Suppose that Select Committee came to a different conclusion from that of the Monopolies Commission as to how much should be spent by the Roche Company on research, why should any of your Lordships think that that conclusion was more weighty or valuable than the conclusion reached by the Monopolies Commission? I do not believe that any of your Lordships would contemplate a state of affairs in which a Select Committee of this House was set up for the purpose of virtually acting as a Court of Appeal over a recommendation of the Monopolies Commission. That would be completely inconsistent with the object of the Standing Order and contrary to the spirit of the Monopolies Act procedure.
There was a case some years ago of the Solus Order which arose in a peripheral form from a Report of the Monopolies Commission, where Standing Order No. 216 served a useful purpose. In that case, a commercial company had a grievance, not about the Monopolies Report in general but on one limited aspect of it. As a result of the Select Committee set up in that case on the recommendation of the Special Orders Committee, a compromise solution was reached between the Minister involved and the commercial company involved which removed that sense of injustice.
In the case we are considering, that of Roche, the final question must be this: granted that it is the case of a very large and successful group of companies, working internationally and supplying drugs throughout the world, supplying a drug which, if taken in isolation, is worth only a fraction of the price charged to the public or to the National Health Service, who is to be the judge, the company or Parliament, as to how much of those fantastic profits should be spent on research and development? Granted the

1613
necessity of a pharmaceutical company of great repute and world-wide renown to apply a large part of their profits on research in order to eliminate any kind of risk comparable to that which occurred in the case of the thalidomide children, one must either decide to let the company have an unfettered discretion as to how much of its funds should be used on research, involving as a consequence inflated charges to the British and other people throughout the world, or some other body must decide the matter.
In this case I came to the conclusion that, with respect to any Select Committee that your Lordships might decide, pursuant to the proposal of the majority, to set up, I very much doubt whether any recommendation of any such Select Committee would command at least the same measure of respect as the decision reached by the Monopolies Commission. Granted there could be differences of opinion, granted that ten different accountants or experts might come to a different conclusion, finally Parliament would have to decide. I could not overlook the political implications of this matter nor the fact that when the Minister's Order was debated in another place it was received with complete enthusiasm by representatives of all three Parties.
When the noble Earl, Lord Limerick, announced in this House that the Minister was proposing to make an Order, it was also received with considerable enthusiasm. I could not overlook the fact that because the first Order has lapsed and a second Order, in similar form, has been laid to repeat it, that Order comes in due course before the House of Commons for approval. At that stage, Members of the House of Commons will have the opportunity, if they so desire, of reading the whole transcript of the five days' evidence of the Special Orders Committee. They will also have the advantage, if there were a Hansard Report—which appears doubtful—of noting what your Lordships' have had to say as a result of your Lordships' discussions of that five-day inquiry brought before the Special Orders Committee.
One must look ahead and visualise, but I have no doubt that the House of Commons over and over again will approve this Order when it comes up for their approval, month after month, if we go through the course suggested by the
1614
majority of having a Select Committee with its inevitable delays and its eventual report and then a decision in this House. One must realise that at that stage this House, which will have to make its final political judgment on this matter as to whether it approves a Minister's order or not, will be familiar with the fact that the order, or similar orders, have been repeatedly approved with great enthusiasm in another place.
Notwithstanding those observations, I still feel that if the subject had any real grievance, your Lordships ought to direct a further inquiry. One of the primary purposes of this Standing Order, however, is to ensure that there has been a full inquiry. It is true that the terms of the Standing Order contemplate departmental inquiries, but no one can imagine that those words exclude an inquiry by the Monopolies Commission which, by definition, is almost more extensive, better informed and probably more authoritative and independent than any departmental inquiry. Therefore no one can say that there have not been the fullest possible inquiries into this matter.
As my noble friend, Lord Stow Hill, was frank enough to say, in so far as certain matters were not brought to the attention of the Monopolies Commission the fault lies with the company, because they withheld their evidence which, as they now allege, or seem to allege, if it were of value might have induced the Monopolies Commission to allow them to charge a somewhat higher price for their particular drugs than they will be allowed to charge. Therefore, although I appreciate that it may be contrary to most precedents for your Lordships to ignore a Majority Report of the Standing Orders Committee, I think that, in the particular circumstances of this case, bearing in mind the narrowness of the majority and bearing in mind—if I may say so, with great respect—the rather half-hearted commendment of the amendment of the original proposal by my noble friend, Lord Stow Hill, I hope that your Lordships will unhesitatingly support the Amendment moved by my noble friend, Lord Diamond.
12.52 p.m.
LORD REAY: My Lords, before I come to consider the substance of this case—and I hope to give the main reasons why I voted with the majority in

1615
the Committee on this question—I must protest, and strongly protest, against the fact that last night an Amendment should have been tabled by the Leader of the Opposition the effect of which is to reject this Report of the Special Orders Committee. To table an Amendment of this importance late in the evening—I learned of it only by coincidence before I left here at about 7 o'clock—fora debate scheduled to start the next morning at 11 o'clock, and that day being a Friday when most Peers are not present and will not learn in time to be able to adjust their arrangements, really seems to be an unacceptable practice.
LORD SHACKLETON: My Lords, the noble Lord was aware, and so was the House, that there was to be a debate. He was aware—as I think every noble Lord who takes an interest must have been aware—that there was likely to be a Division. The only effect of this Amendment is to give three choices to the House instead of two. I was procedurally advised that it was for the convenience of the House to do it.
LORD REAY: I believe that there were certainly no objections and that it was quite in order to do it, but I am not sure that it is correct to say that it was expected that there would be a Division—certainly not so far as I am concerned. I had no knowledge of this until yesterday. That is not a sufficient explanation.
It is not as if this were an ordinary Amendment: it is not even an ordinary wrecking Amendment. It is an Amendment that invites the House to depart from one of its most traditional practices, as the noble Lord, Lord Diamond, said. There has been no occasion that I can trace when a recommendation to this House from the Special Orders Committee to set up a Select Committee has been opposed. Within the last ten years there have been two such recommendations—arising from the Solus Petrol Order and the Welsh Rural Development Order—and they were not opposed. On no occasion that I have heard of, at any rate since the war, has a Report from a Select Committee on an opposed Private Bill been opposed in this House. The House on all these occasions has accepted the Report of the Committee of its own
1616
members to which it delegated the matters for decision.
I could understand a challenge to this tradition. I agreed with a number of points that the noble Lord, Lord Diamond, made about the sovereignty of this House, and so forth, but in that case the House as a whole should have had proper warning that a challenge to what was hitherto accepted practice was being made. I find it difficult to believe that responsible noble Lords opposite could have properly thought out the implications of pressing the Amendment. I must ask them, therefore, to withdraw it.
LORD BROWN: My Lords, are we to understand that the noble Lord is suggesting that this House, simply by tradition, must rubber stamp the recommendations of this particular Committee? I, for one, would totally reject such an argument.
LORD REAY: I am certainly not suggesting that. If the Amendment had been put down at the beginning of the week I should have had no objection at all to this convention being challenged on this issue to-day. I do not wish to pose as an injured party, but to ask seven Peers to sit in Committee for five days to reach a decision, and then to invite the House without warning and against precedent to reject their Report, is a proposal that I find unsatisfactory. We do not know what other noble Lords might have been here if they had been aware that this challenge was to be made.
It had been my intention to make some observations about various matters of procedure, arising out of our experience on this Committee, where improvements to existing practices could perhaps be introduced. But as the week progressed and the list of speakers grew, particularly towards the end of the week when the great guns of the Opposition were rolled out from their camouflaged positions, it became evident that the issue was narrowing and a certain concentration of resources was required. Accordingly, I shall deal with only one such question because it alone has a bearing on the rest of the discussion, and that is the matter of our terms of reference as set out in Standing Order 216, paragraph 6. It seems plain to me that those terms of reference in no way restrict the Committee from regarding the factors it

1617
should take into account in reaching a decision.
First, as the noble Lord, Lord Stow Hill, pointed out, the Committeeare simply asked to consider whether or not the petitioners have "substantial grounds for complaint". That is unqualified: no type of complaint is excluded. Secondly, sub-paragraph (b) reads:
"whether the matter has been so dealt with upon a departmental inquiry that further inquiry is unnecessary".
Even if that had applied in this case, the phrasing is such that objections to any aspect of the character of that inquiry could have been considered by the Committee. Thirdly, the phrase "to have regard to the other circumstances of the case" amounts to a final permission to the Committee to use their own discretion in picking the criteria according to which their decision should be made. In other words, it seems plain that no considerations are excluded by the Standing Order. They are not restricted to deciding whether the petitioners have already been heard sufficiently fully or fairly, but may consider whether the recommendations are wrong, whether the means by which they are reached are unconvincing, or any other objections.
I did not understand in Committee and I do not understand to-clay the argument of the noble Lord, Lord Fletcher, that it was not our business to question the merits of the Monopolies Commission's Report. If it had been enough to satisfy ourselves that no further inquiry was necessary on the grounds that the Monopolies Commission had gone into the matter at sufficient length, it would hardly have been necessary to sit for five days. Indeed, it would hardly have been necessary to convene the Committee at all. The necessary information could have been gathered in a single visit to the Printed Paper Office.
And what more substantial ground of complaint could the petitioners have than that the recommendations of the Monopolies Commision were wrong, or that they needed further inquiry before the Committee could be satisfied that they were right? In practice, the view that there could be no restrictions on what was considered by the Committee prevailed, because counsel, who held the initiative, were never inhibited from covering whatever ground they chose. To
1618
speculate about what the intentions of Parliament must have been or should have been is a metaphysical exercise, unless these are clearly expressed in Standing Orders. The noble Lord, Lord Fletcher, may be quite right in his opinion that the Special Orders Committee should not act as a court of appeal against recommendations of the Monopolies Commission. It is possible that a majority of this House, or a majority in Parliament, might support him in that view; but if that is correct, if that is Parliament's intention that the Special Orders Committee should not operate in that way, Standing Order 216, paragraph 6, needs to he entirely recast.
In coming to the substance of the case, I should like to make it plain that what I say, even though I was a member of the majority on the Committee, must be taken as being said on my behalf alone. Even our slender majority cannot be shown to have shared any opinion save that expressed in the terms of our Report to this House. The only remark I should like to make about my colleagues as a body—and 1 address this particularly to noble Lords who sit on the Back Benches opposite in case they should feel intimidated by the intellect and solidarity of their own Front Bench—is that the Party opposite had a majority on this Committee. There were four members out of seven of the Party opposite on the Committee and two voted one way and two Voted the other way. I hope that if we arc to have a Division this afternoon noble Lords opposite will show the same admirable disregard for Party considerations and orthodox political reactions, and in the meantime that they will feel strengthened by this reflection to consider this highly complex question with all the impartial attention that it requires.
But there is something more that I need to add by way of introduction. First, as the only other member of the majority, apart from the noble Lord, Lord Stow Hill, who is present this morning, and in the presence of a Government which I can at best expect to be neutral, I shall be speaking at greater length than usual. Secondly, I should state that my own objections to the Monopolies Commission's Report, as I shall show, go wider than the terms of our Report to this House, but I supported the restricted terms of our references to a Select Committee

1619
partly because I could see the value, after our own experiences, of restricting the gaze of a Select Committee to a single issue, and partly because, of all the issues at stake, the question of research costs is the most important.
The claim was made by the company —and it was not contested by the Department—that the effect of the Monopolies Commission's recommendations would be to reduce the revenue of the Roche group from sales in the United Kingdom to one-half of their present value, other things being equal, and, if the prices adopted here were to be followed in other countries, to reduce their world revenue to one quarter of its present value, other things being equal. The magnitude of this effect is explained by the high current dependence of the group on sales of the drugs in question: 70 per cent. of their world turnover in drugs is in Librium and Valium. The proportionately greater effect on world revenue, rather than on domestic revenue, that such price reductions would have is explained by the much less well-known but equally unchallenged fact that prices paid by the National Health Service for these drugs prior to the recent Order were less than one half of the world average price paid, the range being quite wide: Switzerland paying one-third as much as the United Kingdom for Librium and almost twice as much for Valium; the United States paying two and a half times as much for Librium and almost four times as much for Valium.
It is hardly to be expected that other countries would tolerate for long a situation in which the United Kingdom paid one-seventh and one-ninth of the price those countries were paying for the same drugs, and that is the situation that would exist if prices paid by other countries remained as they have been and prices here were those set under the Order. So, on the face of it, there can be no doubt that the future of the groups, with all the research expenditure to which it is committed, must be most seriously threatened by the Governmental Order which followed the Monopolies Commission's Report.
The question therefore is, is this country justified in choosing to reduce from a low level to an almost negligible
1620
level, by comparative international standards, the amount it contributes to Roche's future research? What will it risk foregoing as a consumer if it does so? What harmful national consequences may follow, both with regard to attracting and retaining pharmaceutical investment in this country and with regard to retaliation that can be taken against British companies who follow the same practices? And, finally, do the principles of justice which we like to follow, if not set, justify us in picking out one company from among many in the industry simply to demonstrate that State power and British power is greater than private power and foreign power?
I think it would be true to say that everyone on the Committee felt that by their persistent and even obstinate refusal to disclose certain information, and by the manner with which in their correspondence with the Department they had apparently sought to act as equals with the Department, imposing conditions on discussions, breaking off discussions when those conditions were not met, and so on, the company had provoked the reference to the Monopolies Commision and had provoked much of the aggression which the Monopolies Commission display in their Report towards them.
How much the secretiveness of the company derives from Swiss traditions I should not like to say. How far disclosures fall behind practices in other countries I am not familiar enough with company law to know. But it is a dream these days to imagine that one can on the one hand enjoy the protection of national patent law and the tolerance or support of a purchaser in a monopoly position like the National Health Service, and, on the other hand, refuse to permit the penetration of national Governments into a greater knowledge of one's affairs, and if necessary into some measure of control over one's expenditure.
I should not expect, and I am not certain if I should wish, Roche to get any redress from the Select Committee if, as I hope, a Select Committee is established or any greater generosity from the Government, if they do not appreciate and respond to these demands of our time. Figures hitherto withheld must be produced. Respect, correspondingly, must be shown for any reasonable

1621
request not to publish what the company does not wish to have published. Hitherto at critical moments they have shown themselves unwilling to co-operate. They acted at such moments as if from strength. The challenge was accepted and they were answered in the same style. But, having said that, I think it is legitimate to wonder whether an aggressive response by the Commission to an unconstructive position taken up by Roche is a sufficient way to deal with this complex problem.
About research, I do not wish to add much more to what I and the noble Lord, Lord Stow Hill, have said, except to point out that the principle of protecting the company that does research from the companies that do not is embodied in our patent law, and to remind noble Lords that the Banks Committee concluded that patent protection should be extended, not reduced, from 16 to 20 years, in line with international trends. This recommendation has not, or not yet, been enacted.
They also recommended the repeal of Section 41 of the Patents and Designs Act 1919, the compulsory licence provision, on the grounds, and I quote, that:
"… the benefit which may accrue to the public through the licensing of an alternative supplier does not outweigh the discouragement to research inherent in a system which may deprive a successful researcher of a part of his expected return."
In 1972, the "Neddy" publication on pharmaceuticals, to which the noble Lord. Lord Stow Hill, has referred, urged the Government to implement these recommendations as soon as possible. "Neddy" also urged the Government to recognise that the maintenance of prices of prescription medicines substantially lower in this country than in other countries could, whilst benefiting the National Health Service in the short term, have adverse lone-term effects upon the flow of new products. In particular, they were concerned that research into drugs for diseases common in poorer countries, and for the rarer diseases in richer countries, would be curtailed. My Lords, it is no contribution to this problem to cut drastically the revenues of one of the principal research-based drug companies in the world.
I should like also to add that "Neddy" was alarmed about the abnormally low level of prices paid by the National
1622
Health Service for its pharmaceutical products, not only because of the possible future effects on research. Let me quote this from page 80 in their report:
"Since the United Kingdom is currently one of the lowest-priced markets for drugs, multinational companies with a choice of production locations are beginning to take the view that the United Kingdom is not a good base for the supply of pharmaceuticals in final form to countries where the price is linked to that in the country of origin. This factor may tend to reduce investment in the United Kingdom if the United Kingdom remains one of the lowest-priced markets for a sufficiently long period to affect investment decisions."
May I, in addition, quote this from the same page:
"Currently pharmaceutical investment in the United Kingdom is continuing to grow. However persistence of the apparent current lack of alignment of prescription medicine prices in the United Kingdom with those in comparable overseas markets, in so far as this affects profitability and the assessment by pharmaceutical companies of their future prospects, could cause a reduction in the share of new investment located in the United Kingdom".
So there were various grounds for being disturbed about the level of prices paid by the National Health Service for its medicines even before this Order to reduce them in this instance was made. I do not believe, either, that the Commission justified their conclusion that:
"Some of the cost figures referred to—in particular those for research and promotion costs"—
they were referring to cost figures given by the company—
"grossly exceed the levels which should be taken into account to arrive at fair prices".
On the question of promotion costs, I could understand the view that too much was spent by the industry generally on promotion. But the Commission certainly did not succeed in showing that Roche as a firm spent on promotion out of line with firms of comparable size. Moreover, the whole question of promotion is complicated and badly studied. For one thing, the most expensive element in promotion is the maintenance of a system whereby representatives of large companies visit doctors annually throughout the country. We need to know whether or not this is of benefit to medical practitioners and medical practice.
Nor do I believe that the Commission's brief dismissal of possible cost increases

1623
was sufficient. All the Commission produced on the subject was a footnote, which in its entirety reads:
"We have no reason to think that cost increases since 1970 should significantly affect the general picture."
Let me quote again this from the same "Neddy" publication:
"The cost of research and development per project and the time taken to develop the marketing of product candidates have increased very substantially in recent years."
Moreover, everyone knows that that must be the story, given the intense public concern about toxicity, and the precautions required as a consequence of this concern, and the labour intensive character of highly skilled research.
My Lords, I do not wish to adjudicate. I am not in a position to adjudicate between the conflicting conclusions of separately appointed public bodies, but I must say that it is most difficult to accept the right the Monopolies Commission felt they had to ignore considerations which have been of such concern to others who have been appointed to study the problem. That in itself, I suggest, is sufficient reason to postpone final judgment on the Monopolies Commission's conclusions.
To conclude, I should like to say this. The course which was embarked on when these drugs were first referred to the Monopolies Commission had dangers which I am not certain have yet been appreciated. We have in this country a vital pharmaceutical industry which in recent years has been producing an increasingly favourable balance of payments, and which can certainly expect to enjoy Governmental support in maximising its overseas prices. On the face of it, since the company under attack is Swiss and Switzerland has a small home market, the risk of serious direct retaliation may have seemed insignificant. But it is at least questionable whether, for the sake of a relatively small additional saving on our import bill and to our National Exchequer, we should have opened up a question when we were doing relatively favourably as things were, and when a greater rationalisation might bring others more benefit than it brought ourselves.
Having opened up the question, I think we should pursue it. Counsel for Roche
1624
gave some indication that they hoped the Select Committee might recommend a Royal Commission. It was not up to us as a Committee to recommend this solution to the Select Committee, but for my part I should now welcome this outcome. The extreme complexity of the subject, the areas of ignorance, the clash between public emotion and public interest, the different sources of public emotion—whether originating in a dislike of the idea of waste, including a waste of national resources involved in promotion, or a desire to control the profits of private business—the conflict between this desire to control the profits of private business, on the one hand, and the facts of international competition, on the other: all these combine to produce the formidable problem which will require many years of study, discussion and historical development before a situation is reached in which present demands and future needs are reconciled and in which the need for research is recognised and honestly and rationally supported.
The last thing we should do is what this Amendment requests us to do. For this Amendment invites us to believe that by confirming our willingness to damage a foreign competitor we are somehow doing something of constructive value. Whereas, I respectfully submit, it is the Report itself which, by offering a possibility of a continuing public inquest, alone Rives us the chance of attaining any worthwhile solution to a problem that will in any case be with us for years to come.
1.18 p.m.
LORD SAINSBURY: My Lords, having studied the Monopolies Commission Report, and much of the evidence presented to the Special Orders Committee, it seems to me that the principal point of difference between the Commission and Roche is the treatment of research expenditure in relation to pharmaceutical prices. As Chairman of the Committee that spent nearly two and a half years examining the relationship of the pharmaceutical industry with the National Health Service, I am aware of the difficulties inherent in the examination of this problem. Nevertheless, an attempt must be made to answer certain key questions. What is Roche's total research expenditure? Does it seem reasonable or is it seemingly an inflated figure? Is

1625
it in line with accepted norms in the industry? If it is not, are there any special justifications for it?
The Monopolies Commission, despite Roche's unwillingness to provide some essential data, attempted to answer some of these questions before coming to a conclusion. I am aware that counsel for Roche appearing before the Special Orders Committee claimed that the Commission's figures had been shot clown in flames. However, judging by the examples he gave to the Committee I do not consider that this claim is in any way justified. The fact is that the Monopolies Commission estimated in 1970 that Roche Products Limited had allocated more than 20 per cent. of its revenue from the sale of ethical pharmaceuticals in the United Kingdom to the group's research and development expenses. Those figures may be checked from Table 1,'Appendix 5 of the Monopolies Commission Report. Furthermore, the company claims that additional research costs are charged in the inflated transfer prices that the British subsidiary pays to the Swiss parent.
It is quite clear that even if one ignores this additional charge, Roche's research percentage is very much higher than for most other large pharmaceutical companies. In fact, a report by the Little Neddy" for the chemical industry said that a range of 7 to 12 per cent. is one which experience has shown to be inadequate to produce a sufficient flow of new drugs to provide future profits without jeopardising cashflow in the present. Therefore, the difference between Roche's research expenditure and that of comparable companies is truly spectacular. This, in my view, requires special justification.
In the course of our inquiries into the relationship of the pharmaceutical industry with the National Health Service we received some evidence which showed that, while research expenditure under a certain minimum is unlikely to yield significant results, there is also a maximum above which research and development yields diminishing returns. Of course, it is very difficult to determine with absolute certainty where this maximum lies. However, as Roche claims to spend considerably more in relative terms than other companies, it is in my opinion up to Roche to prove that its figures are calculated in an acceptable way and that
1626
its high level of research expenditure is justified. It is up to Roche to prove that there is no duplication or wasted expenditure and that the proportion of its research devoted to the circumvention of existing patents is not unduly high. It had every opportunity, but it failed to do so. It has even refused to reveal its total sales and research bill and to provide the information necessary to test its claims to the Monopolies Commission. This to my mind indicates that the company knew that its claims would be hard to justify.
In view of this, my Lords, I find the conclusions of the Monopolies Commission unchallengable. The Report makes a very strong case for not allowing all of the company's claimed research expenditure to be recouped through high prices. It also shows that the company has been making excessive profits, and there is no reason to suppose that the recommended prices do not make an adequate allowance for justifiable research costs. For these reasons, I strongly support the minority view of the Special Orders Committee. I do not consider that the setting up of a Select Committee to consider the upward adjustment of the prices recommended by the Monopolies Commission is in any way justified and I shall not have the slightest hesitation in supporting the Amendment in the Lobby if a Division is called.
1.26 p.m.
LORD DAVIES OF LEEK: My Lords, I am sure that the entire House is grateful to the noble Lord, Lord Sainsbury. We all know that had he so desired, after that important Report of which he was Chairman, he too could have taken about 50 minutes talking to the House. I hope that I shall take my pattern from his speech. I myself have gone through all the minutes of all the days' reports. I have never heard such a pejorative approach to the problem as that put forward by counsel Mr. York when I had the pleasure of listening to, and later the task of reading, the repetitive objections to the Monopolies Commission's findings.
The language was not the kind that I should have expected. As a Celt, if I were trying to persuade noble Lords opposite to vote Socialist, that is the kind of language that I might quite fairly use. But it was not the kind of language I expected in the quiet atmosphere of the

1627
Moses Room. Perhaps it was an appropriate room for them to meet in, with Moses on the wall bringing down the Tablets. But whatever Tablets Moses brought down, his commandments were far better than the ethical approaches of the drug company that counsel was trying to defend. I shall try to prove that as I go along.
The first question is the old cry: should drug companies tell all? I must declare an interest in a drug company, as a director of a very small firm which has also had a technological breakthrough in gastro-enterology. It is so small that everybody would laugh at it; our research and development is a "pipsqueak" amount. But I want to correct an impression given when impressive figures were quoted by the noble Lord, Lord Stow Hill. If he looks at page 23 of The Times Business Supplement of May 4 (and I was delighted that Lord Sainsbury mentioned that the optimum amount is about £120 million of sales) he will see that the largest firms are not necessarily the largest producers of major innovations. America spends ten times as much as Great Britain on research but produces only four times as much in therapeutically significant pharmaceutical compounds. In other words, Great Britain is two and a half times more efficient than the United States of America in its drug research. So let us eradicate the fantastic belief that the bigger the pot of gold you have for research, the more you will benefit mankind.
There is a lot of luck in research. I know of the work that is going on, while we are talking here this afternoon on a special drug. It has been going on for three years with no results whatsoever by first-class qualified biochemists, pharmacological research and other things. This is one of the risks that all companies face. But what the whole House is missing is this. We are dealing with two drugs which have a trade mark name. What the Commission was dealing with was the real basic compounds, chlordiazepoxide and diazepam. One could call them cuckoos if one wished —they could have been packaged up with a lovely picture of a cuckoo on the outside and saying, "This is a Swiss product called 'Cuckoo' and it is a marvel
1628
lous tranquilliser". And let me pay a great tribute. These two drugs which this famous Swiss firm have produced represent the finest tranquillisers in the world, with no teratological effects, so far as we can tell. They have not had the tragedy of the thalidomide distillers people. The side-effects are minimal and the drugs have brought great benefit to millions of people throughout the world.
Nevertheless, we are living in a world where more people stuff bottles of patent medicines down their throats than ever before in the history of mankind. Some of the neurotic approaches of Western man to his problems, as compared with that of Oriental man, have not been cured by the most famous drug companies and the most marvellous tranquillisers. We are trying to be sentimental about this. There were moments when I wanted to take a violin in to the Moses Room when I heard the appeal. We were supposed to be ruining Roche Products by asking for these reductions. What the Committee seemed to have missed while I sat in there was the fact that we were asking for reductions on the price as it was in 1970. The price now in 1973 is higher, and consequently the reductions are much less than one would have expected. The United States spends ten times more than Britain on drug research. Nevertheless, we are two and a half times' more efficient than that country in our research.
LORD BALOGH: My Lords, does the noble Lord realise that American expenditure is so high because American salaries, expressed in exchange rates at present, are three and a half times' ours?
LORD DAVIES or LEEK: Certainly, I know that. But the noble Lord has missed the point. It does not matter if it costs ten times as much, our compound output and our results of research are two and a half times better than those of the United States. That is the nub of the point. We are not concerned with what we pay to our Ph.D.s, immunologists, pharmacologists and so on. There is no need to argue further about that; it is a fact.
My next point is that there is no tax on research and development. So this nation is also subsidising research in another way. The income tax authorities do not draw any inland revenue on sums used for research and development. I

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could bore the House with masses of quotations, and I regret that some people have done this, but all the information is here in the Report for those who wish to study it. I regret that this is such a short debate, on a Friday. The Report gives details of the, research; it gives the number of doctors visited—more than 23,000 in Britain. It is all in the Report, as are details of the millions spent just in promoting a drug. "R and D" are two very difficult things. The world has not yet discovered a reliable method of deciding when research returns from a certain drug should stop. These are the horns of the dilemma on which we are impaled, and it is difficult to decide, particularly when a firm is so thick-skinned that it is not prepared to give essential data to the Government.
Paragraph 156 of the Monopolies Commission Report—which was quoted by the noble Lord who spoke so briefly but excellently—shows that essential data was not supplied. But the Monopolies Commission, doing its best without the data, arrived at the notional idea. When comments were made about Britain's approach to this matter Doctor Kenner was quoted. He used the kind of language that I would use on certain occasions when I felt in the mood. A letter from The Times of May 3 was quoted in which the Professor of Organic Chemistry at Liverpool University said
"The name of the game in Britain is apparently Soak the foreigner but don't pay his bills '".
He was so delighted with that phrase that he quoted it twice on the same page.
The implication is that the British people set out to soak the foreigner. The poor people who are taking these drugs and tranquillisers are sometimes psychotics, sometimes in mental homes. They are taking the drugs only because they are recommended by the medical practitioners. They are not taking them to "soak the foreigner". They, if they had enough sense to know what they were doing, would wish they did not have to take the drugs. One must take into account the social cost of the sick. The two drugs with which we are dealing make up 70 per cent. of all Roche's sales. We are asking that revenue from those two drugs be used for research for an undetermined period. That means that
1630
we are asking the sick and others to subsidise research. There is something wrong in this. I wish we could find an easy answer but we shall not find it by sending this matter to another Committee. There is no guarantee—and that was intimated by the Committee—that even when that new Committee meets it will get all the necessary information from Roche. It therefore behoves us, I think, to support the amendment put down by my noble friends.
There are seven faults in Roche's reasoning, as was beautifully pointed out by Professor Hart. You may remember their magnificent advertisement: £44,000 has been spent on it up to now. Dr. Marks, the head of the firm, as quoted in the papers last week, said that this would do good. He said it would give great publicity and increase the profits. I am not concerned with increasing the profits; I am concerned with getting a fair deal for Roche and for the sick and a fair deal for research in therapeutics throughout the world.
We are threatened that if they do not succeeed here they will take the matter to Brussels and the European Commission. It would be a wiser approach for the European drug people to get together to see how this dilemma of research can be solved. It is because I see no hope in the suggestion of the Committee, put forward by a majority of only one vote, that I shall go into the lobbies, if they divide, with my noble friends.
Professor Start said that the advertisement of Hoffmann-La Roche which was published in The Times could be faulted on two grounds. It implies that expansion can only be financed retrospectively out of ploughed-back earnings. This is false. Well-managed companies will often finance expansion through debt issues and previously earned and taxed profits, and these are not the only resources available. A much more serious point is the fact that many lay readers of the Roche statement will he given the impression that Roche must pay for its research effort out of earnings after tax. This is quite false, whatever form of financing is employed, since research and development costs are deductible for tax purposes. Indeed, Sir Keith Joseph argues that as a result of this deductibility the British taxpayer has financed at least

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40 per cent. of Roche's research and development costs attributable to the sales of its products in this country.
I am coming to an end because, despite the fact that I should like to make other answers and develop my argument, it would be impinging on the tolerance of this House on a Friday. But I must say that I am tired of this country being pushed around by multi-national firms, and I warn this House, having been in the other place and here for over 28 years, that the power of Parliament should be retained. The charisma of Britain is being lost by this malaise, this sudden rush into losing our sovereignty and other things. I do not want a foolish sovereignty, but I assure this House that if this Motion were to go through and this arcane Committee were set up, and if my noble friend's Amendment is not accepted, we shall lose some of the sovereignty that the British Parliament should retain.
1.40 p.m.
LORD BALOGH: My Lords, this case, as my noble friend, Lord Diamond explained, has a special character. I can add another aspect to that special character. It is the first time that I am able to correct a pronunciation in this House. It is not Roche to rhyme with "cockroach". There are three aspects of this case: there is the legal, the political and the economic. I have no sort of claim on the first two, but I was very interested by Lord Fletcher's argument on the political aspect of the situation. So far as the legal aspect is concerned, I should have thought—I am sure I can be corrected here—that if evidence which could and should have been submitted to the Monopolies Commission has not been submitted, but has been refused, then to say that new evidence has come to light on the basis of which the case should be reviewed is obviously false. I also want to say, though without reading the last 10 per cent. of the Report of the Monopolies Commission which has not already been read out, that the figures so far as the dividends and profits are concerned read as follows on page 79:

"Profit for the year

£6,598,000

Dividend

£3,524,000"

I will not animadvert on this any further.
LORD STOW-HILL: My Lords, may I just say now what I should have said when that question was put before? May I give my authority for the statement I made? It may be right or it may be wrong, but I should put before the House why the figure of 2 per cent. was mentioned. It came from Mr. York's argument on the first day. He said:
We plough virtually everything back into our business. We have never distributed to our shareholders, for more than 20 years, as much as 2 per cent. of our turnover. Our figure is often -5".
It may be right or it may be wrong.
The noble Lord referred to Appendix 7, in which dividends are referred to as £3.524,000, on a profit of £6,598,000. The only information I got from the Report was those figures taken together with paragraph 207, which treats that return as a return presented on behalf of the company showing that it earned 6 per cent. on sales, obviously saying that in a critical sense. I did not myself think—I may be wrong or I may be right; the noble Lord knows much more about it than I—that that clinched the matter. I do not know what £.31 million is on the authorised or issued capital. I had counsel's statement before me and I assumed that this was right-2 per cent. on turnover for 20 years and often less. I apologise for interruption the noble Lord. I should have given that answer before.
LORD BALOGH: My Lords, the noble Lord, I fear, ought to stick to the juridical aspect of the matter. The figures which he gave, of course, include profits. The bigger the profits, the smaller the distribution; but that does not mean that on capital engaged, which is the important thing, one cannot make 50, 60, 80 or 100 per cent. I shall be one of those shoemakers who stick to my last, and therefore I just want to say a few things about the Monopolies Commission Report, and the meaningfulness of our Special Committee's recommendation.
I have always been against the Monopolies Commission. I think it is a clumsy sort of blunderbuss, which hits in an unexpected way. It is not a generalised policy. It has seemed to me just recently that the Government have learned that a price policy is the proper way to deal with these matters, not singling out a few special cases and then bringing the State's power down like a ton of bricks. I also

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want to say that I unhesitatingly accept that very large profits must be made on successful drugs, exactly in the same way as I unhesitatingly accepted in a previous campaign I led on oil that the oil companies must make very large profits, because otherwise the unsuccessful ventures cannot be covered either in oil and in drugs.
Of course, one must ask oneself how much the profit should be. I am afraid, however one looks at it—my noble Friend, Lord Sainsbury, expressed it far better than I ever could—that this is obviously not an objective but a subjective matter depending on yourself, whether you are timid, not timid, expanding, wishing to expand or whether you want to keep your place. It is a matter which varies from firm to firm and also from time to time. It is not an objective affair. It depends entirely on judgments of extreme complexity. The one point which Lord Sainsbury has contributed decisively to this debate is that if it can be shown that the increase in expenditure yields less and less, at that point there is an objective marker. But, of course, Roche have not come forward with this idea at all.
Our Committee says that the inquiry should be limited to adequate provisions. What is adequate? Who will tell us what is adequate? Adequate for Mr. Getty is clearly very different from what is adequate for me. But I have other advantages. This means, of course, that the Committee decided that the Monopolies Commission's recommendation was wrong. It seems to me extraordinary that five noble Lords should get together and say that there is a grievance. To me this is a somewhat esoteric sight. None of them has ever studied industry. Perhaps they have studied law and all sorts of other aspects. But it seems rather quaint that five noble Lords should declare that a very complicated economic analysis by the Monopolies Commission, which has two of the most eminent industrial economists among its members, is wrong.
Another matter that I find extraordinary is that, apparently, the Committee accepted that, whatever the research expenditure is, it should be put on to the price. I have never heard such a thing in my whole life. This means that we accept that the whole of the structure is monopoly. But if one accepts that it is
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monopoly, it is up to the Government to control it, because there is no objective market force to control the price. That is the great difference between an oligopolistic or monopolistic price formation system and an ordinary system of competitive price. In this there is no such thing as a competitive price.
Finally, though this ought not to be stressed, what my noble friend Lord Davies of Leek said has a great importance; that so far as we can make out only one-twentieth of the total research of this company takes place in this country. If we were to alter the price recommended by the Monopolies Commission, not only should be place a burden on the balance of payments but we should create a new and very dangerous precedent on the basis of which much more burden could be laid by one company or another on the unsuspecting British Government and public.
1.54 p.m.
THE EARL OF HALSBURY: My Lords, I support the Motion before the House and I oppose the Amendment. I was once in the pharmaceutical industry and had to take in my stride all the problems that the noble Lord, Lord Davies of Leek, and the noble Lord, Lord Diamond, say cannot be solved. We had to do it on a day-to-day basis. I can assure the noble Lord, Lord Diamond, who pirouetted with his usual elegance round the 12 accountants who could not agree on how to recover essential research charges, that the difficulties are all imaginary. It only turns on where one draws certain imaginary lines through the organisation: they are not real lines. Everything ultimately turns on cash flow.
I have no connection with the Roche company, although some of their directors and scientific staff are friends of mine. However, I am informed that the reason that the parent company was somewhat uninformative in its evidence to the Monopolies Commission was based on a difficulty, and not just obstinacy. Swiss company law and Swiss commercial practice arc not the same as in this country. Companies are not required to disclose a lot of things to shareholders that would be the case with a British company. I understand that the president of Roche was prepared to provide this information on a confidential basis, but,

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possibly wisely, the Monopolies Commission decided not to receive it on a confidential basis. There arose deadlock. I believe that it was not due to any lack of goodwill on the part of Roche. The company felt that it could not disclose to the machinery of government and administration in a foreign country information that it was not accustomed to give to its own shareholders.
I think there is some danger of a little folie de grandeur in the attitudes we adopt towards this matter. We do not cut a big figure in the pharmaceutical world. Our consumption is about 4 per cent. of the world's consumption, and 64 per cent. of that reaches us through the subsidiaries of foreign companies. We represent about 21 per cent. of the market for those who supply us with 64 per cent. of what we need. In this connection I should like to emphasise the points made by the noble Lord, Lord Braye, that we are in great danger of cutting off our noses to spite our faces, because these companies can easily settle in Eire. One can run a British business in Eire quite well and outside the jurisdiction of anything like the Monopolies Commission.
To put our own pharmaceutical industry into proportion, I could mention at least three houses—Hoffmann-La Roche, Ceiba Geigy, and Merck in America—which are larger, each individually, than the whole of the British pharmaceutical industry. This shows up in the Monopolies Commission's report where Hoffmann's research expenditure is given as £30 million, whereas the United Kingdom research expenditure is little more than half that, £22 million. Its subsidiary company, Roche Products, has been a good citizen in this country. It has supplied us with Valium and Librium, which are major scientific breakthroughs. It has supplied us for a long time past at prices below world levels, out of its cash flow. It has spent £10 million on a factory in Ayrshire which gives employment to our people. That factory will export 61 per cent. of the world's requirement of vitamin B' and pantothenic acid. I reckon it a good citizen which ought to have a certain amount of support and not to be nagged at.
It should be remembered that if that 64 per cent. upon which we are de
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pendent were translated in money terms, if we did not have these foreign firms manufacturing in this country we should throw a burden of £180 million a year on to our imports. Do we really want to do that by affronting one of the distinguished members of the international pharmaceutical community?
Had there been a monopoly commissioner instead of a Monopolies Commission, and had it been me, I think I should have written my report very briefly. I should have said, first, that as we were buying Valium below world prices there was no major cause for complaint; secondly, that this point about whether the research expenditure was allowable or not for tax when shown separately, but allowable when lumped in with raw material prices so that raw material prices look pretty silly, was due to our own silly tax system; and lastly, that if the money to build the factories had not been provided out of profits it would have had to be provided from somewhere else or foregone. The merits or demerits of doing this were no business of mine.
There is a lot of confused thinking about the way in which companies set out their budgetary forecasts and precalculate their profits. Governments decide on their expenditure first and then look for taxes to meet it afterwards; a commercial company proceeds in the reverse sense. One starts off with the sales forecasts for the coming year, volume and price, but usually based upon notional increments in the previous year's selling based on trends. Then one looks at expenditure. It does not matter how the expenditure is classified, and one ends up with what looks like a net profit. Then one reviews that from the standpoint of cash flow. One has to decide whether it is sufficient to finance the growth of the business, remembering that every growing business needs an injection of working capital in proportion to the scale of the business and an injection of fixed capital in proportion to the difference between capital expenditure and depreciation allowances; otherwise, one merely sags downhill. The matter then gets pushed round the decision loop—a sort of feedback mechanism—and eventually up comes a model for the coming year, which everybody adopts as the target.

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Section 220(b) of the Monopolies Commission Report announces a doctrine which makes my hair stand on end from the standpoint of its universal applicability. I should like to quote it in two parts, with a slight interruption in the middle. What they say is:
"Although the amount the manufacturer chooses to spend on research is a matter for his own judgment, it is open to question whether all such expenditure should be regarded as properly recoverable from current sales whatever the circumstances."
If it is not recoverable from sales, what is it recoverable from? Is it to be done on borrowed money and then capitalised? Everybody who has done that has gone bust. The latest example of it is Rolls-Royce.
LORD DIAMOND: May I interrupt the noble Lord to say that perhaps the noble Earl did not notice that the accent is on "current". The only question is whether it is spread on current sales or spread forward on current and future sales.
THE EARL OF HALSBURY: In that case it will rank as a creditor and will have to be paid off. That is what Rolls-Royce found. This is what Rolls-Royce did. They carried their research expenditure forward so that they were showing a notional profit in the accounts and they suddenly ran out of cash to pay the dividends with and had to borrow, and they went into liquidation in due course.
Now I continue my quotation from Section 220(b):
"The proposition, indeed, becomes untenable if funds which become available from excessive profits are used to expand the scale of research, with the result that current research expenditure is pushed to exceptionally high levels and continually increased."
That is the second way to go insolvent, my Lords. I cannot imagine that the Director of Research at Hoffman-La Roche, finding himself in possession of a surplus, is allowed, without reference to his colleagues on the board, to spend it on research, just because research is research, without any attention to the merits of the various research targets. There are always more targets coming forward than the money available to fill them.
I have had to do these jobs in practice and I know it. I could always postulate
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a research ten times as costly as anything that was actually going on. Although the noble Lord, Lord Davies of Leek, tells me I cannot solve this problem, 1 can—and do—on a day-to-day basis. The mere fact that Hoffmann-La Roche is prosperous would indicate that this is not the way it goes about its business. To suggest that this is a sort of model with which people should comply—as I said before, it makes my hair stand on end from a purely commercial point of view.
What one does from the accountancy point of view is to net the revenues by subtracting all discounts, subtract all the expenses and arrive at the net profit which is expressed as a per cent. return on the capital employed in the business. One cannot, in some cases, do that, because it has been the policy of Hoffmann-Roche for years to write its fixed assets down to nil, so one does not know what they are worth, although an insurance value is given in the report. But does it matter? If its fixed assets are written down to zero, it merely means that it puts itself in a position to scrap something and to rebuild a more modern successor at any moment of its pleasing. I hope it will not be to scrap Roche Products in this country and to rebuild them in Eire, hut it is in a position to do so. I wish that all the companies of which I am a director were in the same position. Over and over again there is something surviving from the 19th century that I should dearly love to pull down, if only the money were there to do it with.
The implied way in which the Monopolies Commission have gone to work in their thinking is that out of this balance of cash flow they subtract one item—research—and they say that this shows a gross profit which is much too large and that therefore the research item is much too large. That is a fantastic argument. Why not subtract the wages bill and say that that is much too large? Or the materials bill, and say that that is too large? Why not add the whole lot together and say that the total expenditure of the company is much too large? What is it supposed that hoards of directors are always doing, saying that their expenses are much too large and cutting down on them? This is straight commercial thinking—
LORD DAVIES OF LEEK: My Lords, I apologise, but is the noble Earl quite sure that it is really that? Because the nub of the argument is that La Roche is asking for the same contribution for research per kilogram that it gets from any other country in the world. In fact, everywhere it sells it expects the same share per kilogram. That is part of the argument. I think it is fair.
THE EARL OF HALSBURY: My Lords, if the noble Lord will allow me I will deal with that point a little later.
I come now to this sort of purely rhetorical question: what can one afford to spend on research? There is no answer to this question, but I will provide a notional answer which is the answer one uses in practice. One can afford to spend on research as much as one's competitors, provided it is done as effectively, because it goes on to the price of the product. If one is more cost/effective than one's competitors, one can afford to spend a little more. One has to judge whether £1 of research will produce £10 of revenue in the future more than one's competitors. Somehow, that decision gets taken too.
The concept of itemising research cost over products when one is developing a large range of products, of which one knows that only a few will be successful, is quite impossible. There are suggestions throughout the Report that this should be done. Who pays for the losers? If the research on a particular product was all that one was allowed to recover out of sales, who would pay for the losers? They must come out of profits. But the profits must be big. Of course the winners must pay for the losers.
There is more to it than that. If one is working on an expanding scale one has to assume that every winner was once upon a time financed by a predecessor and during the course of its career it will be providing the finance for its successor, even though one cannot specify which of the various research projects to which it is contributing that will be. Naturally, on an expanding scale a given winner will have to bear essential research charges heavier than those borne by its predecessor, and its successor will bear heavier ones too. Surely the right thing to do is to concentrate research on to where it is highly cost/effective.
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In so far as the research expenditure at Hoffmann-La Roche is a higher proportion of turnover than the average, surely they are more than average cost/effective. I simply cannot follow the argument which says that because they tackle more projects they are on the law of diminishing returns. We should be grateful to them for a number of lessons, if we are willing to learn. They taught us how not to be a lame duck. They taught us to achieve a cash flow which relieves the pressure on the markets—pressure which drives up interest rates if the money has to be borrowed instead. They have given us a lesson in cost/effectiveness. Another thing we have to learn is not to put anybody who tries to do anything into the dilemma of coming under one of two accusations: either that he is a lame duck, if he does not make any money, or that he is caught by the Monopolies Commission if he does, and is told that he is making too much. What is too much? How long is a piece of string?
Why should we not let people make hay while the sun shines, if they are deserving cases and we shall get some side-effect benefits out of them? The trouble with Reports of bodies like the Monopolies Commission is that they never see the problem as a whole. They are not concerned with cash-flow problems and reinvestment. They are not concerned with the fact that Roche Products in this country was probably running at a loss for the decade 1950 to 1960, when it was in a very thin state. All this disappears, yet the commercial man remembers it.
When either public folly or a long motor journey have tired me to the point where the usual nightcap will not send me to sleep, I occasionally take a Valium tablet. What does it cost me to buy a bottle of 100? I cannot remember, but I know what Roche Products get for it when they supply it. For 100 Valium they get 21p. That is 0·2 of a penny per dose. One-fifth of a penny for a good night's sleep, when one wakes up feeling fresh in the morning—does anybody really grudge it them? Compare the price of Aspro, which is 30p for the same quantity; of Anadin, which is 34p and Alka Seltzer, which is 60p. If 60p is a fair price for Alka Seltzer, would something a little higher than 21p perhaps be a fair price for Valium? It seems to be

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a pretty derisory sum for one night's sleep. Even if it was the price that it was in 1970, which was four times that—83—it would still be a fairly low price.
I do not want to trespass on the time of the House—
LORD DAVIES OF LEEK LORD DAVIES OF LEEK: Oh!
THE EARL OF HALSBURY: —but it seems to me that we are rather like Kipling's last story in the Jungle Book, "The Butterfly that Stamped". You will remember that King Solomon and Queen Balkis were highly amused at the butterfly going through the motions of stamping and uttering threats all round. Our attitudes are in somewhat marked contrast to the laconic comments of the the president of Hoffman La Roche who, despite all our commotion, sees no reason to modify his policies. That is exactly the sort of thing that William Tell used to tell Gessler at a time when the Swiss were showing the Austrian Hapsburgs out of Switzerland.
p>I believe that we have a lot to learn about this subject I remember a conversation which I had with Professor Stowell, who was both President of the Union of Pure and Applied Chemistry on the one hand, and on the other President of the Saundo Company. I asked him what his research policy was and he told me that his policy was to tackle something very difficult and do it very well. Then, if he made a success of it, it was not worth while anyone else's trying to repeat his work and he could get his price all over the world. That sort of robust ambition is something which we might well emulate. I do not like to see us nagging at the 64 per cent. of those who supply us when we are only 2-1 per cent. of their market. We are in a very sensitive position. I am glad to see the noble Lord. Lord Braye, back in his place because I am hammering home some of the points he made in his speech.
2.14 p.m.
LORD WELLS-PESTELL: My Lords, it would never have occurred to me, if I may say so to the noble Earl, Lord Helsbury, to take Alka Seltzer for a good night's sleep. I do not see how one can equate Alka Seltzer with Valium, which he clearly knows much more about than I do.
THE EARL OF HALSBURY: My Lords, of course he cannot. That was the point of bringing them in.
LORD WELLS-PESTELL: My Lords, then I do not see how one can make a comparable price for them.
I rise because I want to support the Amendment which stands in the name of my noble friend Lord Diamond, but not because my arm has been twisted by anyone on my Front Bench. In fact, when I went into the Chief Whip's office to put my name down to speak to-day, I found I was the first and only name at that time; the others seem to have crept in since then. I should be the last to question the rightful use of Standing Order 216, because clearly it is a Standing Order of supreme importance not only to this House but to people who have recourse to it in one way or another, but what I do question—and I will not go into this point at any great length, as my noble friend Lord Fletcher dealt with it rather more effectively than I can —is the use of Standing Order 216 in this particular matter, having regard to the long, deep and involved hearing which the Monopolies Commission gave to this issue which resulted in the Order which has been before both Houses of Parliament. The use of Standing Order 216 to call in question a decision of the Monopolies Commission which has been set up by both Houses of Parliament is neither appropriate nor desirable in this instance.
From my understanding of the situation, the Monopolies Commission thoroughly explored this matter over 18 months and I cannot but feel that during those 18 months and in the number of sittings which they held they became much more informed of the position—and I say this with the greatest respect—than the Special Orders Committee could have clone in five days. I think the Commission explored the position from the Roche point of view as far as that company or combine would allow them to do so. The firm of Roche had every opportunity to deal with the matter when it was before the Monopolies Commission, and if it had been more frank about its financial position the situation which we are debating to-day would not have arisen.
I know the noble Earl, Lord Halsbury. said that the procedure in Switzerland

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relating to the publication or disclosure of company's affairs differs vastly from that in this country, but I cannot accept that Swiss firms do not know what is required of them when they are operating in other countries. They must have known that in appearing before the Monopolies Commission a full disclosure of the financial situation was absolutely necessary.
I do not deny that Librium and Valium are perhaps two of the most successful drugs that we have had for some considerable time. I merely want to concern myself with the recommendation of the Special Orders Committee in relation to setting up a Select Committee to consider making adequate provision for a proper allocation of group research and development. I do not want to deal with percentages I would rather deal in figures. I should like to quote from the Under-Secretary of State for Trade and Industry, Mr. Peter Emery, when he introduced this Regulation of Prices (Tranquillising Drugs) Order in another place on May 3 last. He said:
"The starting point was the massive discrepancy between the manufacturing costs of the active ingredients of the products"—
Librium and Valium—
"—apprmimately £9 and £20 per kilo respectively—ard the transfer prices paid by the United Kingdom company to the Group—over £360 and £900 per kilo."—[OFFICIAL REPORT, Commons, col. 1604.]
In other words, the manufacturing cost of Librium was £9 and was sold to the Roche Product Company in this country at £360 per kilo.
TILE EARL OF HALSBURY: My Lords, the noble Lord has not taken my point. This was because the Inland Revenue in this country would not accept the full central research charge and directed that they were prepared to ignore it if it was added to the price of the material.
LORD WELLS-PESTELL: My Lords, I take the noble Earl's point, but it does not alter the fact that it is sold to the Roche Products (United Kingdom) company at 40 times more than the cost of production in the case of Librium and 45 times more than the cost in the case of Valium. The Sunday Times, on May 27, 1973—and I must be frank with your Lordships that I have relied more on the national Press than perhaps I have relied
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on other sources, because I wanted figures and not percentages—said the respective drugs sold in the United Kingdom at £655 per kilo for Librium and £1,260 per kilo for Valium. These are drugs that started at £9 and £20 per kilo. I can well understand a combine not wanting to disclose its financial accounts as in my view it might well result in a kind of indecent exposure. I think the Government acted with commendable speed—and we ought to say so, particularly those of us who from time to time presume to criticise them—following the Report of the Monopolies Commission, when they recommended a substantial reduction in the prices of these two drugs charged by Roche. The Monopolies Commission's work was very thorough, and I believe that the seven people who were responsible for the Report produced a very fine one indeed.
We know that there have been previous difficulties with Roche over the -prices of Librium and Valium. In the 1960s a substantial amount was repaid to the Department of Health and Social Security in respect of overpricing. This is nothing new so far as this combine is concerned. When the time came in 1970 for Roche to to provide information to the Department of Health and Social Security, it refused to do so voluntarily. A statutory direction had to be issued to compel it, and the combine finally complied in 1971. It seems that there has always been difficulty in finding out the true position of the Roche combine.
In conclusion, 1 may say that the Union Bank of Switzerland put the turnover of the group at 5,800 million Swiss francs in 1971, which in round figures equals about £750 million sterling. The president of the group is reported to have stated that research expenditure is equal to about 15 per cent. of turnover. An element of secrecy has always been present when dealing with this concern, and the United Kingdom group, Roche Products, told the Monopolies Commission that it is not possible to obtain exact information concerning ownership and control. I think it would be a mistake to adopt the recommendation of the Special Orders Committee. I say this with some regret, because there is perhaps not a more important Standing Order than No. 216 in your Lordships' House. It is one that we must guard very carefully, although in

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matters of this kind in the future we may have to do something to prevent a situation like this from arising again.
2.24 p.m.
LORD BROWN: My Lords, I am grateful to my noble friend, Lord WellsPestell, for reiterating the figures; it saves me from doing so, and I will not take up the time of the House. They are pretty horrifying. I will make one point: when the firm of Roche increased the price of the active ingredients by figures of, respectively, 4,000 and 4,500 per cent. before charging them to this country, they were indulging in a form of tax evasion of a very serious kind, as the profits arising from those increases of transfer prices accrued in Switzerland, where they were subject to Swiss tax, instead of accruing in this country where they should probably have accrued and been subject to British tax. The point has not been made, but that is all I have to say about the figures.
I listened to my noble and learned friend Lord Stow Hill, and the noble Earl, Lord Halsbury, and with great respect, when they were arguing about the percentage of money that should be spent on research. Those arguments are largely irrelevant to the question, as we are not a tribunal or a body to decide how much is an appropriate amount for research. The noble Earl, Lord Halsbury, was saying that even if this company in Switzerland had increased their research costs by fifty times more than they are at present, the arguments he adduced would still have applied, as he did not seek in any way to limit the amount they spent; and that whatever they decided should be spent, the British public would have to pay accordingly. It seemed to me a most extraordinary argument. We have a Monopolies Commission to protect the British public against this form of exploitation, and in their wisdom they have come to certain conclusions.
I want to get on to rather different arguments, as it seemed to me that the case which Roche really had to press with the Committee was not concerned with re-arguing about the Monopolies Commission, but, if possible, to display the fact that the Commission had not done their job properly or legally. I should like to take up some of the argu
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ments Roche used, as I am one of those who spent the early hours of this morning reading the whole of the evidence before the Committee. It accused the Monopolies Committee of being a creature of the Department of Health and Social Security.
The language of the company's counsel was highly impertinent and abusive throughout. He said that the D.H.S.S. eventually pay for it so they employ their creatures to get on to an investigation, their creatures do what they are told and put the price up. This is scurrilous comment. The fact is that, as anybody who has any familiarity with procedures in the Board of Trade (as it was) knows very well, any President who gets anywhere near the Monopolies Commission during his term of office is warned by all his civil servants to keep away. They are separate bodies and the legal considerations in the Commission and the decisions of the President or the Secretary of State subsequent to the Commission issuing their Report are entirely separate things. I believe that the weakest form of argument that one can possibly employ in any situation is to pour scorn on the integrity of one's opponent. That is what Roche were doing in this case, much to the detriment of its own status, I believe.
THE EARL OF HALSBURY: Surely it was counsel.
LORD BROWN: That is to separate the arguments put forward by counsel employed by Roche from the opinions of Roche. I do not know where we stand on the matter. It was counsel, but I take it that Roche takes responsibility for what its counsel said in its defence. It would be a very peculiar situation if it did not.
The secondary accusation was that there was no proper consultation. I do not know whether the House is aware that since 1968 the Government have followed a consistent practice of refusing the interests concerned the opportunity of commenting on the findings of the Monopolies Commission. Your Lordships may ask why, and I will tell you: because previous experience has shown that the almost invariable result was a rehearsing of the evidence and the arguments that had already been: considered by the

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Monopolies Commission. This is an inevitable consequence of offering to discuss the results with the party concerned. Thus since 1968 Ministers have simply discussed the means of implementing the findings with the parties involved, except in cases where the Minister seeks to follow actions different from the Commission's recommendations.
Thus, consultation about implementation is important, as it usually has led to voluntary co-operation on the part of the companies involved in implementing the Minister's decisions. No order is thus required. For example, in the Petrol Station Order, some years back, 36 companies co-operated voluntarily. No order was made against them. One refused and, as your noble Lords know, the matter had to come before this House. Roche not only refused voluntary co-operation with the Commission in supplying information, but refused to discuss price reductions and repayments or voluntary co-operation with the Minister until the D.T.I. had undertaken to change the United Kingdom patent law. It is effrontery for a British company, let alone a foreign company, to try to make bargains with a British Government Ministry to change the law before it will enter into discussion, very properly, over prices and the rest.
The Minister rightly refused the opportunity to Roche of reopening the findings of the Monopolies Commission. He was right. Had he done otherwise he would in the future have had to give to every company whose affairs came before the Monopolies Commission a similar right to reopen the case and discuss it all over again. What Roche was seeking was procedural changes—changes in the Monopolies Act—and they have no right to do that.
Then there was the accusation of too much speed: "indecent haste", was the term used of the action of the Secretary of State. The Secretary of State had the Order for two months and he then laid it before Parliament. If that is indecent speed, it is justified by the fact that every day he delayed placing the Order and getting it passed was costing this country £10,000. It is a consideration for any Minister to delay that and then to have to face Parliament, having wasted
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£10,000 for every day that he delayed it. Roche also sought to argue that the Order should have been laid in draft form so that they could discuss it. The company had to retreat on that point, because it is inconsistent with the law.
It claimed that it had right of appeal through the procedure of this House and the Select Committee. The Monopolies Act does not give right of appeal. If it had been intended that it should, it would have been explicit in the Act. Are we now to turn Select Committee procedure into an appeals procedure? That is what is being suggested—that the whole matter should be re-explored before a Committee which has no accountants, economists, or statisticians in its service. which has to hear everything on evidence, and which is unable to keep anything confidential—because it is very much in the interests of the parties who are presenting their case that it should sometimes be kept confidential. The Select Committee will not be able to do any of that and it will he deprived of some evidence as a result.
To send this matter to a Select Committee is not consistent with our procedure or our law. The Chairman of the Special Orders Committee, in introducing this subject, referred to the fact that the Select Committee was designed as a means of protecting the interests of the citizen and the individual. He was right: that is what it is for. The whole business is not seeking to preserve the rights of the individual: this is a corporate body, a commercial company, which is quite a different matter. In turning down the sending of this matter to a Select Committee and in accepting the Amendment we are not striking a blow against the rights of the individual or the citizen; we are dealing in a proper way with the interests of a commercial company and defending the British subject from being grossly overcharged for a drug which is extremely valuable.
The Monopolies Commission who have sat on this matter have a great deal of relative experience of hearing a whole range of cases in the past. If we send this question to a Select Committee, it will have no experience whatever and it is likely that the witnesses will have very little experience either. Anyone who examines a matter of this kind must make

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a subjective decision; one cannot make an objective decision about the proper level of research to load on to the price of an object like a drug. It is a subjective decision that must be made on the basis of wide and prolonged experience. There is only one body in this country which has that wide and prolonged experience, and that is the Monopolies Commission.
If anyone wants to appeal against the way in which the Monopolies Commission have dealt with this matter, it is an issue for the courts. He has the right to complain to the High Court that the Monopolies Commission have failed to carry out the legislation under which they act, and that is the course open to Roche Products. There is no denial of the right of appeal; that is its way of appeal. It has not the right to reopen the whole case with this body.
Much of the argument that has been put to-day concerning the amount of money that should be spent on research and thus added to the price is not a matter that we can debate in this House. We are concerned with procedure here, and the procedure which has been suggested—of sending this matter to a Select Committee—can have only one result: we shall be asking a Select Committee to do a job which it will not be capable of doing nearly as well as the body which was set up for this purpose by the Monopolies Act.
Roche have not only a bad case, but a case which it spoiled further by the intransigence which it displayed by its refusal to disclose the facts which were required to support its case—if it had one—and by the abuse which it has heaped on civil servants, on the Secretary of State and on our legal procedure. I think that it will have to accept the decisions of the Monopolies Commission and I hope that this House will accept the Amendment and thereby place it in that position.
2.36 p.m.
LORD BRABAZON OF TARA: My Lords, I was under the impression that not only were we talking about procedure this afternoon, but that noble Lords were being allowed to air their general views on the drug trade. I have had a certain amount of dealing with the Swiss, on a supporting basis, so to speak. One has to get to know them. It is all
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very well to put a pistol to their heads and say, "You have to produce these figures." They will shut up when one does that. If Hoffmann-La Roche wrote to the Bank of England and said that it would like to open an account, but, before doing so, the Bank should be prepared to produce its proper balance sheet and profit and loss account, Hoffmann-La Roche would get a pretty rude answer. When one is dealing with the Swiss, one has to anticipate that kind of thing.
Hoffmann-La Roche's figures are secret, but it is almost certainly the largest manufacturers of medical drugs in the world, and possibly the most distinguished manufacturers of that sort of drug that has ever existed. It has not been suggested to-day, but it has been mentioned to me once or twice by Members of your Lordships' House, that any company with a capital whose shares stand at £20,000 must be profiteering. That is absolute "hooey". Under Swiss law, scrip issues are not allowed. Rights issues are allowed, but as La Roche do not want money they do not have rights issues. They are 77 years old and, being successful, they have built up a considerable position in the world without asking either their own shareholders or any of the public for extra finance. They have 70,000 shares outstanding. I.C.I. have 480 million. There is a well-known stores company in this country which is never accused of profiteering; it is usually regarded as giving very good value for money. But if one had bought its shares at fl in 1935, those shares would now be worth £200-odd. That was due to scrip issues and keeping the shares down to what appears to be the acceptable level in this country.
A number of references have been made as to how to allocate research expenditure. It is almost impossible. If one researches into 10 products, and if 10 per cent. were a reasonable profit on each, if only one in 10 is successful one must have 100 per cent. profit on that, otherwise research stops. All this business of repaying money and so on, if one looks at the history of Hoffmann-La Roche, one finds that among other things they produced a drug which was not patentable but which virtually shut TB clinics in the civilised world. Surely they ought to be able to claim a bonus

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for that; but they have not. They have got, I understand, a most promising attack on Parkinson's disease which they think will work, but they will not make much money on it because, fortunately, very few people have Parkinson's disease.
My worry in all this is whether we have started a chain reaction in the world. We have suggested cuts in prices; other countries have asked for cuts in prices. It starts with Roche, but it will go on to every other drug company in the world, and one just asks oneself whether it is desirable to interfere with research into drugs, as I should have thought this undoubtedly will do. Companies will just think that it is not worth doing.
My Lords, all I want to say, in conclusion, is that the Department can well pat itself on the back for saving the National Health Service a few million pounds, and trying to claim back a million or so, but I should have thought that for the future health of the human race it was better to have Hoffmann-La Roche, even if they profiteer—which I do not think they do—rather than no Hoffmann-La Roche.
2.43 p.m.
LORD HALE: My Lords, I am sure the noble Lord who has just spoken suffered as I shall do from the necessity of considerably abbreviating his remarks, even up to 60 to 75 per cent. Therefore, while I should not like to criticise, I must say that I thought some of his facts were selective.
I, too, read these 300 pages last night. It took me seven hours, and I took a Roche pill to give me two or three hours sleep afterwards—and very excellent their pills are. I began to read the eloquent speech which was made with great sympathy: this simple Swiss family producing ethical drugs by ethical means and operating in ethical ways; charging only 2 per cent. on a grossly exaggerated turnover, and thus laying up treasures in Heaven and capital profits in this world; founding another company in the American hemisphere, registered in Canada and operated in Uruguay, in which there were also 70,000 shares, of which only two possessed voting rights, so the entire control could be run on ethical grounds
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from Switzerland, and by ethical means; operating a system which permitted them to sell to developing countries at reduced rates, but did not necessitate their saying how little; considering the special position of Turkey, selling one drug at 49 per cent. under the Turkish Government's regulations, and not selling any of the other because there was no profitable market for it; laying down their own ethical rules, by which they described themselves as saying, "We base the price on the amount the market will pay."
My Lords, if they base the price on the amount the market will pay, this is a country in which they have virtually and effectively only one customer. It is very convenient. They sell through the shops. They do not sell to the Department of Health, but in the end the Department of Health pay for nearly everything, except for the reduced advertising matter they give to the hospitals and to the Army, a practice which is not very good.
The noble Lord has said that if you tickle a Swiss in this way, and if you upset him, he is apt to "clam up". But they did not "clam up". They never released any relevant figures. They always declined, on moral grounds, to give the figures which really are relevant. They endeavoured to establish a method of computation in which you take the exaggerated prices and then work you way down, so if you are charging 11 per cent. advertising matter on a price of £1,000 per kilo when it ought to be £500, that 11 per cent. is really 22 per cent. They produced a method of mathematics which is really quite surprising; but, they did not "clam up". They did correspond with the Department of Health, and, so far from "clamming up", they disgorged over £ 1 million as recognised over-payment, and ever since then the Department of Health has been justly kicking itself for signing the receipt in full discharge of claims up to date because it has come to the conclusion that it ought to have asked for at least four times as much.
That really is the position of the general ethics in the matter. No one disputes that Roche are a prosperous firm, a good firm, or that they produce excellent products. No one has ever said anything to the contrary. However, I must

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confess that as I proceeded to pages 2 and 3, and was becoming quiet tired, it was this astonishing absence of figures which struck me. I was not surprised, of course, that I found the real point on the penultimate page, which I imagine is about page 260. I apologise to the noble Lord, Lord Fletcher, who has already made an excellent speech, for quoting his remarks, but they seem to sum up the position precisely, because I can also quote the reply. Right at the end, the noble Lord, Lord Fletcher, says to counsel for Messrs. Roche:
"You say that nothing can be done. If you feel able to comment I would appreciate it, but if you feel you cannot, I will understand. The Order we set out to consider was approved in the House of Commons, if I may say so, with some enthusiasm. It has now lapsed and another Order has been made and by agreement we are considering your Petition as affecting that Order. That Order will, in clue course, come before the House of Commons. All Members of the House of Commons will presumably then have available the transcript of the proceedings here and they will be able to read the weighty arguments you raised and the powerful arguments against the reasonableness of the Order. Therefore, to some extent the House of Commons will be able to exercise a much more informed judgment than before as to whether it should pass the necessary resolution or not. Therefore it is not quite true to say that there is no other redress."
There really cannot be any disputing that. The Select Committee does not give any reason for their decision, as far as I know, and I am inclined to think that it might have been better if they had; but no doubt the Select Committee followed the usual practice.
Mr. York replies first, in a brief paragraph, to say that matters of justice have always been left to the quieter atmosphere of the House of Lords, and he then goes on to say:
"Members of Parliament are very busy men and to expect them to read, digest and understand five days' transcripts and all the associated documents is not realistic."
Of course, that is true: we know that Members of Parliament do not read all the documents. I remember being told in 1946 by a well-informed historian of statesmen that a member of the Cabinet could not read all his Cabinet papers if he sat on his backside from one Cabinet meeting to another and tried to get through all the relevant documents. I discovered that, essentially speaking, that is true. It is not the system by which we work, and counsel knows it. We have specialised Committees sitting, and every
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ex-Member of the House of Commons knows that most of the work of the House of Commons is done in the Committees which are considering these matters and giving special attention to them. They always have someone who is completely well-informed who can give guidance and help Members to arrive at a decision; and there are Party meetings, and so on.
I have already used 35 per cent. of my 40 per cent., and I want therefore to turn immediately to Standing Order 216, paragraph 6. It is important that we should look at it again. There was a good deal of argument in the Committee as to the meaning of "substantial grounds of complaint". Someone said, "Is it big?" Well, of course not. This is a remedy for the oppressed. Is it important financially or in magnitude? What is "a substantial ground of complaint?" Surely, interpreting it roughly, it means that someone has been unjustly oppressed and has made it clear that he has been unjustly oppressed, and has had no opportunity to be heard. I should have thought that that was the question before the Committee. And Heaven knows! Roche had an opportunity to be heard on 16 occasions and have never put forward the information which could reasonably be required.
The second thing to be considered—sub-paragraph (b)—is
"whether the matter has been so dealt with upon a departmental inquiry that further inquiry is unnecessary."
My Lords, what is a departmental inquiry? Does anybody know? Is it a term of art? No, it is not. It is not even spelt with capital letters, which is normal for a term of art. I have sat on Departmental Committees, Select Committees, Royal Commissions—every kind of committee known to science, and some that were not—the Joint Committee of the Lords and Commons, and so on; but a departmental inquiry I do not know.
It means one of two things. Either it is intended to be interpreted strictly as a full inquiry by the Department concerned, in which case there was one—it immediately preceded the setting up of the Royal Commission. They corresponded. There were bundles of correspondence that looked like the Poulson case being handed round the Committee

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Room, as I understand, from reading. The information was there. Every question had been asked. Very few had been answered. Or, in a wider sense, if it means, in general words, a full inquiry connected with Government activities or Ministerial activities, then of course the Royal Commission have done it, done it thoroughly and done it well. I do not think that their Report is very well written, and I do not think it is very clear in parts; but there is no doubt that it dealt with everything. It has made everything clear and it has given Roche the benefit of the doubt, whatever it did. It did not recommend prices being reduced by 60 per cent. or 75 per cent. It recommended that they be reduced by those figures at least, and said that this was a very generous estimate.
Finally, I would just mention sub-paragraph (d):
"whether, having regard to the answers to the preceding questions and to the findings, if any of these inquiries and to the other circumstances of the case, there ought to be a further inquiry by a Select Committee.…"
And if there is, what happens? We have the Royal Commission on one side, the Select Committee on the other; the Royal Commission saying "We have looked into this", and the Select Committee saying, "You have not looked into it quite enough."
LORD BROWN: My Lords, I think my noble friend is unaware that he is using the term "Royal Commission" when I am quite sure that he means the Monopolies Commission.
LORD HALE: My Lords, I mean the Monopolies Commission, of course, which, exercises the statutory powers entrusted to it by Parliament and whose procedure, because of complaints, was in fact the subject of a special inquiry, ordered by a recent Prime Minister, by the Lord Chancellor of the day and the Attorney General. Both reported that its procedure was being carried out in accordance with the will of Parliament, with the powers it possessed, and with considerable diligence. That is the position.
In those circumstances, while thanking the Committee for its very gifted labours, for its patience, for the questions that were asked and for this Report, which will be helpful to both Houses in considering the
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Order, I venture to think that my noble friend the Leader of the Opposition is right in his Motion and that it merits support.
2.54 p.m.
LORD FERRIER: My Lords, I came to this House not intending to speak, and I am doing so only because I spent 12 years in the pharmaceutical industry, to which I came as a layman, as an industrialist. I must say at the outset that I had the impression during this debate, as I have said before in your Lordships' House when discussing pharmaceutical problems, that we must remember that the end product we are considering is the relief of human suffering, not only in this country but throughout the world. Although, as I have said, I was at one time interested in the industry, I ceased to be connected with it in 1965. My only interest now is that I hold few shares in one English company. At the same time. during the period I was in the industry I had the experience mentioned in a number of papers to which your Lordships have referred, of the time when the then Minister of Health, Mr. Enoch Powell, used Section 46 of the Patents Act to seize a patent of a product which was the property of Pfizer. This, I admit, was the first occasion on which I realised that the right honourable gentleman was capable of doing things which in my view were odd. A row ensued and it is mentioned in a number of the Reports to which your Lordships have referred.
However, it is well to remember that that was in 1961. The situation to-day is very different. We are talking now of Section 41 of the Patents and Designs Act. This is quite another matter. As I see it, the position has now been stabilised. The present Minister for Health, my right honourable friend Sir Keith Joseph, has got the thing working properly... It is well understood between the National Health Service and the industry; or so I believe. At any rate, these drugs are the only ones that there has been a row about. I believe that the noble Lord, Lord Stow Hill, referred to this. He said he hoped that we should find a sensible formula by extending this inquiry. I believe that a sensible formula exists to-day.
Having said that, I think it is fair also, in connection with my opening remarks,

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to remember that these are absolute wonder drugs. This a real breakthrough, comparable with the sulpha drugs and the like, and going back through thousands of years to opium. As such, they have saved and are saving the State huge sums of money in reducing the number of patients in hospitals for those who are mentally ill. Somebody with experience told me last week that in visiting a hospital with which he was concerned he found there were 1,400 patients, whereas the previous year there had been 2,000. The answer was, "Oh yes—Valium; people can be sent home much sooner." It is well to remember that.
In saying that, I have a great deal of sympathy with what my noble friend Lord Reay said, and the noble Earl, Lord Halsbury, in bringing out the important factors about the need for research, the cost of research, the impossibility of saying of a certain figure, "That is the right amount." One cannot do it. And to quote the noble Earl's phrase, which will replace something I had jotted down, one must remember that the winners have to pay for the losers. It is not just the cost of the research that produced Valium. It is the cost of research for a whole spectrum of drugs, only one of which may be a winner. That must be borne in mind.
But—and I think it is a big "but"—in this case, as the noble Lord, Lord Hale, and a number of others have pointed out, I think that Roche has been arrogant, stubborn and secretive. Although it has provided supplies of these drugs to hospitals and the like which is one way of promoting them; and a very good way, too!—I feel that it has only itself to blame for the fact that the Minister for Health had no alternative but to act, and act swiftly, as he did on the Report of the Monopolies Commission. I will not go on referring to that again. It has been referred to over and over again.
Referring to my noble friend Lord Reay, I think it is very valuable to know that, with the views he holds, he also holds a responsible position in the Councils of Europe. But I go some way with him in complaining about the way in which this debate has been brought upon us without really letting us know that it would lead to a Division. I am glad that we are to have a Division, and I support Lord Diamond's Amendment. He mentioned the need for a Royal Com
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mission, and it may well be that we should have another "full-dresser" on this subject, though we must remember that the whole problem of patents will be reviewed as we go into the EEC.
This leads me to my last point, which is Section 41. I return to the Banks Committee's Report, at page 118, where in Section 410(2) they say:
"We think it wrong, in principle, that a patentee who exercises his rights with moderation"—
words which I myself underline though they are not underlined in the Report—
"should stand to lose a part of the profit to which he is reasonably entitled to another supplier, who has not undertaken the research necessary to discover and develop the drug.
At the end of that paragraph the Committee recommend the repeal of Section 41, Compulsory Licence Provision, which is the section on which this Order is based.
I turn to the speech of the noble Lord, Lord Stow Hill, who said that the time spent on the admittedly narrow Select Committee which the whole Report recommends would not be wasted in the public interest. My Lords, I take the opposite view in terms of this Section 41. It would mean vast expenditure in terms of money, vast expenditure in terms of money, vast expenditure in terms of your Lordships' time, all over the weir, in my opinion, because this section is to be repealed, and the situation will be reviewed again. For that reason I, for one, feel that in this case it is important that we follow the advice given to us by the noble Lord, Lord Fletcher and the noble Lord, Lord Brown, with whose speeches I entirely agree; and I would only say that it is a thousand pities that we have no Hansard and it may be weeks before we can really peruse what is said in this debate.
3.5 p.m.
LORD DOUGLAS OF BAR LOCH: My Lords, I shall not detain your Lordships long, but I do have some experience of this problem, because I was a member of the Public Accounts Committee of the House of Commons from 1944 until 1946, and we had the problem of monopoly prices and monopoly profits before us on quite a number of occasions. Undoubtedly these things present difficulties. There is always an element of

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judgment about what is reasonable or what is not reasonable, but it is the case, in regard to what we are discussing today, that we are dealing with a monopoly, and that the proprietors of it can charge as much as they think the traffic will bear. Therefore the profit has no relationship whatsoever to ordinary commercial competitive prices.
What the noble Earl, Lord Halsbury, said may be perfectly true about competitive businesses, but it is not true in this case. This is a monopoly. It has been investigated by the Monopolies Commission and it is a waste of time, superfluous and ineffective that a Committee of your Lordships' House should attempt to investigate one particular facet of this problem in the terms of the resolution which is now before us; namely,
"whether the prices recommended by the Monopolies Commission make adequate provision for a proper allocation of group research and development expenditure in the sales of the reference drugs by the Petitioners in the United Kingdom.…"
This presupposes that the total of the group's research and development expenditure is entirely unassailable, under any criteria related to monopoly profits, and that all the Select Committee will do will be to produce some new allocation between one branch of this company's numerous ramifications and another instead of that which the Monopolies Commission arrived at.
I submit, my Lords, that it is impossible for the Committee to get to work upon that basis. If anything is to be done, they will have to go into the whole matter, root and branch, from the beginning, because one cannot make a judgment of any reasoned character within the terms of what is contained in the Report of the Select Committee. I do beg your Lordships not to commit this House to an enterprise which is not practicable. After all, the Monopolies Commission took a year and a half or so to investigate this problem. They were experienced in this kind of job; they had expert assistance at their disposal, and still they took all that time. Can a Committee of your Lordships' House compete with that expertise, and can it work any more quickly? Surely this is reducing our procedure to an absurdity.
3.9 p.m.
LoRD CONESFORD: My Lords, I will delay the noble Lord, Lord Byers, only for a few moments. I think I differ from many of the speakers on both sides of the House to-day in that they all seem to have found the matter before us very simple. Some seem to think that it is quite obvious we should vote for the Amendment, others that it is obvious we should support our own Committee. My Lords, I do not mind confessing that I find the question extremely difficult: but I have come to the definite conclusion that we ought to support our own Special Orders Committee. My reasons for that do not show any lack of respect for the Monopolies Commission. As a former Parliamentary Secretary to the Board of Trade, I have had some fairly close connection with many of its activities in the past.
My Lords, somebody said that there is no appeal under Statute from the Monopolies Commission, and that by the Order, which I am supporting, we are trying to create, in effect, an appeal. I agree that there is, under Statute, no appeal from reports of the Monopolies Commission, but it is an equally important fact that the law does not provide for the conclusions of the Monopolies Commission being automatically brought into force and made the law of the land. For that the intervention of the Minister in Parliament is normally necessary. When this House takes a view on the merits of the Order proposed by the Minister, it is doing its duty under the rules that govern Parliament, and the fact that there is no appeal under Statute from a Report of the Monopolies Commission really has nothing to do with it.
The noble Lord, Lord Fletcher, in an admirably clear and succinct speech said, in effect, that we shall be doing something futile if we support the majority of our own Select Committee. With all respect, we shall not. The noble Lord said that if we decided there should be a Select Committee to consider this limited point, and the Committee differed from the Monopolies Commission, we should have to choose between their findings; and one would have no more value than the other. With great respect to the noble Lord, I do not think that would be the result. I think the result would be that if the Select Committee suggested that

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the Order ought to be changed, the Minister would consider their Report and, in the light of the new knowledge in that Report and the Report of the Monopolies Commission, would make his recommendation to both Houses of Parliament as to what the Order should be.
So far as I understand the matter, I personally think that the new knowledge that might emerge from this Select Committee, if set up, would be very valuable. I confess that, even before I heard the noble Earl, Lord Halsbury, I was alarmed about the effect of the general proposition that too much money is spent on research. It is a very dangerous thing to say. Conceivably, it may be right—I do not know—but I believe it most desirable that a Select Committee should further consider it. It is a very good thing that, unless the circumstances are altogether exceptional, we should support the advice given to us by our own Select Committee. This is particularly the case when the Government themselves have an interest and when the Petitioner is not even a British subject. In passing, I should like to correct a statement made by the noble Lord, Lord Brown. In referring to our own Standing Order, he used the word "individual" and said that it would not include a company. I think he will find that the word is "person" and that undoubtedly it does include a company.
LORD BROWN: My Lords, I was quoting the Chairman of Committees, as the noble Lord will understand when he reads Hansard.
LORD CONESFORD: It may take some time before I am able to read Hansard, but I shall do as the noble Lord suggests.
For those reasons I hope that the House will vote against the Amendment and support our Committee.
3.16 p.m.
LORD BYERS: My Lords, I agree with one thing that the noble Lord, Lord Conesford, said, and that is that this is not an easy matter to decide. I shall not argue the merits of this case; I am concerned with what the House should decide to-day when it comes to a vote in a few minutes' time. I find the whole matter disturbing, both in substance and
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in procedure. The Monopolies Commission took 18 months to make a detailed study in depth of the whole problem. They concluded, presumably having made a number of judgments on such matters as the proper allocation of research costs, distribution expenses, promotion expenses and so on, that the drugs were greatly overpriced. I do not pretend to understand how they were able to do this. I do not understand how anyone outside the business concerned can pronounce with any confidence on the correct order of expenditure or cost in the different categories of accounting, particularly if there are no guidelines, regulations or Government contract to interpret. However, if any body of people is qualified to make an approximate judgment it must surely be the Monopolies Commission.
When the Minister received the Report he made this Order. It was challenged by the Petitioners, as they were fully entitled to do, and the Special Orders Committee of this House sat for five days taking the most detailed evidence in order to decide, on a 4 to 3 vote, whether to send the matter to a Select Committee. In my view this is a procedural nonsense, and very costly. With all respect to the Special Orders Committee, it is not—nor is it expected to be—competent to deal with matters of this complexity. The House is now placed in a serious dilemma through no fault of the Special Orders Committee. If it rejects the Motion to send the matter to a Select Committee, the Petitioners may well feel aggrieved that they have been denied the full process of the procedures of this House. That would be unfortunate, but it may well have to be faced, and I am prepared to face it.
On the other hand, if the House decides to send the matter to a Select Committee there is no guarantee, in my view, that any fairer result will be achieved, after that Committee has examined all the evidence, than was achieved by the Monopolies Commission after 18 months of painstaking investigation. I am worried lest we should get into the position where a Select Committee of this House is turned into a court of appeal. I do not believe that this was even the intention of the people who drew up the Standing Order. I hope that the whole procedure in relation to cases of this sort, arising from bodies such as the Monopolies

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Commission and cases of such technical complexity, will be considered very carefully by the Committee of the noble Lord, Lord Brooke, on delegated legislation. I hope that the Department of Health and Social Service will find a far more satisfactory system for agreeing the formula for pricing such goods as ethical goods well in advance of their being put on the market. In the meantime, because I do not think that any Select Committee is necessarily better qualified in a case such as this than the Monopolies Commission, I reluctantly support the Amendment.
3.19 p.m.
LORD SHACKLETON: My Lords, owing to the lateness of the hour, I shall devote my remarks mainly to the procedural aspect. The noble Lord, Lord Byers, in his usual extraordinarily able way, has put in a nutshell what would have taken me 20 minutes to say. It is a fact that the majority of speakers to-day have supported the Amendment, though I am bound to say that if one adds up the length of the speeches it may have been rather more equal. Because it is necessary for us to try to settle this matter pretty soon—before, say, a quarter to four, because I know that a number of noble Lords want to catch their trains—I shall confine my remarks to the procedural point, and in particular to the argument of the noble Lord, Lord Reay, who criticised me for tabling the Amendment. He was the only speaker to bring Party politics into the debate. He talked about the great engines of the Opposition being trundled out. With all his peripatetic manoeuvrings round the House, from the Liberal Benches—I am not sure whether he stopped at the Cross Benches—and then on the Conservative Benches, and with his speeches on the Spectator, I think I must tell him something about the procedure of this House and why a former Leader of the House or Leader of the Opposition or any noble Lord should approach a problem like this in terms of the correct procedure of the House of Lords.
The reason I tabled the Amendment was that it took me about four days of careful reading and studying precedents —the Report was published only ten days ago—to make up my mind that, despite all the precedents, I ought to oppose the recomendations of the Special Orders
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Committee. Having come to that view, and having informed certain House authorities, the great engines of Opposition were then trundled out and it was obvious that there would be a vote. Rather late in the day, in this fairly short period, we discovered that if we just voted down the recommendation of the Special Orders Committee the whole weary business would start again. New petitions would come in.
Therefore this Amendment provides the House with three choices. The House can either vote against the Amendment on the grounds that it does not want the Order now to be laid and dealt with in the ordinary way. The House can none the less vote, having rejected the Amendment, for the Report, or the House can vote against the Report. This follows later. If the House votes against the whole Report, it goes back to the Special Orders Committee, and I am bound to say that this procedure seems to me to be the best way. It is always difficult to ensure in our debates in the House that one gets issues clearly before the House in such a way that a decision can be taken.
Now, my Lords, I should like to say why I believe in these exceptional circumstances we ought to reject the recommendations of the Special Orders Committee. The arguments have been fairly deployed, both by my noble friend, Lord Fletcher, and by other noble Lords; and the noble Lord, Lord Reay, made—if I may now say something nice to him—a very good speech on the other side of the matter. But I do not accept as a constitutional principle—and it would be an exceedingly dangerous thing if we as a House accepted it as a constitutional principle—that we must in every case accept the recommendation of one of our Select Committees.
My Lords, I will go a little further on this point. The fact is that in this case, as noble Lords have pointed out, the Special Orders Committee were given a particularly difficult task. They voted four to three. We know that the Chairman of the Committee, the noble Earl, Lord Listowel, in his usual impeccable and fair way, put the case to the Special Orders Committee in a very fair and impartial way. We know that he voted against this recommendation, and I think there is some reason to believe—as my

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noble friend, Lord Hale, pointed out—that the Committee in certain respects misdirected itself, because when my noble friend, Lord Stow Hill, was interupted by me and subsequently challenged by the noble Lord, Lord Nugent, he said in regard to the passage in Standing Order 216 concerning the sort of consideration that the Committee must take into account in deciding:
"whether the matter has been so dealt with: upon a departmental inquiry that further Inquiry is unnecessary."
that he thought that because this was not technically a Departmental Inquiry, with a capital "D" and a capital "I", it was not a consideration they should take into account. I hope I do not misinterpret him. As my noble friend pointed out, it is printed—if we are going into this sort of detail—with a small "d" and a small "i", but if an inquiry ordered or asked for by a Department is not a Departmental Inquiry, I do not know what it is.
In any case, scope is given in the Order to take into account any of the other circumstances of the case, and the Report of the Monopolies Commission is quite crucial in this respect. It is a far more thorough-going report than any normal Departmental Inquiry. This brings us to the further point as to whether our Special Orders Committee can usefully do a job in this matter. The Special Orders Committee are bound by Standing Order 216. Although they obviously were very divided on it, and I personally would not have agreed with their recommendation, none the less they took it perfectly properly. However, Standing Order 216 does not apply to the House of Lords, and because I appreciate that the Government are in a difficult position, and the noble Lord the Leader of the House has an obligation both to advise the House as to practice and at the same time not bring the pressure of Government to bear, because they are an interested party, I have felt that it was my duty—and, indeed, the duty of other noble Lords—to form a view on this issue.
In the case of a Private Bill, we should be exceedingly ill-advised if we departed other than in the most exceptional circumstances—and I think that we must admit that there are some—from the Report of one of our Select Committees.
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But, my Lords, that is a very different type of operation, and it has been usual on those Committees that there has been either a unanimous Report or an overwhelming majority one way. That is not the case here, and I believe that to extend this principle into a constitutional principle is extremely unsound, and indeed dangerous, for the House. Furthermore—and I say this because 1 have a very high regard for the opinion of the noble Lord, Lord Conesford—it is only after the most careful thought that I have felt it right to recommend the Amendment that I have put forward.
My Lords, many arguments have been given on both sides in this matter with which I should have liked to deal. I do not myself believe that a Select Committee can do the job in the period that is necessary or that it is desirable, notwithstanding the advice of the noble Earl, Lord Halsbury—and I acknowledge that the noble Earl is a first-class research scientist and a most eloquent technologist, but not a very sound proceduralist. In this matter, we have to apply the judgment of common sense, the common sense which your Lordships' House shows, and decide that we have given Roche a pretty good run today.
Admittedly, there is prejudice against Roche. I have refrained from commenting on Roche's quite extraordinary performance, because it is important that we come to our view not just on a judgment as to how they behaved—although there has been plenty of evidence on that —but on whether it is right for the House to take this matter any further. I would submit that if this Amendment commends itself to the House the effect will be that the Government Order will be proceeded with and it will be possible for both Houses to take their decisions in the usual way.
3.30 p.m.
LORD WINDLESHAM: My Lords, this has been a full debate and one that has done credit to your Lordships' House. We have seen an impressive range of special knowledge and experience deployed by noble Lords who have taken part. Their contributions have undoubtedly provided a most thoughtful and valuable preparation of our minds for a decision of considerable

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importance. I should first of all, on behalf of the House, like to thank those noble Lords who served on the Special Orders Committee which considered whether the Petition of the Roche Company should be referred to a Select Committee. The Special Orders Committee met on five separate occasions, three of them while the House was in recess.
The noble Lord, Lord Diamond, in moving the Amendment, and the noble Lord the Leader of the Opposition, in the speech he made just now and others who have supported them, have put a powerful argument for the House to set aside the recommendation of its Special Orders Committee that there should be further inquiry by a Select Committee into the particular issue of whether or not the prices recommended by the Monopolies Commission for profitable drugs which are already on the market made adequate provision for a proper allocation for group research and development expenditure.
As I understand it, the basis of the argument is that an Order made by the Government of the day, following a careful review of the evidence of the Monopolies Commission—a body created by both Houses of Parliament—and furthermore an Order which is open to challenge by way of normal Parliamentary procedures relating to Statutory Instruments, is not an appropriate case in which the Special Orders Committee should recommend that an Order should be referred to a Select Committee of your Lordships' House for further examination. Against this view stand the speeches of those who have spoken in support of the Motion in the name of the noble Earl, Lord Listowel, who presided over the Special Orders Committee when it considered this Order. Although the noble Earl himself voted with the minority on the Committee, he has advised your Lordships in his speech in opening the debate that in this instance the established practice of the House should be followed. The Lord Chairman reminded us that we normally agree to reports of a Committee which has heard the argument of the parties represented by counsel, something which, by definition, the whole House cannot do in considering the Committee's
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Report. The noble Lord, Lord Reay, a member of the Special Orders Committee, also developed the argument for adhering to the usual practice.
What we have to do now is to weigh up in our own minds what we judge to be the merits of this issue. There are several strands. There are the interests of the Government; there are the interests of the House; there is the importance of maintaining the effectiveness of the Monopolies Commission; and there is the consideration that aggrieved parties should be able to pursue the remedies open to them to the full. Each of these is part of what we mean when we talk about "the public interest". Of course, all assessments on matters of this kind are inevitably subjective: we have seen in several speeches to-day how interpretations differ of where the interests of the House and the national interest lie. My own role, it seems to me, being at the same time the Leader of your Lordships' House and a member of the Government, is essentially a hybrid one, with all the complications that that status involves.
Since the Government is a party to these proceedings, as the noble Lord, Lord Conesford, reminded us, it did not seem appropriate that my noble friend Lord Limerick, who speaks for the Department of Trade and Industry in the House, or I, should argue the Government's case for making the Order. The Government have already demonstrated by their action in making the Order that they believed it right to move urgently to reduce the prices charged by Roche for the drugs which were subject to the Monopolies Commission reference.
The Commission is a body, as has been said, of high standing, and, as the noble Lord, Lord Brown, pointed out, it is used to dealing with a wide range of commercial, financial and industrial matters. It is charged by Statute with the task of investigating situations such as the pricing of the drugs with which we are concerned to-day. The Commission concluded, after a detailed inquiry, that Roche's prices in this country had for some time been too high, and that the Roche Group had obtained from the sale of these drugs in this country profits in excess of what they considered justifiable. The Order, which had been affirmed in another place, implemented

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the Monopolies Commission's recommendations on price levels. The Government believe that it was right to make that Order, and continue to believe that, as a matter of public policy, the Order should receive the approval of Parliament.
Let me now turn to the procedural aspects which are the second factor that we must take into account in reaching a decision on whether or not to accept the recommendation of the Special Orders Committee that there should be further inquiry. Under Private Business Standing Order No. 216, the Special Orders Committee is empowered to consider whether a Special Order is hybrid. If it reports that the Special Order is hybrid. It is open for a party affected by the order to petition against it, and the Special Orders Committee must consider whether or not to recommend that the Petition should be referred to a Select Committee. The Special Orders Committee has given this Order the most thorough and conscientious consideration—I am sure that we can all agree about that—and has reached, by a majority of 4 to 3, the conclusion that it should be considered further by a Select Committee.
My Lords, in these circumstances, and after listening to the debate this afternoon, the Government are content to let the procedures of the House take their course. There are differing views about the desirability of the present procedure of your Lordships' House whereby hybrid orders can be sent to a Select Committee. It is true that this procedure is available to Petitioners such as Roche only in the House of Lords. Nevertheless, the House has this procedure. The noble Lord, Lord Fletcher, said he thought it had some advantages and the question that must be answered is whether it should be observed in the normal way, or whether the usual practice should be departed from in this instance, in the case of one exceptional and controversial case.
I know that I am giving nothing away if I say that the Joint Select Committee on Delegated Legislation under the chairmanship of my noble friend Lord Brooke of Cumnor is considering whether the Lords' procedure on hybrid orders is a useful one and whether it should continue as it is, or be altered in the
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future. I understand that the Committee hopes to report before long, and in the light of the recommendations it makes, we shall then be able to decide whether this particular procedure of your Lordships' House should be amended.
Underlying our whole discussion this afternoon there has been one aspect not much mentioned in the debate, although the noble Lord, Lord Byers, touched on it in his short speech a few moments ago. That is the consideration of fairness and natural justice. The procedure of the House on hybrid Bills or Orders allows private interests affected by public actions certain remedies. An aggrieved party is entitled to expect that he can pursue these remedies to the limit. To cut off this procedure before the last and possibly the most effective stage from the standpoint of the petitioner is a course of action that requires careful thought. These are very difficult issues and it may be, for the reasons advanced by the noble Lord, Lord Shackleton, and others who supported him in his amendment, that the procedure should be terminated at this stage. That is for your Lordships to decide but, before reaching a decision, we should have in our own minds the full range of considerations involved.
In conclusion, I should like to say that, speaking for myself, I cannot find in the report from the Special Orders Committee any challenge to Her Majesty's Government in seeking to abrogate from the Government their right to make policy decisions. Under the procedure of your Lordships' House, the Special Orders Committee was called upon to recommend simply whether or not further consideration of a particular matter should be given by a Select Committee. By a small majority, they decided in the affirmative. As has been explained, they recommended that further consideration should be limited to the particular issue of the cost of research and development of new drugs in relation to the profitability of existing drugs which have found a wide market.
Your Lordships have now heard the arguments that have been deployed—and they have been deployed fully and effectively. I have made it clear that I do not think that the Government should seek to influence the decision of the House in any way. Noble Lords will want to give due weight to the arguments

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of the noble Lords, Lord Diamond, Lord Shackleton, Lord Fletcher and others who spoke for the Amendment, and to set them against the considerations we have heard put forward by the noble Lords, Lord Stow Hill, Lord Reay, Lord Halsbury and others. In the end, it is for your Lordships to decide. This is the
Resolved in the Affirmative, and Amendment agreed to accordingly.

CONTROL OF ZOOLOGICAL GARDENS BILL [H.L.]
3.50 p.m.
LORD JANNER: My Lords, I beg to move that the House do now resolve itself into a Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord Janner.)
House in Committee accordingly.
[The LORD AIREDALE in the Chair]
Clauses 1 to 3 agreed to.
crucial issue, and I am content for the House to use its own judgment and to reach its own decision.
3.42 p.m.
On Question, Whether the Amendment shall be agreed to?
Their Lordships divided: Contents, 43; Not-Contents, 23.

CONTENTS

Amherst, E.

Davies of Leek, L.

Kennet, L.

Amulree, L.

Diamond, L. [Teller.]

Llewelyn-Davies of Hastoe, B.

Auckland, L.

Donaldson of Kingsbridge, L.

Loudoun, C.

Balerno, L.

Douglas of Barloch, L.

McLeavy, L.

Balogh, L.

Effingham, E.

Nathan, L.

Beswick, L.

Emmet of Amberley, B.

O'Hagan, L.

Brockway, L.

Ferrier, L.

Phillips, B.

Brown, L. [Teller.]

Fletcher, L.

Sainsbury, L.

Burton of Coventry, B.

Gaitskell, B.

Samuel, V.

Byers, L.

Greenwood of Rossendale, L.

Serota, B.

Chalfont, L.

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

Shackleton, L.

Champion, L.

Snow, L.

Chorley, L.

Hale, L.

Strabolgi, L.

Clwyd, L.

Hurcomb, L.

Wells-Pestell, L.

Crook, L.

Janner, L.

NOT-CONTENTS

Airedale, L.

Grimston of Westbury, L.

Milverton, L.

Atholl, D.

Halsbury, E. [Teller.]

Platt, L.

Beauchamp, E.

Ironside, L.

Reay, L. [Teller.]

Brabazon of Tara, L.

Lauderdale, E.

Reigate, L.

Conesford, L.

Listowel, E.

Ruthven of Freeland, Ly.

Craigton, L.

Lucas of Chilworth, L.

Stow Hill, L.

Cranbrook, E.

Massereene and Ferrard, V.

Vivian, L.

Dudley, E.

Merrivale, L.

On Question, Motion agreed to.

Clause 4 [Maintenance of Zoo]:
LORD SOMERS LORD SOMERS moved Amendment No. 1:
Page 2, line 22, at end insert—
("( ) the provision of cages which allow reasonable freedom of movement, including lying down, stretching and turning round;").
The noble Lord said: I put this Amendment down largely as a probing Amendment, but I should like to make it clear from the start that my chief interest is to see the Bill go through, and if passing this Amendment will impede it in any way I shall certainly not press it. I do not, however, see why it should do so. It is possible that my Amendment is already covered by Clause 4(a), but there is the doubt in my mind that the health and welfare of the animals is sometimes a question of individual opinion. It need not necessarily include mental welfare. It is for that reason that I have put the Amendment down. It is a simple provision that would be perfectly easy to

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enforce and, I think, is already observed by all respectable zoos. I beg to move.
LORD JANNER: Those who are sponsoring the Bill fully appreciate the intentions and objects which the noble Lord, Lord Somers, has in mind. We certainly should not do anything that would diminish the intentions of the Amendment, and we are quite satisfied that the clause already provides for the point raised by the noble Lord. In the circumstances, we hope he will accept the position in the same light as we see it and withdraw his Amendment.
THE MINISTER OF STATE, HOME OFFICE (VISCOUNT COLVILLE OF CULROSS): I should like briefly to comment on the Amendments which have been put down, from the point of view of the Government, though I do not in the least wish to influence the noble Lord, Lord Janner, and his colleagues, or the House. All I want to do is to put our point of view on the Amendment.
The noble Lord, Lord Somers, said he thought this matter might be covered under Clause 4(a). We think so, too. The positive disadvantage of this provision is that supposing a minimum size of cage or enclosure was laid down for a particular animal, some zoos might consider that the minimum was the equivalent of the maximum. This would clearly be a pity, because it might discourage people from providing greater freedom, which I know is the noble Lord's intention, as it is of all of us. Therefore I would suggest to the noble Lord that this is, as he thought, covered by paragraph (a).
I should like also to make one general point. There are points in the Bill where I believe the drafting needs tightening up. I mentioned Clause 4(e) in my Second Reading speech. There are a number of points in this Bill which, although not fundamental, need to be examined with the help of Parliamentary counsel if we are to have a really good measure on the Statute Book. It has not been possible to do this at the moment, and I do not think that the noble Lord. Lord Janner, will criticise me for this. There has been a certain amount of haste in this matter, to which I do not object, but I make the point that in order to produce a perfect Bill it may be necessary in due course to tighten up the drafting so that
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eventually a good measure appears on the Statute Book. I make no promise about putting it on the Statute Book; I merely make the drafting point so that I do not need to do it again. But here the drafting of the Bill is adequate, and the noble Lord, Lord Somers, need fear nothing if he decides not to press the Amendment to a Division.
LORD JANNER: I hope I shall be forgiven for speaking again. The point raised by the noble Viscount is important, but we have given considerable attention to the Bill and had excellent drafting people on the matter. I am not talking of myself, but of the Parliamentary draftsmen. I am worried about something else. There is considerable anxiety about the situation as it exists at present. If it is possible for the draftsmen to get any suggestions put before us by the Report stage, or perhaps in another place, it will be advisable to do it as speedily as possible. There is public agitation about what is happening and we are most anxious that it should be allayed.
VISCOUNT COLVILLE OF CULROSS: What happened was that the noble Lord and his friends were most co-operative in framing the Bill broadly in its present form. The details were filled in by his own expert advisers and I do not wish to suggest that they have done anything but a good job. However, the noble Lord will also know from long experience of both Houses that there is always room for a second technical look at these matters. I deal with the animal side of the Home Office day by day, and at the moment I have on my hands no fewer than four Private Members' Bills, none of them easy, and this is no exception. If the noble Lord thinks that I can get the resources of Parliamentary counsel on this Bill within the next fortnight or so, I must disappoint him. What I can say is that if he likes to continue consultation with us, we will do our best to see that we get the details right, but I cannot promise that it will be done in a hurry in order to get a perfect measure within a short period of time.
LORD SOMERS: The remarks of the noble Viscount are entirely convincing. I think it would be possible, if the Bill is passed, to amend it later to add a few extra points. I would rather do that than

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impede the progress of the Bill. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.0 p.m.
LORD CRAIGTON LORD CRAIGTON moved Amendment No. 2:
Page 2 line 30, at end insert:
("(g) that effect is given to such measures concerned with the conservation of rare animal species as shall be conveyed to him through the Council by direction of the Minister after the Minister has consulted with such authorities as he may think fit").
The noble Lord said: I tabled this Amendment immediately after Second Reading because I felt that the powers and duties in connection with conservation should be added to the Council's powers and duties. As an example of what I mean, may I say that if I were running a zoo and did not wish to keep certain animals over the winter but wished to dispose of them, let us say, by sale, I could get away with that, entirely against the interests of conservation, without being struck at by any of the clauses of the Bill. I feel that conservation should be added to the Bill, and I hope that the noble Lord, Lord Janner, or the Minister will be given time by my Amendment to find an answer if I do not find one myself.
In winding up on Second Reading the Minister pointed out that the duties of the zoos are dealt with in Clause 4, inspection in Clause 5, and what happens after inspection in Clauses 6 and 7. So I had to fit my new paragraph into Clause 4. It is not very long. The clause will read:
"It shall be the duty of the owner of a zoological garden to make and maintain proper provision for ensuring at that zoological garden:
(g) that effect is given to such measures concerned with the conservation of rare animal species as shall be conveyed to him through the Council by direction of the Minister after the Minister has consulted with such authorities as he may think fit."
Now, I know that there are a number of Ministers concerned, and they would act only through this Amendment or through this Bill where it was helpful in their ministerial responsibilities: for example, in any results that would flow from co-operation between the Council and the Advisory Committee on the Animal (Restriction of Importation) Act
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1964, who have said that they would like such co-operation. There might, as a result of that, be special housing or welfare arrangements for certain species. Again, arrangements might be made for breeding at certain zoos as an alternative to imports. Again, although it is a minor matter, the Council might think it wise to have a little plaque—like the Jersey Zoo, which has a little dodo plaque—on the cages of all the animals which are threatened. This is a most important educational exercise, because the children and other people who go to the zoo realise that they are seeing something that is of inestimable value and which must be preserved.
I do not think that it is any more difficult to administer and adjudicate on my humble little clause than it is on any of the other subsections in Clause 4, because who can really adjudicate adequately on the health and welfare of animals, or the provision of adequate veterinary care, or the adequate number of people? These questions are all matters of opinion, especially when it comes to deciding whether a zoological garden is maintained in a proper state of repair. The truth is that the adjudication under Clauses 4 and 5 will add up to a number of failings which, taken together, will show a zoo that is perhaps too badly run to allow it to continue without improvement; and that is the purpose of Lord Janner's Bill.
Basically, I think that this Bill should include powers to take conservation measures, and I hope that the Minister will accept the Amendment. If he does not accept it, I feel justified in asking the noble Lord, Lord Janner, or the Minister for a reason why my Amendment is not acceptable, a reason that will be acceptable to the many conservation interests concerned who will read this debate and wonder, as I do, why the Home Department should be taking conservation out of this Bill twice. If I can have a satisfactory reason given by the noble Lord who preceded me in this debate, I will withdraw this Amendment.
VISCOUNT COLVILLE OF CULROSS: I wonder whether the noble Lord, Lord Janner, and the Committee would allow me to say a word on this subject before the noble Lord speaks? I will give way to the noble Lord if he would like me

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to, but this is, I think, essentially a matter for Government to attempt to advise the Committee. There is no doubt that my noble friend, Lord Craighton, is right in thinking that many people, including the Government, are interested in the conservation of wild species, whether in this country or abroad. The trouble is that there are two points of substantial importance when we are considering this Amendment to the Bill.
First of all, this Bill has been prepared after a considerable amount of work between the noble Lord, Lord Janner, and his friends and my own Department to cover a specific area, and we hoped that with the drafting titivations that I mentioned it would be successful. But it has only attempted to cover a certain area—the welfare and health of animals in zoos and the safety of the public visiting zoos—and there has been a self-denying ordinance among those who have been promoting the Bill to keep it to that area, to the extent indeed that some of Lord Cranbrook's original and heartily felt ideas have, for the public good, been abandoned in the draft that we now have before us.
The suggestion that my noble friend, Lord Craigton, has put forward is a major extension of the scope of the Bill, and this must he recognised at once. It does not mean that conservation is not a good thing or that any body disapproves or is anything but wholly in favour of it: it is simply that, within the scope of the Bill at the moment, we have no provision for conservation. If we were to try to make provision we should be promoting a different measure from the one that at the moment is being given a Second Reading in this House. I would then go on to the sort of difficulties which attack Government in dealing with such matters. Legislation already exists on the Statute Book to deal with conservation and governmental control over conservation of rarer species of either animal or bird.
I answered a Question the other day about the import of rare birds. This is a Home Office matter, and where the Home Office is responsible an Order is made which refers to birds of prey and owls. There is another provision under the Animals (Restriction of Importation) Act 1964, to which my noble friend Lord
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Craigton referred. At present this is the responsibility of my right honourable friend the Secretary of State for Education and Science, though in fact it is the Department of Trade and Industry which upon her advice issues the licences when importation is allowed. Under the provisions of the Nature Conservancy Bill, which is at present before Parliament, there is some reason to suppose that this whole conservancy matter could go over to my right honourable friend the Secretary of State for the Environment.
If my noble friend thinks that, having discussed a Bill of this sort with the noble Lord, Lord Janner, and his colleagues for something like 18 months now, I could agree to co-ordinate the views of two other major Departments—probably the Department of the Environment as well—within a matter of a few weeks, in order to see, first, whether they would be agreeable to the Council set up under the Bill having charge of this aspect of the matter and, secondly, whether they agree that that particular responsibility, it invested in the Council, would fit reasonably well into their existing statutory liabilities, then I am bound to say that noble Lords expect more than the Home Office can possibly attempt to achieve.
I am sorry about this, but it adds a great complication to the Bill. Within the machinery of Government it involves a number of different Departments, all of which are bound to have a fairly important point of view. I cannot put these together at present. I cannot say whether the Council it is proposed to set up under the Bill is the right vehicle for dealing with this matter. I must advise the Committee that any insistence upon the inclusion of this totally new element into a Bill which has previously been confined to the matters that I mentioned would make it very dubious indeed whether the Government could retain the neutrality which they have so far adopted towards the Bill.
I should be very sorry to abandon this attitude, but I am bound to warn the Committee that I am not ready, and I am not likely to be ready within the foreseeable future—in Parliamentary terms—to go as far as my noble friend Lord Craigton suggested. It is not through lack of sympathy with conservation; it is simply that it does not fit

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into the pattern that the noble Lord, Lord Janner, and his colleagues have prepared for this Bill, which is intended to be a limited measure and which, with this amendment, would be greatly extended from what it was originally intended to do.
4.11 p.m.
THE EARL OF CRANBROOK: My Lords, I find myself in complete agreement with the spirit and intention lying behind the Amendment of the noble Lord, Lord Craigton, but not so much in agreement with the blank non possumus of my noble friend who sits on the Front Bench. On the other hand, if the noble Lord, Lord Craigton, were to consider the existing legislation, he would find that most of what he wants is already met He wants conservation to be one of the main points in any zoo policy, on the ground that there is danger that zoos and other animal collections exert pressure on wild populations by encouraging collectors to collect animals to bring to this country for sale.
As the noble Viscount has said, we have two Acts which control the importation of creatures into this country. The Animal (Restriction of Importation) Act 1964, which is intended only to apply to rare animals. Under that Act, when a licence is given to import an animal, I think it is the invariable practice of the advisory committee to insist that it goes into a zoo or collection where it will become part of a viable breeding unit. Permission is never given to import a single animal which could not possibly breed in captivity; it is given to viable breeding units only when the committee are satisfied that the man in charge of the zoo or collection is sufficiently skilled to be able to ensure that help is given to the preservation of that species by breeding in captivity. That policy has been remarkably successful. There is a similar provision for birds in the Protection of Birds Act, and in the 1967 Act there is a special provision that licence is to be given for aviculture, which means the breeding of birds in captivity. It is true that, as yet, there is no provision to ensure that animals not looked upon as rare are sent to viable breeding units, and that so far the Protection of Birds Act has not been brought into operation
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to control the large imports of birds that take place.
The noble Lord also referred to the practice which has been the habit of some of the worst zoos of having summer collections; getting rid of the animals in the winter and not bothering about their welfare as they would have to do under Clause (4)(a) of this Bill. In recent years it has become the yardstick of the efficient running of a zoo that it succeeds in getting the animals in part of the collection to breed. That is what builds up the reputation of a zoo. I have no doubt that the Council, when it is set up, will be bound to take that into consideration in relation to Clause 4. All reputable zoos look upon that as an essential part of their animal welfare to-day. I am certain that the Council will insist, almost inevitably, upon the securing of good breeding units for all animals in zoos. In paragraph (f) the Council will have all the information it needs to ascertain whether that is being done. I believe that most of what the noble Lords require will be done under existing legislation, and I accept what the noble Viscount said, that this is not the proper place to put it, though I believe that we can get it in other ways.
LORD GREENWOOD OF ROSSENDALE: I think we are all in difficulty here because we are all anxious to see the Bill on the Statute Book and we all support very strongly the sentiments of the noble Lord, Lord Craigton. Our difficulty stems from the fact that we are up against an extremely difficult timetable. The noble and learned Viscount has described all the work and discussion that have already gone into this Bill, and has told us that there is no chance of having the help of Parliamentary draftsmen between now and Report. For that reason we should be a little self-disciplined in supporting any Amendments, however much we should like to see those Amendments incorporated in the Bill. I hope, therefore, that the noble Viscount will be able to give us some encouragement to believe that the services of Parliamentary draftsmen will be available before the Bill reaches another place, and that perhaps, through the discussions that we are having in your Lordships' House in Committee, Members of another

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place may be acquainted with the strength of opinion which has been expressed here and that perhaps the discussions can take place there which otherwise we should all like to see taking place both on Committee and on Report.
LORD HURCOMB: I feel some sympathy with the noble Viscount, and I agree with him that it is no good putting a greater burden on the Home Office than it can effectively and vigorously carry. But it seems to me that the noble Viscount may be exaggerating the difficulties here. At the same time, I wonder whether the Amendment goes far enough. As I read it, all the Amendment says is that the owner of a zoo, if he happens to own one of these rare species, is to keep it and behave towards it in a certain way. The Amendment does not impose some new and broader duty on him of having a policy of conserving rare wild animals. Possibly it ought to do this, and possibly the framer of the Amendment might have another look at that question, and wonder whether he is not being too moderate.
If I am at all right in the construction that I am putting on the Amendment as it stands, I cannot see why it should cause either the draftsmen or the Home Office, or the Minister, in due course, any difficulty in saying that if these creatures happen to be under a zoo owner's care they will be treated and dealt with in certain ways. Therefore, is there not a risk that the whole problem may be getting blown up into proportions which it will not really assume in practice if something of this kind goes into the Bill?
LORD DONALDSON OF KINGS-BRIDGE: I hope that the noble Lord will not press this Amendment. My noble friend's Bill has had to shed unasked-for additions ever since it was first introduced. We had circuses and every kind of other thing brought in by people who have a natural interest in these matters, and the narrow object of this Bill, which is to prevent animals from being exhibited for money without due care, is liable to fall. Of course I support every word that Lord Craigton and the last speaker said. If the Minister responsible explains to us that this is too difficult for him to help us over, we may feel sorry for him and
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think that it is a feeble affair; but that is the situation. I do not say that, actually: I understand the situation very well. However, if noble Lords do feel that, I still think that we must put up with it. Let us get something absolutely specific, quite hard, and easily understood, which we have spent years discussing and which is still not entirely agreed to by some of the people that it will concern; and please do not let us widen it. I believe that the noble Lord would do well, in the interests of the Bill as a whole, to step down this time, and I will support him on a Private Member's Conservation Bill any time that he likes to bring it in.
LORD JANNER: My Lords, I am very grateful to the noble Lords who have spoken. I think that one could almost agree with every word that has been expressed, particularly in relation to our anxiety to see that what the noble Lord, Lord Craigton, wants shall be brought into effect in practice. I do not wish to detain the House any longer, except to say that I have had a fair amount of experience on Private Members' Bills, and I have not yet known of any Private Member's Bill that has gone through if there has been any Government opposition. It may not be a very strong argument to use, but at the same time I think that one has to look at the practical side of these matters.
As the noble Viscount has said, we have had very long talks about this—incidentally, I think the noble Viscount underestimates his ability to look at Bills. I have had the privilege of sitting for some years under his very able guidance in respect to the examination of Bills in the Consolidation Committee and I have never found him at a loss at putting things right, even though the draftsmen presented their own particular views. Therefore, I shall make a personal appeal to him to look at the position as put by my noble friend Lord Greenwood and try to agree this.
If the noble Lord, Lord Craigton, sees fit to withdraw the Amendment, I am sure it will be in the interests of getting the Bill through as speedily as possible. That being the case, perhaps the noble Viscount will regard that as a step towards getting the Bill through this Session. In the circumstances, I hope that the noble

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Lord, Lord Craigton, will withdraw his Amendment.
4.23 p.m.
LORD CRAIGTON: I was very disappointed by the reply of the noble Viscount. He said that the Bill was for health and welfare of the animals in a zoo. I wish he had realised what I am sure everybody else realises, that it is the welfare of the rare animals in a zoo on which the life of the zoo depends. We cannot ignore this. I am fortified in the belief that although the noble Viscount does not apparently put any value at all on conservation being added to the Bill, the Zoo Council will, I am sure, make every effort to use it to help conservation. It is they who, one day, will be sorry that powers for conservation are not included in the Bill. Having said that, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 4 agreed to.
Clauses 5 to 7 agreed to.
Clause 8 [Supplementary provision as to the register and fees]:
4.24 p.m.
LORD CRAIGTON LORD CRAIGTON moved Amendment No. 3:
Page 4, line 13, after ("number") insert ("and amount").
The noble Lord said: In spite of the fact that the Council have powers to vary the amount charged I felt it might be more convenient for the Council to consider the amount that was drawn by the zoo as well as the number of people visiting it. As I said on Second Reading parties of schoolchildren can add greatly to numbers without adding much to money. But I stand entirely on the recommendation of the Front Bench as to whether I should press the Amendment.
LORD JANNER: I hope the noble Viscount will concede the point. I think that it has been very admirably put in a few words by the noble Lord, Lord Craigton. So far as I am concerned, I should be happy to accept this Amendment.
VISCOUNT COLVILLE OF CULROSS: I have no strong views on the principle, but with the greatest respect to my noble friend Lord Craigton, I shall now draw upon the eulogies that the noble Lord, Lord Janner, said about me a little while ago. If noble Lords want to take account of the point which my noble friend has made, I wonder whether my noble friend would look at paragraph 8(l)(c). I think that the noble Lord means that the sum is to be calculated on the number of paid admissions and the sum received from such admissions. The number of admissions and the amount of admissions, which is what the Amendment says at the moment, is the same thing. What the noble Lord means is the number of admissions and the amount of money that is obtained from the admissions, particularly as some of them may relate to large numbers of schoolchildren.
LORD CRAIGTON: The number of paid admissions and the amount of paid admissions seem to me to be two different things.
VISCOUNT COLVILLE OF CULROSS: It means the sum received from such admissions. I think that that is really what my noble friend means. If that is what the noble Lord would like to put down, I am sure that it is a very good point, but at the moment I do not think that the noble Lord is quite achieving what he wants to achieve.
LORD DONALDSON OF KINGSBRIDGE: May I suggest that if the noble Lord would withdraw the Amendment I am sure that my noble friend would incorporate the correct wording on Report?
LORD CRAIGTON: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.28 p.m.
LORD DONALDSON OF KINGSBRIDGE LORD DONALDSON OF KINGSBRIDGE moved Amendment No. 3A:
Page 4, line 14, at end insert: ("provided that in the case of paid admissions of under 100,000 to a zoological garden during the previous year, the sum shall not exceed cult per cent. of the gross takings of that zoological garden.')
The noble Lord said: The noble Lord, Lord Strathcona, asked me to speak to

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this Amendment because he cannot be here to-day. The noble Lord is a director of one of the zoos in the association of which I am not the chairman; that is, the Association of Zoos. I am the chairman of the Federation of Zoos. The fact that we both think that this is a reasonable Amendment may commend it to your Lordships.
The Amendment is very simple. There is a feeling among some of the smaller zoos that they are in danger of being charged too much for the services. We saw no reason whatever not to put a ceiling on that, and therefore we have put down this Amendment which provides that any zoo with paid admissions of less than 100,000 shall have its contribution calculated as a relation of not more than 1 per cent. of the gross takings. I think that this is perfectly satisfactory. But if the wording is not satisfactory, the meaning is quite clear, and I would happily withdraw the Amendment in order that it may be re-worded. In the meantime, I beg to move.
VISCOUNT COLVILLE OF CULROSS: May I say a word on this Amendment before the noble Lord, Lord Janner, comments? It is not because I wish either to support or oppose the Amendment: I am taking my usual neutral attitude. The question is that if one provides by Statute, as this Amendment would do, that there is to be a shift of the burden of fees from the smaller zoos to the larger ones, one takes away any element of discretion in the Council that is being set up to make a scale to fit the case, and one will have one category which is, by Statute, dealt with in a certain way, and all the other zoos will be dealt with in another way. Therefore. one will inevitably shift the financial burden.
I do not want again to go into the question of the finances of the Council as a whole, because these were dealt with on Second Reading, although we do have slight reservations about these. One will shift the financial burden from the small zoos and load it, so that the Council can carry out its work properly, on to the larger ones.
As the Bill stands at present, there is the enormous merit that, in Clause 8(4) it says:
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"The Council may, if they think fit, remit in part any annual sum prescribed under subsection (I)(c) above."
This is endlessly flexible, and instead of laying down statutory citeria, particularly if a subsequent Amendment about the make-up of the Council is accepted, it may he a more satisfactory way of dealing with it, and one that would appeal both to the noble Lord, Lord Donaldson, and to my noble friend Lord Strathcona and, indeed, to those whose interests are to some degree represented by what they say. I put that forward because I think it is worth considering.
THE EARL OF CRANBROOK: Perhaps the noble Lord, Lord Donaldson, may be willing to withdraw the Amendment because I feel it should be discussed with some of the associations currently concerned with zoos. Provision is made in Clause 8(4) for dealing with particular types of cases in particular ways and it might well be that some words added to that clause would be more satisfactory than doing it in this way. But certainly it should first be discussed with the various associations representing zoos.
LORD DONALDSON OF KINGSBRIDGE: If my noble friend is prepared to look at this again between now and Report stage, I shall be happy to withdraw the Amendment.
LORD JANNER: I appreciate the point that has been raised, and of course one takes into consideration the view put forward by the noble Viscount, but there is something to be said for the intention of this Amendment. However, I am quite prepared to look at it again and, in the circumstances, perhaps my noble friend will be good enough to withdraw his Amendent.
LORD DONALDSON OF KINGS-BRIDGE: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clause 9 agreed to.
Clause 10 [Accounts]:
LORD JANNER LORD JANNER moved Amendment No. 4:
Page 5, line 11, leave out ("and Corporate").
The noble Lord said: There is a very simple explanation for this Amendment. The words "and Corporate" no longer exist in so far as the particular body to which they refer is concerned, and in the circumstances I beg to move.
On Question, Amendment agreed to.
Clause 10, as amended, agreed to.
4.33 p.m.
THE EARL OF CRANBROOK THE EARL OF CRANBROOK moved Amendment No. 5:
After Clause 10 insert the following new clause:
Annual Report
".—(1) The Council shall as soon as possible one year after the commencement of this Act make to the Secretary of State a report on the exercise and performance of their functions down to that date, and shall make a similar report to him as to each period of twelve months thereafter as soon as possible after its end.
(2) The Secretary of State shall lay a copy of any report under this section before each House of Parliament."
The noble Earl said: Under the Schedule, 9 out of the 11 members of the Council are nominated by the Minister and two by outside bodies. Quite apart from the fact that Parliament should be kept informed on this rather important piece of legislation about animal welfare, it will be important that the nominating Minister and the nominating bodies should know about the Council's activities over the previous year. It is common form for such a report to be made. This would be useful to the Minister, to Parliament and to the general public, and I hope your Lordships will agree to this Amendment.
LORD JANNER: As is usual, the views of the noble Earl are acceptable, and are put in such a form that they could not be otherwise than acceptable. In the circumstances, I have nothing to add. I think it is a reasonable Amendment and I hope it will be accepted by the Committee.
VISCOUNT COLVILLE OF CULROSS: I have a word to add. Although I agree with the noble Lord. Lord Janner, that there cannot possibly be anything but good in publishing a report, it does not affect the principle that the Council will be an independent body. If it lays its report before Parliament, I very much hope that noble Lords and members in another place will remember that this is
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an independent body. It is not a body for which my Department is responsible. Of course, we shall take an interest in its report; we should endeavour to do so and I think it would be of great value. But the Council will still remain an independent body and not a creation of Government. I think it is important to make that point while saying that, so far as I am concerned, it seems to be an admirable Amendment. I have some drafting points but I shall not deal with those now.
THE EARL OF CRANBROOK: My Lords, it may well be an independent body, but the Minister makes the appointments; the appointments are only for three years. I hope and trust that if the Minister feels that the Council is not acting in accordance with the sort of policy of which Parliament and the general public are likely to approve, he will make some changes in its constitution. I do not look upon that as being unconstitutional. It was part of the intention of the framers of the Schedule that the Minister should have that power.
VISCOUNT COLVILLE OF CULROSS: I think that that is quite right. If the Council is doing things that Parliament says are perfectly dreadful, I am sure it would the duty of my right honourable friend to reconsider the membership of the Council; but while the Council consists of whoever it does consist of, it is the Council and its dealings are not the direct responsibility of my right honourable friend. I must make that perfectly clear.
LORD SOMERS: Is that not also true of a body such as the Arts Council, whose Report is debated regularly in your Lordships' House?
LORD DONALDSON OF KINGS-BRIDGE: With respect, the Amendment has been accepted by my noble friend, so there is no conflict here.
On Question, Amendment agreed to.
Clause 11 agreed to.
Clause 12 [Interpretation]:
THE DUKE OF ATHOLL THE DUKE OF ATHOLL moved Amendment No. 6:
Page 5, line 40, at end insert:
("deerpark" means any enclosure where deer are kept with or without other domestic animals;").
The noble Duke said: It might be to the convenience of the Committee if we considered the two Amendments standing in my name, namely, Amendments Nos. 6 and 7, together. It is fairly common for houses and gardens open to the public to have a deerpark attached or alongside, and at this moment I feel that it is only right that I should declare an interest—although a very small interest—in this Amendment. My house, which is open to the public, has a paddock with two deer in it at the moment, but I hope to build up so that I have representatives of each of the three kinds of deer resident in Perthshire.
Under Clause 3(3), if one charges for admission to one's house for car parking, and if one has anything that can be described as a "zoological garden" alongside it, or near it, one comes under the auspices of this Bill. I have no objection to that at all. I think there is every reason for wording Clause 3(3) in that way. Otherwise, some people who run zoos and who are frightened by the prospect of coming under the control of this Bill might try to get round its provisions by charging only for car parking, or something like that. So I have no intention of trying to amend Clause 3(3).
In the definition clause, Clause 12, the definition of a zoological garden is given as:
"any place, other than a circus, where are kept for the purpose of exhibition exotic animals or indigenous wild animals which are not living wild in their natural surroundings."
It might be argued that deer in deer-parks are living in their natural surroundings. That is a point which is open to some doubt, however, because roe deer, certainly, normally live in woods, and red deer normally live out on the hills. It could be argued that they are living in their natural surroundings, but however hard one tried, I do not think that one could say that they were living wild in their natural surroundings. Therefore I feel that deerparks alongside houses or gardens open to the public would come under the control of this Bill, and the owners of the houses or gardens concerned would accordingly have to register with the proposed Council.
There is a let-out in Clause 3(1)(b), which says:
"The Council may exempt from the pro-visions of this section any zoological garden if
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they are satisfied that circumstances exist to justify such exemption."
Presumably the "zoological gardens"—to use the words in the Bill—would have to be inspected by an officer of the Council before they could be exempted, in order to see that they qualified for exemption. I should have thought that this would create a lot of unnecessary work and expense for the Council, and that it is much easier to exempt deer-parks, which are fairly straightforward concerns. They are well-known and well-appreciated in the English language, and I think it is very rare for them to be mismanaged.
I should like to ask one other question of the noble Lord, Lord Janner. If one obtains an exemption under Clause 3(1)(b) of this Bill, is this in perpetuity, or does one have to reapply for exemption every year? This is a point of some importance, because presumably one could have a perfectly adequate garden as regards size, but if one put more animals or different species in it, it might become overcrowded and therefore become undesirable under Clause 4 of the Bill. I should have thought that the danger of exempting too many such places is that, once they are exempted, they may take advantage of such exemption and let their standards deteriorate.
This would seem to me to be a great pity. I hope, therefore, that deerparks may automatically be excluded from the Bill by an Amendment such as the one that I have put down, and that other places, if they obtain exemption for the purposes of the Bill, will at any rate be inspected from time to time to see that they are keeping up satisfactory standards. I beg to move Amendment No. 6.
VISCOUNT MASSEREENE AND FERRARD: I should like to support this Amendment briefly. It is perfectly true, as my noble friend has said, that it would appear to be quite unreasonable that a deerpark, where one has indigenous deer and where one may also have cattle and sheep grazing, and even perhaps horses, should be classed as a zoological garden. So many houses in this country have deerparks with indigenous deer in them.
VISCOUNT COLVILLE OF CULROSS VISCOUNT COLVILLE OF CULROSS: Oh, oh!
VISCOUNT MASSEREENE AND FERRARD: My noble friend on the Front Bench says, "Oh, Oh!", but I think I am quite right in saying that. A considerable number do. I agree that if one has a deerpark with exotic deer in it, that is a different matter, but where there are indigenous deer I hope that such deer-parks would be exempt. Having said that, I should just like to say again that I warmly support my noble friend.
THE EARL OF CRANBROOK: I think that the noble Duke intends that his Amendment should deal with indigenous deer and not with exotic ones, because the Amendment as now drafted, if it included all deer, would virtually bring in a zoo which had nothing but deer in it, and this would be far outside what the noble Duke intends to cover. If the noble Duke were prepared to add the word "indigenous", it would probably cover the case which he wishes to cover and which, as he points out, it was intended to cover by Clause 3(1)(b). That makes it quite clear, and I think it would be a useful addition if the word "indigenous" were added to the Amendment, although I regret that his deerpark is not being inspected because after what he heard about keeping animals in viable breeding units I feel quite sure that the noble Duke will go home and make his two deer up to four as quickly as he possibly can.
LORD JANNER: I do not intend to delay the Committee any longer. What I should have liked to say has been said admirably by the noble Duke, and I hope that the Government will see their way to accepting his proposals. In the circumstances, I assume that the noble Duke has it in mind to withdraw the Amendment, so that the matter may be considered on Report. That would probably be the better way of dealing with it. I do not know the rules of this House well enough to know whether one can put an Amendment down forthwith.
VISCOUNT COLVILLE OF CULROSS: One can. But before we started this debate it was to be fallow deer, now it is indigenous deer. Where are the indigenous deer? Are they in the United Kingdom? I imagine that is what my noble friend suggested. The trouble about saying "indigenous" is that I do
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not think the interpretation of "indigenous" in that sense means indigenous in the United Kingdom. Perhaps one could consider the phraseology of this matter. The principle of it is certainly something that I should in no way wish to object to.
LORD CRAIGTON: Once again the intention is perfectly clear and absolutely desirable. The words may not be quite right. If my noble friend will undertake to discuss this matter with the noble Duke between now and then, I am sure we shall arrive at words which are acceptable.
LORD JANNER: I shall be very pleased to do that.
THE DUKE OF ATHOLL: I am very grateful for the way in which the spirit of my Amendment has been received. Perhaps, to get over the difficulty of "indigenous or "fallow", we might insert the words
"deer which are found in the wild in the United Kingdom",
which would make it perfectly clear that it is only deer which can be found ranging about this country and, therefore, would not include such exotic species as white-tailed deer and the deer of South America. After what has been said, I am only too pleased to withdraw the Amendment and to have another shot at it on Report. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 12 agreed to.
Clause 13 agreed to.
Schedule [Constitution of the Council and Supplementary Provisions]:
4.48 p.m.
LORD DONALDSON OF KINGS-BRIDGE LORD DONALDSON OF KINGS-BRIDGE moved Amendment No. 8:
Page 7, line 11, at end insert ("having regard to the size and type of zoological garden with which those members are connected").
The noble Lord said: This is in the same spirit as the last Amendment and will, I think, be more acceptable. We

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suggest that when the Minister is nominating four members from bodies representing zoological gardens to sit on the council, we should add:
"having regard to the size and type of zoological garden with which those members are connected."
This gives the Minister the opportunity, and indeed a fairly strong hint that it might be wise, to have some of them at least representating small zoos. I beg to move.
VISCOUNT COLVILLE OF CULROSS: My Lords, since my right honourable friend would in any event do exactly that, he has no objection whatever to being told to do so by Statute.
On Question, Amendment agreed to.
Schedule, as amended, agreed to.
House resumed: Bill reported with the Amendments.

RYDE CORPORATION BILL
The Chairman of Committees informed the House that the opposition to the Bill was withdrawn; the Order made on the 17th April last discharged, and Bill committed to the Committee on Unopposed Bills.
  AIRPORT CAPACITY AND MAPLIN PROJECT
  AIRPORT CAPACITY AND MAPLIN PROJECT
  COPY
  COPY
  CIVIL AVIATION AUTHORITY
  CIVIL AVIATION AUTHORITY