Sitting of 18 December 1974

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

    South Africa
    Mr. Luardasked the Secretary of State for Foreign and Commonwealth Affairs if he now plans to pay an official visit to South Africa.
    Mr. Kinnockasked the Secretary of State for Foreign and Commonwealth Affairs if he now plans to make an official visit to the Republic of South Africa.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): Such a visit is not part of my proposed tour which will start on 30th December.
    Mr. Luard: Is it not a fact that in about a fortnight's time the Foreign Secretary will find himself very close to South Africa? Might it not be a good idea to extend his travels a little to make it clear to the Government of that country that, although many people in this country welcome any initiative on Rhodesia which is likely to bring about a fair and just settlement of the constitutional problem there, many of us would also hope to see further moves by the South African Government in relation to Namibia and her own policies at home and that, if our Government are to continue to give her the support that we have been giving in the United Nations, we should expect to see further progress made in those areas too?
    Mr. Callaghan: I agree with my hon. Friend's sentiments, but this visit was planned some time ago as a visit to a
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    number of Commonwealth countries and South Africa is not a part of the Commonwealth. I would only add that in the United Nations we have been supporting not South Africa but the principle of universality of the United Nations, which is a different matter.
    Mr. Biggs-Davison: If there is now the hope of easement of relations between the countries of Southern Africa and countries north of the Zambesi, is not this in great measure due to South African diplomacy and the technical and economic assistance that South Africans can and do give to other parts of Africa?
    Mr. Callaghan: We should pay tribute to the efforts of all who have done anything to ease the situation in Southern Africa, including the three Presidents of the Commonwealth whom I shall be visiting. As to the part that South Africa plays, we all welcome anything that she can do to bring home the facts of life to Mr. Smith.

    Ethiopia
    Rear-Admiral Morgan-Gilesasked the Secretary of State for Foreign and Commonwealth Affairs what information he has concerning the safety of British subjects in Ethiopia.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Miss Joan Lestor): Information available to me at present does not suggest that the safety of British subjects in Ethiopia is currently endangered. But the situation there is one which gives us some cause for concern and the British Embassy is watching it closely.
    Rear-Admiral Morgan-Giles: I thank the hon. Lady for that reply. Has she any information concerning the fate of Emperor Haile Selassie and his family, who have been good friends to this country over a long period?
    Miss Lestor: I understand that the former Emperor, several members of his family and 200 or so other people in detention in Addis Ababa were recently visited by representatives of the International Committee of the Red Cross, who found the former Emperor in reasonably good health. Hon. Members will also have noticed recent assurances by the provisional military Government that

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    remaining detainees will be given a fair trial.
    Sir Bernard Braine: Is the hon. Lady aware that in Ethiopia there is a long and honourable tradition of kindness and hospitality towards all foreigners and especially towards British members of voluntary agencies who have been engaged in work in that country, especially since the terrible famine of last year? Is she further aware that all Members of this House—I am speaking of well over 200 of them—who have signed the recent early-day motion are grateful to the Government for the efforts they have made in conjunction with other Governments and the United Nations to prevail upon the provisional military Government to treat political detainees with humanity and that we shall continue to welcome any further efforts that Her Majesty's Government make in that direction?
    Miss Lester: I thank the hon. Gentleman for those remarks and I share his view.

    Export Promotion
    Mr. Aitkenasked the Secretary of State for Foreign and Commonwealth Affairs what proportion of British diplomats serving in Her Majesty's embassies overseas are engaged in furthering British exports.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): About one-quarter of our diplomatic staff overseas are engaged full time on export promotion. Many of our other diplomats also contribute to the work of furthering British exports, which is a first charge on the resources of the Diplomatic Service.
    Mr. Aitken: Is the Minister aware that the overwhelming majority of commercial secretaries in British Embassies abroad are in the B grade of the Diplomatic Service? Can he explain why so many commercial secretaries should be given this apparent career disadvantage of second-class status, particularly at a time when British exports are so important? Will he take steps to sweep away these unnecessary distinctions between Foreign Office personnel doing equally important jobs?
    Mr. Ennals: I would not accept the suggestion that these people are in any
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    way second-class citizens. Some of them in fact hold high status in the Diplomatic Service. I shall look into the points that the hon. Gentleman has raised, but we greatly respect and admire, as well as encourage, the work which is done by these members of the Diplomatic Service.
    Mr. Craigen: Are these members specially chosen for their commercial experience?
    Mr. Ennals: Those to whom I am referring at present are mostly career diplomats. Sometimes people are seconded from the Department of Trade. They have special training before they go, which includes work with commercial firms, and they are chosen because of knowledge of the market concerned. But we are greatly increasing the number who are locally recruited, and are recruited because of their commercial knowledge, in the country in which they are serving.

    Indian Ocean Territory
    Mr. Matherasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about Her Majesty's Government's policy towards the British Indian Ocean Territories.
    Mr. Ennals: The British Indian Ocean Territory is a separate dependency of the Crown. By an agreement signed in December 1966 the islands were made available for the defence purposes of the British and American Governments. No change in Her Majesty's Government's policy is contemplated.
    Mr. Mather: Will the right hon. Gentleman give a clear assurance that he intends to maintain the integrity of the British Indian Ocean Territories, lying as they do across very important air and sea routes to the Persian Gulf and Hong Kong? Will he say something about the facilities at Gan—whether they will be completely written off and whether alternative facilities exist? What will happen in the Seychelles once independence is negotiated? Are we negotiating a long-term agreement? Will the right hon. Gentleman—
    Mr. Speaker: Order. That is four questions already.
    Mr. Ennals: The answer to the hon. Gentleman's first question is that there is certainly no intention of making any change in the status of the territories concerned. My right hon. Friend the Secretary of State for Defence made a statement which concerned Gan. I cannot further elaborate on that. It is a matter for my right hon. Friend. In relation to the question about the Seychelles, of course all relevant questions will be considered by the constitutional conference on the Seychelles which, as the hon. Gentleman will know, is being held shortly.
    Mr. Frank Allaun: Have not the Governments of the nations surrounding the Indian Ocean expressed an intense wish that neither the Russian nor the American navies should be present in the area? Therefore, will not the British Government reconsider the leasing of the base at Diego Garcia to the Americans, who propose to spend £12 million—not dollars, but pounds—on developing it as a nuclear base?
    Mr. Ennals: I cannot give any such assurance to my hon. Friend. A decision has been taken and it was announced by my right hon. Friend the Secretary of State for Defence. But there is no doubt that countries in the area are concerned about the build-up of naval vessels. Certainly we and the Americans have agreed to consult on arms limitation in the Indian Ocean. We shall also continue discussions with other countries in that area, some of which, such as Australia, have made important proposals.

    Namibia
    Mr. loan Evansasked the Secretary of State for Foreign and Commonwealth Affairs what further progress has been made in Her Majesty's Government's examination of the question of Namibia.
    Miss Joan Lestor: I refer my hon. Friend to my right hon. Friend's statement in the House on 4th December.— [Vol. 882, c. 1555–64.]
    Mr. Evans: My hon. Friend will have seen the text of the resolution which was carried unanimously in the Security Council yesterday condemning the South African's illegal occupation of Namibia. Will she convey to the Foreign Secretary
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    the wish that when he travels to meet Commonwealth leaders in Africa—we wish him well on the journey—he should consult African leaders with a view to persuading them to use their good offices to ensure that the South African Government negotiate with SWAPO to bring in the immediate independence of Namibia at the earliest possible date, and certainly before 30th May next, which is the date contained in the resolution?
    Miss Lestor: My right hon. Friend will be meeting SWAPO leaders in Lusaka when he goes there. We have already said that we consider the South African occupation of Namibia unlawful and that we hope to see an independent Namibia as soon as possible.
    Mr. Cormack: Does not the question of the hon. Member for Aberdare (Mr. Evans) show it to be all the more absurd that when the Foreign Secretary is paying a visit to Africa he should miss out what is by any standard one of the most important nations in that continent? Will the hon. Lady persuade her right hon. Friend to think again and go to South Africa and discuss this and many issues of burning importance?
    Miss Lestor: Nothing that my right hon. Friend does is absurd. It is up to him whether or not he visits South Africa.

    Libya
    Mr. Gryllsasked the Secretary of State for Foreign and Commonwealth Affairs when he next plans to visit Libya.
    Mr. Goodhartasked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an official visit to Libya.
    Mr. Ennals: My right hon. Friend has no plans to visit Libya.
    Mr. Grylls: If the Foreign Secretary does meet members of the Libyan Government, will he pursue with them very vigorously the case of my 83-year-old constituent who has lost everything in Libya, and will he let me know what their reaction is to her very just claim which has been pursued for a long time? Will he draw to the attention of the

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    Libyan Government the fact that her claim is very modest compared with the £17·4 million which is to be paid in cash to BP any moment now?
    Mr. Ennals: As the hon. Gentleman knows from the Adjournment debate in May, I am personally very well aware of the difficulties which Mrs. Starkings is facing, and I have a great deal of sympathy for her. I assure the hon. Gentleman that we shall continue, as we have done previously, to press the Libyan Government to give urgent consideration to her case.
    Mr. James Johnson: I do not particularly want the Minister to visit Libya, but is he aware that I do want him or any of his ministerial colleagues in the Department to visit the Horn of Africa? During the last 10 years, particularly since the independence of Somalia, no British Minister has been there. In view of the opening of the Suez Canal next March and the designation of the Indian Ocean as a zone of peace, as well as many other factors, could not one Minister, when moving about on the usual line—Lusaka, Dares-Salaam and Nairobi—go to the northeast and have a look at that part of the world?
    Mr. Ennals: Many of us go beyond the usual line to which my hon. Friend has referred. But I shall look at his suggestion. The demands upon my right hon. and hon. Friends and myself are fairly heavy in terms of travel, but I shall bear in mind my hon. Friend's suggestion.
    Mr. Goodhart: As it has been estimated that Libya is now contributing more than £5 million a year to various terrorist organisations, including the Provisional wing of the IRA, may I ask what protests we have made in the last 12 months about Libya's anti-social behaviour?
    Mr. Ennals: We have made it very clear to the Libyan Government that we regard Libyan support for the IRA as blatant interference in the internal affairs of the United Kingdom. There are certainly indications that the IRA may have received some aid and training from Libya. I think that the whole House would deplore that situation.
    Mr. Colin Jackson: Does my right hon. Friend agree, however, that Britain has important commercial interests and educational links in Libya and that, therefore, it is very important, despite the natural disquiet about certain matters which have been mentioned, that we should maintain contact with Libya and indeed, in certain circumstances, make a ministerial visit?
    Mr. Ennals: I agree with my hon. Friend. We certainly want to maintain contact with the Libyan Government and to maintain a good relationship. There are important outstanding issues. One of them, happily, has been settled in the agreement which has been reached between the Libyan Government and BP concerning the outstanding claims. This was an important step forward. Certainly we hope that it will be followed by others.

    Civil Rights Covenants
    Mr. Michael Marshallasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a statement outlining the progress made towards ratification of the International Covenant on Civil and Political Rights adopted by the United Nations General Assembly in 1966.
    Mr. Guy Barnettasked the Secretary of State for Foreign and Commonwealth Affairs how soon he expects Great Britain will ratify the International Covenant on Civil and Policital Rights.
    Mr. Ennals: We are actively considering the question of the ratification of both the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights.
    Mr. Marshall: Is the Minister aware that it is over six years since we signed the original covenant? Is he further aware that with the evidence of increasing torture in the world at large, and indeed the whole problem of terrorism in the world, the one way in which this country could give a lead in many of these matters would be to move with some speed on this ratification? Does he accept that his letter to me of 25th November, in which

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    he said that he was proceeding with all reasonable speed bearing in mind the complexity of the question, does not satisfy any of us?
    Mr. Ennals: I am glad that it does not satisfy the hon. Gentleman. When I took my place at the Foreign Office I had to brush the dust off the covenant which, as he says, had been signed six years ago. There was not much evidence that it had been looked at in the previous four years until we came to office. But we are giving it serious consideration. It so happens that the British Government do not believe in ratifying covenants unless we are absolutely satisfied that we can stand by them.
    Mr. Barnett: Why have so many years elapsed before the Government have seen fit to ratify this covenant? What has stood in the way? May we have a little more information about this?
    Mr. Ennals: First, I cannot account for the four years that preceded our arrival in office in March—except for the dust. There has been a great deal of intensive activity in trying to deal with the many complex problems. I should be very happy to discuss this matter with my hon. Friend, but I cannot do so at Question Time because it would take too long. There are many problems relating to both law and practice in the United Kingdom and the dependent territories.
    Mr. Russell Johnston: In considering this matter, are the Government giving consideration also to the optional protocol to the International Covenant on Civil and Political Rights, which would allow individuals to make petition to the Human Rights Commission?
    Mr. Ennals: We are considering that matter as well as both the two declarations.

    Uganda
    Mr. Townsendasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on his present policy towards General Amin's regime in Uganda.
    Miss Joan Lestor: Our policy in Uganda, as elsewhere, is to protect and promote British interests.
    Mr. Townsend: Can the House be told what is the current position regarding
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    compensation talks? Do the Government seriously think that Uganda will be in any position to honour any agreement that is reached?
    Miss Lestor: We continue to remind the Ugandans of their obligation to pay prompt, adequate and effective compensation for all British properties expropriated in Uganda. Uganda has acknowledged this obligation, and official talks took place in Kampala in September, but I have no further report on the present situation following those talks.
    Mr. Farr: Is it not about time that we took a more robust attitude with Uganda and made it clear to General Amin that his policies are intolerable as far as we are concerned? Moreover should we not, temporarily at any rate, withdraw our High Commission offices?
    Miss Lestor: I do not think that anybody on this side of the House has done anything other than show a great deal of concern for the policies of General Amin. We are not in any way condoning anything he has done. With regard to the withdrawal of our mission, although it is depleted our High Commission is still able to protect British interests and at the moment we see advantage in maintaining a diplomatic presence in Kampala as long as there is effective work to be done there. We are watching the situation.

    Namibia (Military Bases)
    Mr. Hooleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will raise in the United Nations Security Council the threat to peace in Southern Africa arising from new military bases set up in Namibia by South Africa at Grootfontein, Unono, Ondangua airport, Ruacana, and Een-hana in Oliavango.
    Miss Joan Lestor: No, Sir.
    Mr. Hooley: Is my hon. Friend aware that I very much welcome the unanimous resolution of the Security Council requiring South Africa to give up its illegal occupation of Namibia? Is she further aware, however, that if the United Kingdom and the United States do not exercise effective pressure on South Africa over this and related matters, the chance of a savage and bloody confrontation in

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    southern Africa, along the lines of Mozambique and Angola, will thereby be increased?
    Miss Lestor: I am very mindful of what my hon. Friend says. All I can add to it is that we have made perfectly clear to the South African Government, and publicly, that we are anxious to see early progress towards self-determination and independence, and we shall continue to support the United Nations where we can in its efforts to help the people of Namibia to achieve that.
    Mr. Mather: If the Foreign Secretary wishes to influence the policy of South Africa, will he take a leaf out of the book of Dr. Banda, who made a State visit there recently and who has done more to influence South Africa's policy on apartheid than any other outside statesman has done?
    Miss Lestor: My right hon. Friend has already indicated his attitude concerning a visit to South Africa. On the question of apartheid and the effectiveness of certain visits, I should like to see some results as far as a deterioration in apartheid is concerned, and I do not yet see them.

    Southern Africa
    Mr. Luceasked the Secretary of State for Foreign and Commonwealth Affairs whether he proposes to visit the major countries of Southern Africa.
    Mr. James Callaghan: Yes, Sir. I have announced plans which were made some time ago to visit a number of countries in Southern Africa.
    Mr. Luce: Since there is growing and valuable contact between the black and white Africa leaders, will the Foreign Secretary consider exiling himself for an even longer period to look at the real problems of the Southern African States —South Africa itself, Rhodesia and elsewhere—in order to try to see whether he can facilitate in particular a settlement in Rhodesia? Will he, in the process, consider facilitating a Rhodesian settlement by offering a substantial aid programme, if possible with the help of Common Market countries, to the African community in Rhodesia to
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    improve its standards at a rapid pace? Would not this meet with the approval of both the European and the Africans in Rhodesia?
    Mr. Callaghan: If there is any prospect of achieving a settlement in Rhodesia, which I would very much welcome, as I think the whole House would, on the terms of the Six Principles, I would certainly hope that as part of such a settlement there could be a crash programme or a substantial programme of educational aid. There are a large number of African children who by their intelligence and ability qualify to go to secondary schools but do not go to such schools. This would be one of the ways in which we could be of considerable assistance.
    Mr. Rippon: Will the Foreign Secretary make clear that he would not rule out a visit to South Africa if he felt that it would help to promote a settlement in Rhodesia?
    Mr. Callaghan: Of course I will not rule it out. But this obsessive interest by Opposiiton Members about whether I go to South Africa is a little tedious against the background of reality. Of course I have taken note of what has been said, and I shall do what is necessary, but I planned my visit to talk to the Commonwealth Prime Ministers about a number of topics of which Rhodesia would be one—an important one but not the only one—and we shall consider, after I have had discussions with them, what other initiatives would be helpful in the situation.

    Mutual Force Reductions (Talks)
    Mr. Robin F. Cookasked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the progress of the Vienna talks on mutual force reductions.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): The discussions in Vienna are proceeding steadily and in businesslike fashion. It would be unrealistic to expect early results in a negotiation of such complexity.
    Mr. Cook: I am grateful to my hon. Friend for that reply, but can he tell the House something of the British attitude

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    to the Dutch proposal to include tactical nuclear weapons in the discussion? Is he aware of growing public unease that a large number of these weapons are deployed in Central Europe? Does he appreciate that if there were to be a reduction in conventional forces which did not affect the number of nuclear weapons we would be in danger of seriously lowering the nuclear threshold?
    Mr. Hattersley: I have no comment to make on the statement by the Dutch Minister of Defence about 10 days ago. I would make clear to my hon. Friend, however, that the British Government take a position in these discussions that we co-ordinate with our allies, and a co-ordinated allied position does not include the proposition that nuclear weapons should be included at this stage.
    Mr. Cormack: In view of the defence review proposals, will the hon. Gentleman accept that it is absolutely essential that any force reductions are really mutual and balanced, and, therefore, that even if the talks last for years we must not cut back our defence any more than we have done in the past few weeks?
    Mr. Hattersley: The essential element in the talks is that they shall be mutual and balanced and that a reduction in armament spending should be and might be obtained by each side—the Warsaw Pact and NATO—without a reduction of the security of any one of the nations involved in the talks. That is the principle on which the talks were founded, and that is the principle on which we are continuing to participate in them.
    Mr. Frank Allaun: Is there not good sense in the proposal of my hon. Friend the Member for Edinburgh, Central (Mr. Cook)? Has not even Dr. Schlesinger said that the MBFR talks are the obvious forum for discussing this exact proposal, particularly since this item has been removed as a concession by the Soviet Government in the SALT talks which are taking place elsewhere?
    Mr. Hattersley: There is obvious good sense in any reduction in armaments and arms spending which can be effected without a consequent reduction of security for any one party to the talks. We do
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    not want to make judgments on whether those dual aims can be achieved until we have looked very carefully at any one element in the talks.

    Middle East (EEC Talks)
    Mr. Leslie Huckfieldasked the Secretary of State for Foreign and Commonwealth Affairs what further consultations he has had with EEC Ministers in connection with the Middle East; and whether he will make a statement.
    Mr. James Callaghan: The Foreign Ministers of the Nine continue to keep various aspects of the Middle East situation under review. Our endeavour is to concert a common attitude, but we are not always successful.
    Mr. Huckfield: I thank my right hon. Friend for that reply. Since the outcome of the Martinique talks between President Ford and President Giscard d'Estaing have not exactly been too successful with regard to the Middle East, and since my right hon. Friend is, I accept, very much in favour of preserving a common European approach on the Middle East, will he now do all within his power to ensure a common European line in defence of the right of the State of Israel to exist within secure boundaries?
    Mr. Caliaghan: Yes, certainly. I do not think that is challenged by any member of the Nine. We are still basing ourselves on Resolutions 242 and 338. They continue to be the bedrock until further changes are made at the United Nations.
    Mr. Grylls: Is the Foreign Secretary pressing the EEC to give further aid to relieve the plight of the Palestinian refugees in their camps, as has been done before? Are we pushing that forward?
    Mr. Callaghan: I cannot recall a recent discussion on the subject of aid to the Palestinian refugees in particular, but the EEC has substantially increased its aid to the United Nations fund which was set up last April. However, I think that that is a separate issue.
    Mr. Faulds: Since my right hon. Friend is a pragmatic and patriotic fellow, will he agree that we and our European allies are taking a much more realistic attitude towards energy problems than is the

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    American State Department, and will he seek to avoid at all costs a confrontation in this matter with the oil-producing countries?
    Mr. Callaghan: Although I have seen reports about the opinions of various people, it is not my understanding from my conversations with the United States Secretary of State that he in any way desires a confrontation with the Arab States, and neither is his policy based on that. It is based on an attempt, in which he has been successful so far—I shall certainly give him all the support which the British Government can give in the next steps—to try to achieve a just settlement in the Middle East.
    Mr. Rippon: Will the Foreign Secretary give the House more information about the formation of the International Energy Agency, which is a good example of co-operation within the Community? Will he, perhaps, consider a White Paper or a statement on the subject, because, as I am sure he appreciates, this agency is more supranational in character than, for example, the European Community itself?
    Mr. Callaghan: Yes, Sir, I shall consider that. It may be that the Secretary of State for Energy might provide it. I regret that France is not involved, because I think that we should be that much stronger if she were, but it is an excellent example of pooling of resources by the Western consuming nations in the event of any attempt to use the oil weapon. It means an abandonment of sovereignty, but I do not think that any hon. Member minds abandoning sovereignty if the benefits are worth it, and in the case of this agency they are.

    European Security and Co-operation
    Mr. Sproatasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the latest progress of the Conference on Security and Co-operation in Europe.
    Mr. Hattersley: The latest news from Geneva is encouraging, and I hope that further progress will be made on the declaration of principles and in basket III before the Christmas break in the work of the conference.
    Mr. Sproat: I welcome the progress that has been made, in particular the agreement of the Soviet authorities at last to the reunification of families, but will the Minister see to it that the allies remain absolutely firm in demanding more progress on the military confidence-building measures, and in particular on the giving of advance notice of troop manoeuvres, since this is about the only security element in what is at least partly a security conference?
    Mr. Hattersley: The hon. Gentleman is quite right; the major security element in the conference now is the confidence-building aspect of it, and the notification of manoeuvres is an essential part of that. The British Government, as part of the Western co-ordinated attitude on these matters, will continue to press for satisfactory answers in that area.

    International Women's Year
    Mrs. Renée Shortasked the Secretary of State for Foreign and Commonwealth Affairs what allocation of funds has now been made by the United Kingdom for International Women's Year.
    Mr. Ennals: I have carefully considered this matter once more but regret that I have nothing to add to the reply I gave to my hon. Friend on 27th November.—[Vol. 882, c. 416.]
    Mrs. Short: If my right hon. Friend finds that he is short of money in wishing to give more to International Women's Year, will he consider ending the grant of £20,000 a year to the European Movement, which is campaigning against our party's policy, and give that money instead to International Women's Year, which is campaigning for this party's policy of peace and equality? Will he think about that?
    Mr. Ennals: I have no doubt that the main substance of my hon. Friend's question will be dealt with under Question No. 34. It is true that we are short of money. I wish that it had been possible to give a rather larger grant to International Women's Year.
    Mr. Lane: If, or when, the proposal for an international men's year comes forward, will the Government look favourably upon it?
    Mr. Ennals: I think that I assured hon. Members opposite on the last occasion when this matter arose at Question Time that, as far as I can see, every year up to now has been international men's year.
    Mr. William Hamilton: Will these funds apply also to the women in the EEC?
    Mr. Ennals: There are women in the EEC, and we do not discriminate against them.

    Foreign Governments (Recognition)
    Mr. Cryerasked the Secretary of State for Foreign and Commonwealth Affairs if he will outline the criteria adopted by the Government for recognition of a foreign Government.
    Mr. Ennals: The criteria for recognition of a foreign Government are that it enjoys, with a reasonable prospect of permanency, the obedience of the mass of the population and the effective control of much the greater part of the territory.
    Mr. Cryer: Will my right hon. Friend confirm that an important element in the failure to recognise the Provisional Revolutionary Government in South Vietnam is the boundary question? If that be the question, why do we recognise the Thieu regime, in whose case conformity with the criteria seems sadly lacking? If the objection is on political grounds, why do we recognise so many politically objectionable regimes, such as those in Spain—
    Mr. Cormack: And Russia.
    Mr. Cryer:—South Africa, China and, for that matter, Russia?
    Mr. Ennals: In Her Majesty's Government's view the question of recognition has never been one of judgment of the politics of the country concerned. We have recognised what is. As regards Vietnam, we have recognised the Government in the North and the Government in the South. In the southern part of Vietnam, the PRG controls only a small part of the territory and an even smaller percentage of the population.

    Falkland Islands
    Mr. Gowasked the Secretary of State for Foreign and Commonwealth
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    Affairs whether he will make a statement on the constitutional future of the Falkland Islands.
    Mr. Ennals: Last January the Governor appointed a Select Committee from the elected members of the Falkland Islands Legislative Council to ascertain the views of the electorate on possible changes in the constitution and to make recommendations on the form such changes might take. It has yet to make its report.
    Mr. Gow: What discussions have the Government had with the Government of the Argentine about the future status of the Falkland Islands?
    Mr. Ennals: There have been several discussions between Ministers of Her Majesty's Government and Ministers of the Argentine, one occasion being as recent as last week. It is the wish of both Governments to keep in touch, and I assure the House that it remains the policy of this Government, as of previous Governments, that no change in the present British sovereignty over the Falkland Islands shall be made against the wishes of the islanders.
    Mr. James Johnson: My right hon. Friend's last statement will give great satisfaction to all hon. Members—at least, I hope so—and to the Falkland islanders too. Will he be good enough to tell us about the future of the airfield, which I understand is to cost about £4 million? Even more importantly, can he confirm or deny that there is an important oilfield lying between the Falklands and Patagonia?
    Mr. Ennals: I am afraid that I cannot give the date for the airfield. As regards oil, geophysical surveys of possible oil-bearing areas around the Falkland Islands were carried out during the last southern summer. Until the evaluation of the results of those surveys is available, I can give no indication on whether the rumours are correct.

    Cyprus
    Mr. Dodsworthasked the Secretary of State for Foreign and Commonwealth Affairs what progress has been made with the implementation of United Nations Security Council resolutions 353 and 360 concerning the future of Cyprus.
    Mr. R. C. Mitchellasked the Secretary of State for Foreign and Commonwealth Affairs what further initiatives he proposes to try and attain a settlement of the Cyprus dispute.
    Mr. James Callaghan: Talks have taken place on humanitarian issues between Mr. Clerides and Mr. Denktash, but no progress has been made on political matters. I had discussions with the Greek and Turkish Foreign Ministers last week with a view to facilitating these.
    Mr. Dodsworth: I am grateful to the right hon. Gentleman for that reply, but can he reconcile the reports of the supply of a British-made computer to those directing Turkish troops in Cyprus with his declared intention to protect the interests, property and security of all citizens in Cyprus, whether British, Turkish or Greek?
    Mr. Callaghan: I must ask the hon. Gentleman to put down a Question about the computer. I was not aware of it until he spoke.
    Mr. Mitchell: Docs my right hon. Friend think that the return of Archbishop Makarios will make a settlement in Cyprus easier or more difficult to obtain?
    Mr. Callaghan: The Archbishop has been making a number of visits in the island and has seen for himself the conditions in which the refugees are living and the division which has taken place in the island. I am sure that he will lend his great weight to a settlement of these issues, which will benefit all the people there.
    Mr. Gorst: Will the Foreign Secretary indicate when the refugees in the British bases are likely to be released to go where they wish?
    Mr. Callaghan: We certainly do not wish that the refugees should be held in the British bases. Their homes are mostly in Greek-occupied territory. If Mr. Clerides and Mr. Denktash can begin discussion on these political matters, I would hope that this would be the kind of settlement they would get down to as an item of priority?
    Mr. Dalyell: May I draw to my right hon. Friend's attention the strong view of the Cypriot communities in Glasgow
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    and Edinburgh that everything should be done to prevent partition?
    Mr. Callaghan: In all my conversations, both Greek and Turkish Cypriot leaders in Cyprus and the Greek and Turkish Foreign Ministers have always emphasised that they have no desire to see the island partitioned.

  EUROPEAN ECONOMIC COMMUNITY

    Trade Balance
    Mr. Buchananasked the Secretary of State for Foreign and Commonwealth Affairs if he will take account of the deficit in trade between the United Kingdom and the EEC partners, as stated by the Secretary of State for Trade on 18th November, in his renegotiation of the terms of United Kingdom membership.
    Mr. James Callaghan: The country's trade deficit is a matter for serious concern wherever it arises. Since 1971 there has been a general deterioration in Britain's non-oil trade gap with a number of important trading partners and all these factors will be taken into account.
    Mr. Buchanan: Does my right hon. Friend find that this deficit weakens his hand in renegotiation with the EEC? Is the deficit unique among our partners in the EEC? How does it compare with our increasing deficits with other countries?
    Mr. Callaghan: I do not find that the deficit weakens our negotiating hand. Other countries have a large deficit too, although Germany is in substantial surplus. On the second part of the question I have to report a genuine deterioration. Our non-oil trade gap with the EEC has increased fivefold between 1971 and 1973, with EFTA it has increased threefold, with the Commonwealth it has increased thirteenfold and with the United States it has increased by 17 times.
    Mr. Scott-Hopkins: Does the Foreign Secretary agree that membership of the Community has greatly benefited our trade and that because of the lowering of trade barriers between Britain and the EEC we have obviously increased trade with the Community, much to our benefit?
    Mr. Callaghan: Trade has increased and so has our deficit. Whichever side hon. Members stand on in this controversy, they must recognise that it is too soon to say whether membership has benefited or worsened our position on the balance of payments. One has only to look at the figures that I have set out before me in connection with our deficit with other countries to see that it is very difficult to draw any conclusion. If we are to have an argument about this, let us at least get it on to a sensible basis.
    Mr. James Lamond: Is not part of the deficit due to the unfortunate importing from Mediterranean associate members of cheap cotton yarn, which by mistake, I presume, has been labelled as a raw material? The importation of this yarn is having a devastating effect on the cotton spinning industry in the North West, so much so that some manufacturers are prophesying the death of the industry in this country in the early part of 1975.
    Mr. Callaghan: The Commission is meeting today, I understand, to consider this matter, which is a serious issue for Lancashire. The position of the textile industry has taken up the time of a number of meetings of the Council of Foreign Ministers, but it would not be right to ascribe any substantial proportion of the total deficit with the EEC to that particular subject.
    Mr. Marten: Assuming that a parliamentary answer is a sensible basis for this discussion, is the Foreign Secretary aware of an answer which I received last Thursday which showed that 96 per cent. of our non-oil trade deficit was attributable to the EEC?
    Mr. Callaghan: I have the actual figures here and if I can find them quickly I shall give them. The argument depends upon the total figure. I have been trying to make a fair appraisal of it. I must tell the hon. Member for Banbury (Mr. Marten), who is a fair controversialist on these issues, that I would defy anybody to draw any particular deduction about what is likely to happen in terms of our membership of the EEC from what has taken place since 1st January 1973. That simply is not possible. I have pages of statistics here
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    and I have done my best to find a thread through them in order to try to find an answer, but there is not a clear answer.
    Mr. Blaker: Is the right hon. Gentleman aware that the proposal by the Secretary of State for Trade appears to be that we should have a free trade area instead of membership of the EEC? Will the Foreign Secretary explain, or ask his right hon. Friend to explain, how that would improve our trading deficit compared with membership of the EEC?
    Mr. Callaghan: I do not know that my right hon. Friend has indicated that it would improve our deficit. He has argued that it would be better for Europe as a whole if there were a free trade area rather than the EEC with the Commission operating, and that is an entirely different matter. I hesitate to draw a deduction having advised hon. Members not to do so, but the only deduction one can draw is that membership of the EEC has probably done very little to alter the balance one way or the other. We have to set against a deficit such points as the increasing activity which has taken place in this country and the fact that we are buying more food from the EEC and less from elsewhere. There are many different factors that operate both ways on this and it is simply not possible yet to assess the impact of the EEC on our trading position.

    Documents (Scrutiny)
    Mr. Spearingasked the Secretary of State for Foreign and Commonwealth Affairs what representations he is making to the relevant authorities of the European Economic Community to rectify the difficulties in obtaining EEC documents referred to in paragraph 9 of the Secondary Legislation Scrutiny Committee in its Second Special Report (HC 250-ii) dated 20th August.
    Mr. Hattersley: Responsibility for the supply of EEC documents to the Scrutiny Committee rests with the Government, not with the EEC authorities. I have discussed this question with the Committee in the light of its Second Special Report. As a general rule these particular documents are not published. Any which were published would be sent to Parliament in accordance with normal practice.
    Mr. Spearing: Does not my hon. Friend agree that the House would be disturbed to know that these documents were not available? Is it not worth noting that nearly two years after joining the EEC we are apparently not able to influence matters because, due in certain respects to communications, we do not know what is going on? Is my hon. Friend aware that the Select Committee said that matters of trade mandates were sometimes of even greater importance than those concerning legislation? Will he now do his best to make sure that these documents are published so that our Scrutiny Committee can at least see them and send them to the House for discussion?
    Mr. Hattersley: I am bound by the resolution of the House of 7th May which says that it is my duty to send to the Scrutiny Committee documents which are published. While I have an obligation to fulfil that duty, I have an equal obligation not to exceed it. As to whether the EEC should publish its trade mandates, let me remind my hon. Friend that the EEC publishes and the House examines propositions for new treaties which would have been determined by the Community as a whole. What it does not publish is its interim negotiating position, and neither does this country, and it would be ridiculous to do so.
    Mr. John Davies: Will the Minister of State reassure the House by saying that the arrangements to which he has now subscribed are of a kind which will give the House better, or at least equal, access to arrangements which are entered into by the Community than may be gained by this country on its own account?
    Mr. Hattersley: I would be happy to give that assurance, but the assurance given by implication by the right hon. Gentleman, the Chairman of the Scrutiny Committee, probably carries more weight than anything I might say.
    Mr. Lee: Even if my hon. Friend has no direct responsibility in this matter, should he not put pressure on the body to publish its documents, or is that something far too democratic for the Common Market to consider?
    Mr. Hattersley: I must conclude that my hon. Friend does not understand the documents about which we are speaking.
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    The documents to which the Committee specifically referred and which are the subject of the Question are the interim position papers of the nine members as they try to form a collective view on a negotiating mandate. I am sure that on reflection my hon. Friend would agree that they are not suitable for publication.

    Renegotiation
    Mr. Fairgrieveasked the Secretary of State for Foreign and Commonwealth Affairs how the renegotiations of the United Kingdom's EEC terms are proceeding.
    Miss Fookesasked the Secretary of State for Foreign and Commonwealth Affairs what progress he has made in his renegotiation of Great Britain's terms of membership of the EEC.
    Mr. Adleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the progress on Great Britain's renegotiation of the terms of the Treaty of Rome.
    Mr. Norman Lamontasked the Secretary of State for Foreign and Commonwealth Affairs whether he will make a further statement on the progress of the renegotiations with the EEC.
    Mr. James Callaghan: I would refer the hon. Members to the statement made on 16th December by my right hon. Friend the Prime Minister.—[Vol. 883; c. 1121–24.]
    Mr. Fairgrieve: I thank the right hon. Gentleman for his reply. As the EEC is dragged in as a red herring by hon. Members on both sides of the House on various matters to which it is not relevant, will the right hon. Gentleman confirm that, terms apart, the accession to the EEC and the negotiations completed by the Conservative Government in the early 1970s were a continuation of the genuine application for membership and negotiations begun by his right hon. Friends in the late 1960s?
    Mr. Callaghan: The important words in that supplementary question were "terms apart". It is in regard to the terms that we find the complaint. It is the seven major terms which we are now renegotiating. We have always indicated our position on that matter since 1971.

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    But, given that it is "terms apart", I have no doubt that the rest of the hon. Gentleman's supplementary question follows, for what it is worth.
    Mr. Alan Lee Williams: What proposals have been made to the Council of Ministers of the EEC about the United Kingdom's contribution to the budget, and what has been the response?
    Mr. Callaghan: The contribution to the budget is one of the terms on which we thought that the previous Government did not fight the case hard enough. We have made certain proposals, and the Heads of Government at their recent meeting, recognising that Britain had a reasonable source of complaint, asked both the Council of Foreign Ministers and the Commission to try to find a formula that would enable the situation to be put right. I hope that that will proceed within the next two or three months.
    Miss Fookes: Are we to expect the Government's decision about a referendum or a General Election before or after the conclusion of the negotiations?
    Mr. Callaghan: I cannot yet say when the negotiations will be completed, but I hope that it will be in the early months of next year. In that case, I hope that there will be a decision from the Cabinet on the question of how the British people are to be consulted through the ballot box at the same time.
    Mr. Luard: Will my right hon. Friend accept that many people on the Government benches and in the Labour Party generally welcome the great progress made by him and my right hon. Friend the Prime Minister in Paris in securing the meeting of the terms set out in our party manifesto for renegotiation? On the question of the trade deficit with the Common Market, to which some hon. Members seem to attach such importance, is it not the case that we have always had a deficit with the countries concerned and that in large part the deterioration is because we have been able over the past few months to obtain food and other raw materials from the Common Market more cheaply than from other sources?
    Mr. Callaghan: I am much obliged to my hon. Friend for what he says about our part in Paris. I do not know whether we have always had a trade gap but I have the figures for 1971, 1972 and 1973, which show a substantial trade gap in 1971. It was four times as high in 1973 as it had been in 1971. Before anybody draws any conclusions from that, however, I would add that in EFTA it was about six times as high and in the Commonwealth three times as high. I have the exact figures here. I repeat that it is difficult to draw conclusions. The trouble is that our general trade deficit has been increasing throughout the world, and it is to that that the House and the country should direct their attention.
    Mr. Adley: I sympathise with the right hon. Gentleman in his obvious political difficulties in his own party. Will he give an unqualified welcome to the view expressed today by his fellow Socialist, Mr. Whitlam, Prime Minister of Australia, who hopes that the British Government will stop shilly-shallying and make up their mind to stay in the Community?
    Mr. Callaghan: What the Australian Prime Minister said was very different. I happened to listen to it on the one o'clock news, which is the only report I have. Mr. Whitlam said that it was for the British people to make up their minds whether we would remain in the Community. He said that it would be of no advantage to Australia if we came out. The hon. Gentleman is not particularly accurate on this matter.
    Whatever my political difficulties may be, at least it will not take my party four months to decide who our leader will be.
    Mr. Spearing: Does my right hon. Friend recall that in reporting on the Paris summit meeting this week my right hon. Friend the Prime Minister said that he did not think there was any need to renegotiate the terms of the Treaty of Accession? If my right hon. Friends are concerned with fundamental renegotiation, does not that indicate that they are at least considering amending Section 2 of the European Communities Act? If they will not do either, how does my right hon. Friend think it is a fundamental renegotiation?
    Mr. Callaghan: The two things are different. As I first used the word "renegotiation", perhaps I may be allowed to remind the House of the context in which I used it at the Labour Party Conference, when I said that we would renegotiate the detail and reopen the principles. We have done both. That is exactly the line we are following. The European Communities Act is a separate and different matter. It can be looked at again to see whether it is necessary to alter Section 2 in any way. But we are renegotiating the details and reopening the principles.
    Mr. Churchill: Will the right hon. Gentleman explain why it is one of the central points of the Government's renegotiation of the terms of entry that Britain's share of the EEC's GNP will decline during the period of the Labour Government to 14 per cent. by 1980? Or does the right hon. Gentleman share the view expressed by the Leader of the House last week that it is impossible to say what the position will be by 1980?
    Mr. Callaghan: The projections, if continued, show that situation. What we are hoping, and what I trust in the interests of the country will happen, is that through the operation of the Government's economic policies we shall not fall into that sad position. But in the renegotiation we have to provide against that possibility. It is no use waiting for it to hit us and then going back to the Community and saying "We want to make a change". It is precisely on this ground that we have made the proposal, which would be applicable to any other country which found itself in a similar position.

    Policy Integration
    Mr. Jayasked the Secretary of State for Foreign and Commonwealth Affairs in what respect the Government propose to integrate the United Kingdom more closely with EEC policies in January 1975.
    Mr. Callaghan: Certain transitional changes occur on 1st January 1975 under the Treaty of Accession. Some tariff changes designed to improve the Community's generalised scheme of preferences also take effect on 1st January.
    Mr. Jay: As my right hon. Friend is a great defender of his party's election manifestoes, is he aware that our manifesto for the last election pledged that during the process of renegotiation there would be no further moves towards integration, particularly as regards food subsidies? Is it not inconsistent with that pledge for the Government to introduce an order, which we have not yet even debated, to raise a number of food taxes and levies on 1st January 1975?
    Mr. Callaghan: I am not only a defender of the manifesto; I was also in a humble way part-author of it, and I have a clear recollection of what was put in and why, and what it meant. We are fulfilling our commitments under the treaties, but we are agreeing to no new processes of integration. The two things are different. The total impact of the change in duties will be a small net reduction in duty, amounting to 01 per cent. of consumer expenditure, taking into account both food and non-food items. In the case of certain food imports it will amount to 01 per cent. of consumer expenditure on food, but the total result is a decrease in duty.
    Mrs. Winifred Ewing: As the House devolved certain areas of decision making, including agriculture, fishing and education, to the Scottish Office, is not the fact that the Government countenance the increasing practice of Ministers going to negotiate and discuss such subjects in the absence of a Scottish Office representative a sign that there is a new process of integration taking place, if not sabotage of the Scottish Office?
    Mr. Callaghan: I would not pretend that I could wholly represent Scotland, but I represent Wales in particular, England in general and Scotland with very great willingness. Therefore, unless we are to send four Ministers to deal with Northern Ireland, Wales, England and Scotland, or even five if we count Cornwall, I am sure that the hon. Lady will have confidence in me to represent the Celtic areas of the country.
    Mrs. Ewing rose—
    Mr. Speaker: If the hon. Lady wishes to raise a point of order, will she do so at the end of Questions?
    Mr. Rifkind: In determining the desirable degree of integration, will the right hon. Gentleman take into account a recent survey of 220 leading British companies which showed that only four of them believed that they had suffered more harm than good as a result of our membership of the EEC and that none of them wished Britain to leave the Community?
    Mr. Callaghan: Whatever may be the views of individual companies or hon. Members, the decision will rightly be taken by the British people at the end of the day.
    Mr. Spriggs: Will my right hon. Friend always take it for granted that he represents the British nation as a whole when he goes to Europe to renegotiate or whatever happens on behalf of the Foreign and Commonwealth Office? I ask him never to agree to sell the right of veto in the Common Market.
    Mr. Cailaghan: We shall have a debate on these matters tomorrow. Because there is a motion on the Order Paper, and because I think that the question of sovereignty is very important, I intend to write out rather carefully what the position is and to give it to the House, if I catch your eye, Mr. Speaker. In the meantime, however, let me say that there is no question of our veto having disappeared or being likely to disappear.
    Mrs. Ewing: On a point of order. May I ask for your protection, Mr. Speaker, of Scotland's constitutional position in this House? Unlike Cornwall and some other parts of the British Isles, we have a devolved set of powers to the Scottish Office. The answers which I have received yesterday and today have thrown those devolved powers, which are a constitutional fact, to the wind.
    Mr. Speaker: I am willing to try to protect the hon. Lady and anybody else. But I have to administer the Standing Orders, and I do not think that what the hon. Lady has said raises any point under them.
    Mr. Dalyell: On a point of order. With some seriousness, Mr. Speaker, may I ask for your protection from "phoney" points of order raised by the hon. Member for Moray and Nairn (Mrs. Ewing), who raises them repeatedly to get publicity in the Scottish Press?
    Mr. Speaker: The difficulty about a "phoney" point of order is that one cannot tell whether it is phoney until it has been made.

CROWN AGENTS
The Minister of Overseas Development (Mrs. Judith Hart): With permission, I wish to make a statement about the financial position of the Crown Agents.
The House will recall that on 31st July I announced my arrangements for the restructuring of the Crown Agents. There is now a Board of Crown Agents, including up to seven part-time members with a full-time chairman. After discussion with the new chairman I agreed as an interim measure to appoint only three part-time Crown Agents in view of the immediate and pressing problems facing him. While continuing the practice of non-intervention in the activities of the Crown Agents on behalf of their overseas principals, I reserve the right to give the board directives, and indeed have already done so in relation to their own account business.
The new chairman of the Crown Agents, John Cuckney, who took up his appointment on 1st October, appointed Coopers and Lybrand as consulting accountants to review the present financial position and the future financial requirements of the Crown Agents and their subsidiary companies. Morgan Grenfell and Company Limited have since been appointed to advise on general banking matters.
The chairman, supported by the three members newly appointed to his board, has now reported to me that a decline in market value of some of the assets of the Crown Agents has led to an immediate problem of reserves and liquidity. He has made a formal request to the Government for financial assistance.
The requirement is related to the realistic writing down of assets values in the accounts, and to the need to ensure financial backing appropriate to operations involving some £600 million, excluding funds of some £200 million managed for principals.
The Government have agreed to provide £85 million, subject to parliamentary authority, which will be recoverable, by

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direction, from future earnings or appreciation of assets. Standby facilities have been arranged by the Bank of England.
These arangements will demonstrate beyond all doubt that the Government stand behind the Crown Agents so that the position of all depositors is fully safeguarded; that the confidence of their overseas principals is fully maintained; and that the important services provided to the principals are continued. In the light of the history of the relationship between Government and the Crown Agents in the last four years, involving, as it has, my own initiation of inquiries in 1970, followed by the Stevenson Report to my predecessor, the right hon. Member for Bridlington (Mr. Wood), which was unpublished, and the inquiries made by a Select Committee of this House, hon. Members will clearly want to know how the circumstances necessitating this financial support have arisen. I have asked the Chairman of the Crown Agents to send me a full report on this, and I shall keep the House informed. Thereafter I shall consider whether any further action is necessary.
I have also asked to be informed in detail of outstanding longer-term commitments of the Crown Agents, including certain property investments in Australia, and of any suggestions which the new board may have for the organisation and management of its financial business in the future. I have reserved the right to direct that monies now being advanced shall be repaid from Crown Agents' resources in the course of any reconstruction of the business.
The House will, I know, appreciate that the present Chairman, John Cuckney, and the three members of his board, John Goble, John Gordon and Leslie Kirkley, have had only a very short time to assess the position and report to the Government. On taking office they were confronted with most difficult circumstances, as the House will clearly understand.
This situation, which I am sorry to report to the House, is one which we are seeking to correct. I am immensely grateful to them and would like to take this opportunity to tell the House that I have complete confidence in them. Their prime concern, as it is mine, and, I am sure, that of the House, too, will be that the Crown Agents, with their long history of
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service and capability, are able to continue to provide for their overseas principals the full range of their services.
Mr. Rippon: I thank the right hon. Lady for making her statement at the earliest opportunity. May I also express a welcome for the Government's determination to maintain full confidence in the Crown Agents? As the statement says that parliamentary authority will be required for the £85 million, does the right hon. Lady expect a debate to take place so that we may have the opportunity of a fuller discussion?
Can the right hon. Lady say a little more about the terms and conditions on which the £85 million is to be provided? In particular, what is meant by the phrase "recoverable, by direction"? Its it to be a loan, or a grant, or what?
Not only do I welcome what the right hon. Lady said about a full report being made by the chairman in due course and further statements being made by herself, but I associate the Opposition with what she has said about the confidence which we should have in the new chairman. He has had great experience in public service and outside it, and we fully share the sentiments which the right hon. Lady has expressed about him.
Mrs. Hart: I am grateful to the right hon. and learned Gentleman. As to whether it is a loan or a grant, the position is that the money will be advanced to the Crown Agents but, given the reconstruction of the business that they would contemplate carrying out, there are clearly possibilities that much of it can be recoverable as their assets increase in value or as they make certain changes. Therefore, the position is a little flexible, but we hope that there will be the possibility of recovering some of the money. Nevertheless, it is not precisely a loan, but a grant which we hope will be recoverable. [HON. MEMBERS: "Oh."] Right hon. and hon. Gentlemen opposite must understand that a situation which has been in the making for at least four or five years is not so easily recoverable by a single stroke of the pen on one day. That is the arrangement we have made, and I think that the right hon. and learned Gentleman will agree that on the whole it is the best arrangement to be arrived at.

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The question whether there will be a debate is a matter for the House. I shall be reporting further, and it will be necessary to consider what kind of inquiry should take place. I hope that the House will have a little patience about this because the overseas principals are involved and they, too, will need to be consulted about the form it should take. There is no doubt that the House will be more fully informed and will have a full opportunity to consider the position which has arisen.
Mr. George Cunningham: Will the Minister agree that these enormous difficulties are exactly the difficulties which many of us have been predicting for a long time in the light of the odd constitutional relationship between the Crown Agents and the Government? This is characterised by at least one hon. Member on the Opposition benches for attack as a phoney campaign. Will my right hon. Friend say roughly how much of the loss sustained on the investment side of the Crown Agents' business is attributable to the fall in the value of shares of First National Finance Corporation, one of whose present deputy chairmen was, immediately before he took up that position, Financial Director of the Crown Agents?
Finally, will my right hon. Friend say whether the Government of the day ever gave to the Crown Agents approval to go into this business of investment by comparison with their traditional buying and selling role, which I am sure continues to have the full support of everyone in the House?
Mrs. Hart: My hon. Friend and I, as I know one or two other hon. Members appreciate, have had a continuing and deep concern about the position of the Crown Agents and their involvement particularly in the money market and the property market. That may not be known to some hon. Members, but it is so, and the Select Committee on Overseas Development gave some consideration to these matters.
I cannot give my hon. Friend a precise answer as to the involvement of a particular company. I can tell him that one of the factors involved, which is not unexpected, is that the Crown Agents had considerable investments in property. The
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decline in property values over the last year has intensified the problems that might concern any organisation that put a great deal of money into property, and this is a matter which is dealt with in the report which I have had from the Chairman of the Crown Agents. The further report which I shall hope to make available to the House, at least in summary, will show that clearly.
As to the member of the staff of the Crown Agents to whom my hon. Friend referred, that is a matter which is perhaps better not discussed in the House at the moment, as my hon. Friend will appreciate. If there is an inquiry, whatever form it takes, it might well be a proper subject for the inquiry.
Mr. Pardoe: Is the right hon. Lady aware that the House will be somewhat mystified, in that the Government appeal to have agreed to provide £85 million but have only now asked for a full report into the circumstances which make this financial support necessary? Does not the Minister think that it might have been better to have asked for the full report first and to have provided the finance thereafter?
Although many will welcome the fact that the Government stand behind the Crown Agents, is the right hon. Lady aware that if this kind of nonsense goes on the world will want to know who stands behind the Government?
Mrs. Hart: I am afraid that the hon. Gentleman is falling rather short of his own standards here. He might be well advised to do a little research into the reports of the proceedings of the House in HANSARD over the last four years. It is all there.
I was the first to express serious concern early in 1970 when I was Minister of Overseas Development. That led to my asking my Department for a paper on the constitutional relationship between the Crown Agents and the Government, which was somewhat obscure. That led my predecessor the right hon. Member for Bridlington (Mr. Wood) to ask for the Stevenson Inquiry which, reported, but that report, despite pressure from the then Opposition, was not published. That led to the Select Committee's inquiries which, as soon as I came back into office in March, led to my initiating changes in

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the structure which in turn led to the revelation of what has been going on. The hon. Member for Cornwall, North (Mr. Pardoe) would do better to do some research.
Sir G. de Freitas: Will my right hon. Friend recognise that many of us who have followed for some time the affairs of the Select Committee and the Crown Agents were highly critical in the past? However that may be, there are many of us now who give full support to the present Crown Agents and their chairman?
Mrs. Hart: I am grateful to my right hon. Friend. I must be absolutely frank with the House. This is an unfortunate report to have to make to the House. It follows a series of events and a history of some years. I think that we are now doing the right thing, and I am certain that the Government's duty is to give full backing to the Crown Agents because of their importance and value and because the name of Britain is involved.
Sir Bernard Braine: Does the right hon. Lady accept that there are some Opposition Members—I was, after all, Chairman of the Select Committee that inquired into this matter—who were anxious about the financial activities of the Crown Agents precisely because they cut across a superb, unique record of service to the Crown Agents' principals in the Commonwealth and to the British economy? I very much welcome, although with some sadness, the statement which the right hon. Lady has made today. May I ask whether at any stage any of the principals have been critical of the conduct of the Crown Agents in the carrying out of their normal business?
Mrs. Hart: The answer to the last part of the question is "No". What emerges is that the matter is not as simple as the right hon. Gentleman might suppose. The answer is "No". The overseas principals still have every confidence in the Crown Agents, and I should like to reinforce what the right hon. Gentleman said. What we are talking about today is the consequence of operations in the money market and the property market which left undisturbed the complete efficiency and good faith of the operations
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of the Crown Agents in procurement and in service, which are the real bases of their operations.

EUROPEAN ECONOMIC COMMUNITY (BUSINESS)
The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): I will, with your permission, Mr. Speaker, and that of the House, make a statement about business to be taken in the Council of Ministers of the European Community during January. The monthly forecast for January was deposited yesterday. The House will understand that because of the recess my statement has had to be made earlier than usual in the month.
At present five meetings of the Council of Ministers are proposed for January. Agriculture Ministers will meet on 13th–14th and 20th–22nd, Foreign Ministers on 20th-21st, Finance Ministers on 27th, and Development Ministers on a date yet to be set. It may also be necessary for Ministers to discuss the latest position in the negotiations with the developing sugar-producing countries.
Agriculture Ministers will resume their discussion of Community farm prices for 1975–76 and of proposals for the beef régime.
The Foreign Affairs Council will be the first since the recent Heads of Government meeting in Paris about which my right honourable Friend the Prime Minister made a statement last Monday, 16th December. It is likely that the Foreign Ministers will wish to review the outcome of that meeting, although the full agenda for that Council is not yet available.
The agenda for Finance Ministers is also not known, although they are likely to have their usual monthly discussions on the economic situation in the Community.
Development Ministers will consider the release of a further Community contribution to the United Nations emergency measures, a Commission proposal on guidelines for a new aid framework for the Community, and food aid policy.
There is also likely to be a ministerial meeting between the EEC and the African, Caribbean and Pacific countries

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to conclude the negotiations for a new Convention of Association.
Mr. Rippon: I thank the Minister for that essentially business statement. Since it was largely concerned with business, could he perhaps give a little more information about the possible meeting in relation to the developing sugar-producing countries and the likelihood of the ministerial meeting concluding the negotiations for a new Convention of Association? Is there any reason for doubt about meetings of that kind being held in January? If so, for how long would he expect them to be postponed?
Mr. Hattersley: I have no doubt. The negotiations are now taking place between the sugar producers and those countries which hope to import their sugar. I hope for progress, although each party is at present taking up negotiating positions. The meetings of the Council very much depend on the outcome of the immediate negotiations. The meeting between the EEC Ministers and the ACP countries depends on the timetable by which the parties will have achieved their joint negotiating positions. The ACP countries are meeting in Dakar today and, I think, tomorrow, and the availability of the EEC Ministers is absolute. We would have met the ACP representatives this week had they wanted us to do so. We are at their disposal when they arrive at a common position.
Mr. Marten: Could the Minister ask his right hon. Friend the Foreign Secretary to take up the point of political union which was raised during the summit conference, where it was apparently agreed that it would take a year to decide what was meant? As a referendum is to be held in less than a year I imagine, could not a decision on this matter be expedited? The EEC has been in existence for 17 years. It is one of the aims of the EEC to achieve political union—
Mr. Speaker: Order. A debate on this matter will be held tomorrow. I hope that Questions today will be confined strictly to EEC business for the next month or so.
Mr. Spriggs: May I draw the attention of my right hon. Friend to the need for future business arrangements within the Community regarding matters affecting
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the North-West textile industry and the danger of the importation of textiles under disguise from foreign countries? Will the Minister see if he can put this subject on the agenda so that the danger of mass unemployment in the North-West textile industry can be overcome?
Mr. Hattersley: I am happy to tell my hon. Friend that the item is already on the agenda. The EEC, including the Commission, which negotiates with third countries on behalf of each member State, is conscious of the problem to which my hon. Friend refers. Indeed, the Commission is meeting today to consider what emergency measures are necessary to provide the right sort of protection for the textile industry. I very much hope that a statement about the Commission's decision will be made before the House rises.
Mr. Scott-Hopkins: Will the Ministers be meeting to consider the implementation of the regional policy decisions? Will the Energy Ministers be meeting in Council before the end of January?
Mr. Hattersley: I think it is unlikely that the Energy Ministers will be meeting during the month. If the meeting takes place at all, it will occur towards the end of the month. The Energy Ministers had a very successful meeting yesterday concerning which I am sure all hon. Members wish to offer congratulations to my right hon. Friend the Secretary of State for Energy.
As regards the implementation of the regional policy, the summit meeting made a major breakthrough on regional policy. Indeed it established something which appeared impossible before. I am sure that the implementation of that decision will be discussed by the Foreign Ministers in January.
Mr. D. E. Thomas: Could the Minister give further information about the time scale of the new EEC beef regime and how many meetings are scheduled on this subject during the course of the first three months of 1975? Will he say when he expects an agreement to be reached on the new beef régime?
Mr. Hattersley: The Agriculture Ministers are already scheduled to meet twice during January. They are doing that with the intention, pioneered by my right

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hon. Friend, to obtain a new agriculture regime in general and a beef regime in particular, during the early weeks of 1975.
The new price structure for last year was somewhat delayed, with detrimental consequences to the industry. It is the intention of my right hon. Friend to ensure the operation of the new regime and price structure during the early weeks of 1975.
Mr. Russell Johnston: Referring to the question asked by the hon. Member for Derbyshire, West (Mr. Scott-Hopkins), surely it is not the Foreign Ministers who will be primarily concerned with the operation of the regional fund. Is it not strange that, in view of the fact that the fund is being established on 1st January, the Industry Ministers are not meeting during that month. When does the Minister expect that they will meet?
Mr. Hattersley: The natural process for for the implementation of this decision is for it to filter down from the heads of Government to the senior Council of the EEC—the Council of Foreign Ministers. The decisions of the Council of Ministers will be implemented in more detail by their industry colleagues.
I have had to give the House a somewhat interim account of the EEC business because of the early date of this month's statement. The Council will want to take every step to ensure that the timetable laid down for the Regional Fund by the Prime Minister is adhered to. That will have to happen at the meeting of Ministers.
Mr. John Davies: With the passage through the Congress of the United States Trade Bill, nothing is perhaps more important to the future of the world economy than the expediting of trade negotiations on a world basis within the GATT. Can the Minister please say to what degree this matter will be dealt with by the Foreign Ministers during the course of the next month in the Community, because the EEC holds a large part of the key to the future of these negotiations?
Mr. Haltersley: The Community has been ready to make progress in this area for some time. The passage of the Bill referred to by the right hon. Gentleman has been awaited for some time.
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Now that it has been passed, I have no doubt the appropriate commissioner will be reporting it initially to the Foreign Ministers in January. Whether he will be able to report that the Community has arrived at a satisfactory arrangement with the United States depends on the outcome of his discussions with the other parties.
Mr. Cryer: Could the Minister give us some idea when the commissioners will make a decision concerning the reduction of tariffs on steel imported from developing countries? In the current year their decision-making process was so lethargic that it involved retrospective legislation in this country. I am sure the Minister will agree that retrospective legislation is undesirable but that the lethargy is fairly typical of the EEC bureaucracy.
Mr. Hattersley: I think my hon. Friend misunderstands the structure of the EEC. Normally, when a long time is taken for the confirmation of decisions it is not because the Commission has behaved in a dilatory way but because the Council of Ministers has wished to meet several times to decide whether the Commission's proposals are right or not. I am sure that after reflection on the matter to which he refers, my hon. Friend would prefer the constant democratic scrutiny of the Council of Ministers rather than the speedy rubber-stamping of Commission proposals.
Sir Brandon Rhys Williams: Can the Minister say what business will be considered by the Finance Ministers at the January meeting and whether it is intended to react to the Kissinger Plan for recycling petrodollars?
Mr. Hattersley: I regret I can tell the hon. Gentleman no more about the Finance Ministers than what I said in my initial statement, other than the fact that they have their usual examination of general economic matters affecting member States. The inability to give precise information about the agenda is forced on me by the wish of the House, which I understand, appreciate and support, to have a statement every month. Therefore, in December there is a need to make a statement before the agendas are completed.

BILL PRESENTED
REPRESENTATION OF THE PEOPLE (PROXY VOTING)
Sir John Langford-Holt, supported by Mr. David Crouch and Mr. David Price, presented a Bill to permit electors who are absent on previously arranged holidays at the time of Parliamentary election to vote by proxy; and for related purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 9th May and to be printed. [Bill 54.]

REPRESENTATION OF THE PEOPLE (AMENDMENT)
4.0 p.m.
Mrs. Millie Miller: I beg to move,
That leave be given to bring in a Bill to provide for the conduct of proceedings following the counting of votes at a general election in multi-constituency boroughs so as to ensure that each successful candidate shall be entitled to speak.
I ask for leave on the ground that I myself was denied a pleasure, an honour and a privilege which I suspect that every other hon. Member has considered his birthright on winning an election. In order to explain the significance of this matter, it will be as well for me to tell the House of the events of the night of 10th October in the borough of Redbridge, which is just such a multi-constituency borough.
On this occasion the returning officer, at the conclusion of the counting of the votes in two of the constituencies, which took place in one small hall, after announcing the result, immediately withdrew from the hall followed by his retinue without any explanation as to his leaving or whether he intended to return.
In the absence of any indication of this matter I, as the successful candidate, not knowing what else to do, decided to use my own machinery, which was to mount a step at the side of the platform in order to thank my supporters and helpers and also the workers in the administration who had been involved in the vote counting.
At the end of the proceedings, in common with Labour Party practice throughout the country, we joined in singing "The Red Flag"—a matter which will come as no surprise to my right hon. and hon. Friends. When we had concluded, we joined in raising our arms, as I suspect many hon. Members have done, to give three hearty cheers.
Suddenly the door of the hall opened and the returning officer came back. He invited candidates to take their places on the platform. He announced that it had been arranged—but he did not say by whom or with whom it had been arranged—that the candidate with the highest number of votes and the candidate with the lowest number of votes would be

1591
the only ones allowed to join in the traditional vote of thanks to the returning officer.
I am sure that the House will understand that it was not just my suspicious mind which made me wonder how it came about that a Conservative speaker and one who, had he been present, would have represented something called the Movement to Improve Prosperity in Britain were to be the only people to speak on this occasion, although there were two successful Labour candidates in the same borough.
Of course, I did not question the ruling of the returning officer. But, as hon. Members will understand, this raises the question which perhaps all hon. Members might ask themselves, namely, whether they should have an entitlement to speak at the conclusion of a successful election campaign.
Perhaps it would have been of no great consequence if it had not been followed by an occurrence of some consequence. Certainly it was of consequence to me. The gentleman on whom the honour fell to move the formal vote of thanks, after a few brief words of formal thanks to the officials, said, "This is an ill omen for Britain. Something very ominous has happened in Ilford, North tonight". Looking meaningfully at me, he went on, "A Communist salute has been given in this hall".
At that, the helpers of the Labour Party erupted in disorder. That was not altogether surprising since, during the whole of two election campaigns we had been regaled with descriptions of ourselves of various kinds including such delectable phrases as the fact that we were "Red Nazis". Hon. Members can imagine that a further Communist smear on this occasion provoked a somewhat strong reaction on this account.
I prefer not to indulge in personal attacks on other hon. Members. Nevertheless, I feel that this is a matter which I have the right to bring before the House in order to clarify my position. It may be known to a few of my hon. Friends that I have been an elected representative in the London area since 1945. Never during that time has it been suggested that I had sympathies with or predilections to Communism. To deny it, which
1592
was the only redress offered me by the hon. Member concerned, would have been in the same category as an answer to the question when I stopped beating my husband or when a certain right hon. Member stopped saving fuel by cleaning his teeth in the dark.
This is not a trivial matter, and I am not prepared to allow it, in the words of The Times diarist on a similar issue in the same constituency
"… to pass into Right Wing Tory mythology."
What I have said outlines clearly the point that I am trying to make and the Bill which I seek to promote. I say to this House that every successful candidate in every constituency—not in a selected part of any borough—should have the right to move a vote of thanks to his speakers, to his supporters and to his electorate. It is for that reason that I ask leave of the House to present my Bill.
Mr. Patrick Cormack(Staffordshire, South-West) rose—
Mr. Speaker: Does the hon. Gentleman wish to oppose the motion?
4.9 p.m.
Mr. Cormack: I do, Sir, but I shall not detain the House very long.
This is a preposterous waste of the time of this House. It is a preposterous abuse of the Ten-Minute Rule. If it is allowed, we shall have Bills to regulate the order in mayors' processions and matters like that. It is totally absurd. It does not deserve the serious consideration of this House.
None of us will dispute that successful candidates should have the right to speak at elections, but this is not the sort of thing with which an hon. Member should waste our time, especially when we are about to debate some of the most serious issues that the country has ever faced. I shall oppose the motion.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business):—
The House proceeded to a Division—
Mrs. MAUREEN COLQUHOUN and Mrs. ANN TAYLOR were appointed Tellers for the Ayes, but no Member being willing

1593
to act as Teller for the Noes, Mr. SPEAKER declared that the Ayes had it.
Ordered,
That leave be given to bring in a Bill to provide for the conduct of proceedings following the counting of votes at a general election in multi-hyphen constituency boroughs so as to ensure that each successful candidate shall be entitled to speak.
Mr. Speaker: Who will prepare and bring in the Bill?

ORDERS OF THE DAY

  SUPPLY
  [5TH ALLOTTED DAY],—considered.
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand.]

  THE ECONOMY
  4.11 p.m.
  Mr. Edward Heath: The events of the past few days have made it essential for the House to debate the economic situation before rising for the Christmas Recess.
  The extreme gravity of the crisis now facing this country has in the last fortnight become appallingly clear, and every indicator points to the fact that it will become worse.
  This situation is disguised for many outside the House by massive increases in earnings over these past nine months. The figures published today show that since March basic wage rates have gone up by 21·3 points and the RPI cost of living index has gone up by 12·3 points. Therefore, as a result, wage rates have increased one and three-quarter times the increase in prices in this country.
  For those whom the Prime Minister commonly calls the big battalions, who have been able to get these substantial increases, the very nature of the crisis has been disguised. It has also been disguised externally by the massive borrowings made by the Chancellor of the Exchequer from the oil producers.
  Just over a year ago, in November, the Prime Minister said that this country was in pawn to the oil sheikhs. That was only in the context of our being dependent upon the oil producers for our total oil supplies. Now, of course, we are dependent on them for the massive loans that they have already given us and for continuing loans to cover the vast deficits that the Chancellor of the Exchequer foresees both internally with Budget deficit financing and externally on the balance of payments. Therefore, to use the Prime Minister's phrase, we are now in pawn to the oil producers both for the oil that we need until North

  1595
  Sea oil comes forward and for our existing loans and massive future loans.
  I say to the Prime Minister, in the absence of the Foreign Secretary, that he must now accept that his foreign policy in the Middle East will have to be acceptable to all those there. If there were to be a further conflict in the Middle East by the spring of next year, which many fear, he would then have to hold a position which was acceptable to both sides, which he failed to do when he was in Opposition, and recognise not only that the oil supplies to this country would be in danger but that the continuation of future loans from the oil producers in those circumstances would be at risk.
  The Government are not taking the measures necessary to deal with the short-term crisis which we now face, nor are they tackling the deep underlying problems of the British economy which have faced every Government—the lack of future investment, which is now particularly critical under this Government; the lack of capital behind our working population in which we compare so badly with other industrial countries; the wasteful use of resources, especially of manpower with overmanning, to which my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) drew attention last weekend, and the industrial disturbances and restrictive practices which exist in our industry. Indeed, the Government's present policies are immensely damaging in many ways to our industrial life and economic prospects.
  The Chancellor's taxation policies and the Government's policies for public ownership, intervention and control and the so-called continuing renegotiation in Europe have created uncertainty and destroyed confidence. It will now require an extraordinary effort by the British people to restore confidence in our economy as well as in the stability of our society.
  I believe that the country would not only have failed to understand but would wholeheartedly have condemned the House of Commons if we had risen for the Christmas Recess without discussing this grave situation and giving the Government the opportunity of explaining their failure to act in time in the face of the calamity threatening us and giving the Opposition an opportunity of placing
  1596
  the facts before the country again and of putting forward constructive proposals.
  The Government failed to offer any statement or debate. The Opposition are giving Parliament the opportunity to discuss the matter. I believe that we must seize the opportunity to bring home as vividly as we can to the people of this country the gravity of the situation and what is required of the nation today.
  We must tell the nation the plain truth about the situation. What is required today is a national response from the nation as a whole. We cannot expect that from the British people unless they are told the plain, hard truth about the situation.
  The Government have always been behind hand with the truth on inflation, on increasing unemployment, on the breakdown in industry and on the real need for conservation measures on oil, which we have not yet had. These are but a few of the examples where the country is not being called upon to face the hard facts of life today.
  Let the Chancellor of the Exchequer, who is to follow me, face the reality today, and let this House make a bold attempt to give the nation the leadership that it requires.
  We have had nearly 100 days since the Chancellor, on 23rd September, told the nation that inflation was
  "currently running at 8·4 per cent."
  At about the same time, 20th September, the Secretary of State for Prices and Consumer Protection made the comment:
  "All one can say about inflation is that it is beginning to move downwards."
  But, as usual, the definitive mis-statement came from the Prime Minister the day before polling when he said:
  "Unemployment … is beginning to fall; the balance of payments shows a substantial improvement; the pace of inflation and price rises is moderating … but now we are being inundated with gloom and doom from the Conservative leadership."
  Time after time the Prime Minister and the Chancellor of the Exchequer told the voters that inflation was getting better, slowing down, being reduced, moving downwards, and anybody who disagreed was, in the right hon. Gentleman's cliché of the day, spreading gloom and doom. But one cannot assassinate the truth with a cliché. Now the truth is there for all to see, and the country recognises it.

  1597
  The Chancellor of the Exchequer claimed that 8·4 cer cent. was the rate of inflation at the General Election. Will he tell us what the figure is today? Will he do it on the same basis as he calculated the 8·4 per cent? Will he tell the House?
  I will tell the House. On the Chancellor's basis the rate of inflation today is 21·1 per cent. That is based on the past three months, which was the period taken by the Chancellor in misleading the country by saying that the rate was 8·4 per cent. and coming down. But we have still to feel the full impact of the November Budget with higher petrol prices, higher postal charges, higher rail fares, higher gas and electricity charges, the further increase in petrol charges, which has just been sanctioned, and the result of the changes in the Price Code.
  All of that still has to come on the rate which I have just cited to the Chancellor. If he prefers to stick to the rate over a year, it is 18·2 per cent. That surely is high enough as a rate of inflation, but the indications from these last three months of what is to come are that this rate is bound to increase. These figures are the highest since records were first published in 1947.
  Let us turn to the wages front. There have been numerous breaches of the TUC's pay guidelines. One can take whichever source one likes. There was an article in the Financial Times listing all those who have obviously and openly broken the social contract. So far, about 350,000 people have had massive wage increases, none of them for special circumstances or for special reasons. They were a plain breach of the social contract, and no longer does the Secretary of State for Employment pretend to have a policy about pay.
  I have given a brief summary of the figures which have emerged, and they demonstrate all too clearly what is happening on the pay front. The truth is that today this country stands on the brink of hyperinflation, and that is not the only danger facing us. However great those consequences may be internally, that is not the only danger.
  There is a danger to the balance of payments. I have already mentioned the Prime Minister's statement that it was improving, yet now we see that the non-oil deficit is getting worse, not better.
  1598
  In November it was £227 million, twice as bad as in October. What we are seeing is that in money value exports have stabilised, which, with increases in other imports, must indicate that, volume-wise, we are decreasing, and this is the dangerous threat that we have to acknowledge in our exports.
  The visible trade deficit for the same month was £534 million, the worst ever. The current balance, including invisible earnings which are so valuable to us, was £404 million in the same month, again the worst ever. It is also a matter of fact that since the election sterling has fallen dramatically to its lowest point ever.
  The situation is vividly illustrated by the figures given by the National Institute of Economic and Social Research in its last report. It forecast that from the third quarter of 1974 to the end of 1975 there would be a depreciation of sterling by 4 per cent. That was the basis on which the National Institute made its calculation. The report, which was published a fortnight ago, referred to the end of the third quarter of 1974, but already there has been a depreciation of sterling of more than 4 per cent. on what it was allowing for for the whole of the 14 months to go to the end of 1975. No one can say this with any satisfaction, but it is a measure of the problem that faces us as a nation.
  The next dangerous thing about the situation is that it has commonly been accepted by Governments and economists in the past that if prices get out of level a change in parity or the exchange rate is one means of dealing with it, and might be preferable to other methods. This means that we get increases in prices, which cuts down imports, but later we get an opportunity for exports with lower prices to more than match them, but we recognise that it takes nearly two years before exports can do that.
  What is happening now is that with the rate of depreciation of sterling we are never able to get the advantage of the improvement of prices in exports because import prices are reflected in our prices, and the wage increases which follow deprive us of the advantage of getting a depreciation in the currency or a change in the parity rate. This is the great danger facing us, as the Prime Minister understands full well. The technical phrase is

  1599
  the J curve. We are not getting an opportunity to go up the curve. We are getting the downward part, but there is never sufficient time to take advantage of the upward turn of the curve.
  What are particularly worrying, and it has come as a surprise to many of us, are the reports from many industrialists that we have lost our competitive edge in the markets of the world. If we have done that our falling export performance is understandable, but it is an intensely dangerous situation. We can look at the problem of world trade as a whole and see forecasts for 1975 but it is unlikely that we can comfort ourselves by saying that Federal Germany and two other members of the Community are reflating. The reflation will be of no advantage to us if we have lost our competitive edge in the industrial markets and markets for investment, equipment and manufactures.
  Mr. Norman Atkinson: The right hon. Gentleman is putting a powerful case. Does he recollect that on 3rd October 1973, when his Government were introducing phase 3 of the prices and incomes policy, his Front Bench speakers were arguing the exact opposite of what he is now saying? If he looks at the record he will see that to be so.
  Mr. Heath: I cannot agree with the hon. Gentleman. The phase 3 figures were introduced before there had been any increase in oil prices. I do not accept the hon. Gentleman's statement that a different case was being put on that occasion. The case I am putting relates to the danger to our exports. We have to face the situation realistically if we are to find a solution to the problem, and, as the hon. Gentleman said, the case I am putting is powerful.
  We can see the squeeze on companies, despite what the right hon. Gentleman has done, the industrial disputes and the loss of our competitive position. British industry is being squeezed by taxation, by difficulties in borrowing, and by a pay policy which is, in effect, a free-for-all. All this is driving more and more of British industry into bankruptcy, and, therefore, into the Department of Industry to get support from the Government.
  One has to say to the Chancellor of the Exchequer that there may be some
  1600
  hon. Gentlemen below the Gangway who want this to happen, but I am prepared to give credit to the many on the Government Front Bench who do not want it to happen. However, it is happening. For how long will the Chancellor of the Exchequer be able to find from public funds the vast sums that are needed to maintain the position of British industry and those who are affected by the position in the stock market and elsewhere? We have had a further statement this afternoon—a very important one—involving large sums of money. The Chancellor of the Exchequer has to face the impact on the Stock Exchange, the effect on investment and the issue of how he will find the necessary funds to deal with this problem.
  I deal next with the industrial situation. The number of days lost through strikes between April and October was up by nearly 50 per cent. compared with the same period last year. So much for the Prime Minister's period of "peace and quiet". No one can take any joy from industrial disputes, but the Government surely ought to have the honesty to recognise that these disputes are occurring under their administration. The figures are up by 50 per cent., and the criticisms made by the Prime Minister and his colleagues of the previous Government ought to be withdrawn.
  If one looks at the general forecast of industrial trends from the CB1 and from industry, one realises that a more sombre picture is being painted than at any time since July 1966. In two months since the election, when we were told that everything was to get better, we have seen the worst-ever rate of inflation, with forecasts of still worst to come. This is inevitable from the figures published today on the movement of wage rates and earnings. Since the election we have seen the worst-ever balance of trade deficit, the worst-ever current account deficit, the worst-ever rate for sterling and a collapse of the stock market. The Chancellor of the Exchequer said earlier this year—perhaps in a rather unguarded moment—that the Stock Exchange "is a very accurate barometer" of confidence in the Government's ability to govern. It is pretty well at the bottom of the barometer now, though it may go lower, and it shows no confidence in the Government's ability to govern.

  1601
  The stock market is at its lowest level for 21 years, and in real terms at its lowest level since well before the Second World War.
  Mr. Atkinson: It is irrelevant.
  Mr. Heath: Is it irrelevant to all those trade unions which have pension funds invested in equity stock? Is it irrelevant to all those with small savings who put their money into insurance funds? Is it irrelevant to those who will retire and are looking to that as their source of income? I have never before heard such a disgraceful remark from an hon. Member. It is indicative of the harm that is being done to this country and to its people. It embodies the attitude that the Stock Exchange is only the concern of a few wealthy people and what does it matter if it brings in its train the collapse of British industry—or is the hon. Member for Tottenham (Mr. Atkinson) one of those who wish to see the State take over every item of British industry?
  Mr. Atkinson: I meant that the Stock Exchange was irrelevant in terms of yield. What people are getting today is the equivalent of fixed-interest loan yields, and the Stock Exchange has shown an inability to provide fresh issues. Therefore, fixed interest loans are irrelevant.
  Mr. Heath: I advise the hon. Gentleman to discuss the matter with those who manage his own trade union's funds and ask them whether they are happy with the present situation of the Stock Exchange.
  The Government are presiding over, and indeed hastening, the decay, destruction and near-collapse of normal mechanisms of production, finance and savings. The momentum of corporate expansion is dwindling to almost nothing because of the shortage of internal and external finance. Financial institutions are finding fewer creditworthy clients to lend to and cannot offer the public security of capital or income. The real rate of return is still negative. Each of these problems compounds the others and leads to further complications and distortions. These are the symptoms and effects of inflation at a rate of 20 per cent.
  There are many forces which threaten to make the current wage inflation worse.
  1602
  Stage 3 has been abandoned. We shall see in the new year greater pressures on negotiators to press for higher wages, interim agreements and topping-up arrangements of one kind and another—all of which will break the 12-month rule. They will press for new threshold arrangements to ensure protection against price increases. Many groups have already obtained settlements to compensate them for the past and they now want settlements to anticipate the future. This has been pointed out in the introduction to the National Institute's report.
  The Secretary of State for Employment (Mr. Michael Foot): I hope that the right hon. Gentleman will not give currency to that part of the National Institute's report, because it is quite untrue that any anticipatory arrangement would be within the guidelines, and it is untrue that any settlements are being made on that basis. It is a misleading statement made in the National Institute's report, and I am sure the right hon. Gentleman will not wish to give it currency. If he were to do so, it would encourage people to try to make settlements on that basis.
  Mr. Heath: I appreciate the right hon. Gentleman's point, and I would in no way wish to emulate his conduct when he was in Opposition.
  Mr. Foot: I said that the statement made by the National Institute was wrong in both particulars. That report suggested that anticipatory arrangements would be within the guidelines. That is untrue. I also said that it was untrue that settlements were being made on that basis in any general sense whatever. Now that the right hon. Gentleman has been given the facts, I hope that he will withdraw that statement and give no further currency to it.
  Mr. Heath: I repeat that I shall deal with this statement in detail because I do not propose to follow the course taken by the right hon. Gentleman in Opposition; namely, of inciting every major wage claim he could find.
  To deal in a little more detail with the right hon. Gentleman's point, what is stated in the Institute's report is not within the guidelines of the social contract. There can be no other explanation for very large wage increases, which

  1603
  cannot be justified under the social contract, other than that they are anticipating the future. This is well known to anybody who has been concerned with trade union negotiations.
  Mr. Foot rose—
  Mr. Heath: I hope that the right hon. Gentleman will allow me to finish the point. I do not know how any of these very large awards can be justified except on the basis that people are trying either to get in before a wage freeze or to anticipate a rise in prices. The National Institute correctly points out that to take such a course is to compound inflation. It cannot do other than make the situation worse. This is where the Secretary of State for Employment is so completely ineffective in not trying to restrain such awards or finding some way of dealing with them, because it is compounding inflation.
  Mr. Foot: I repeat to the right hon. Gentleman that that statement by the National Institute is false and misleading. I trust that the right hon. Gentleman, having had the facts drawn to his attention, will now refute the statement and not continue to give it credence. It is quite untrue that settlements are generally being made on that basis. The right hon. Gentleman should withdraw what he said.
  Mr. Heath: The Secretary of State for employment will have to deal with the facts of the case and explain how these massive awards can be justified. They are leading to increased inflation.
  I hope that in their reply tonight the Government will say what precisely they intend to do about the wage position. Will wages continue at the rates I have cited today in quoting from the Department of Employment's figures, will this situation be allowed to continue, and what are the Government prepared to do about it?
  If there were no such cover as the social contract and this House or the country were to see an announcement of these figures at any normal time, we would say "These are completely incomprehensible and unjustifiable". However, the Government are seeking to give an air of respectability to the whole situation. That is the dangerous
  1604
  aspect of the social contract. The Secretary of State for Employment has responsibility in this matter. He has to say that wage demands will deal with the real position of the economy, or he has to accept that he has an ineffective policy, or that he has at the moment no policy at all. There is no time to be lost if the Government are to have any chance at all of mastering inflation either through a voluntary policy of some kind or through an alternative statutory policy.
  A great deal has been said recently about conciliation and arbitration. Those of us who have had experience in the Department of Employment, or the Ministry of Labour as it was, appreciate the importance of conciliation and arbitration. We also know the weaknesses. There are many aspects of industrial life in which that aspect can be successful. Let me quote what the Chairman of the Conciliation and Arbitration Service said the other day:
  "You must not think that the CAS is responsible for the terms of settlements; we do not mind if it is £30 or £40 or anything else. Our first responsibility is to try to secure a settlement".
  The situation on arbitration and conciliation at present could not have been stated more clearly. I am not talking about disputes over conditions in factories, because obviously there are many cases which can be dealt with speedily by conciliation, but I am dealing with arbitration. That statement certainly sums up the situation. The whole philosophy behind the CAS is to secure industrial peace, but, obviously, it is prepared to do so at any price.
  How can this situation be reconciled with an effective anti-inflation policy of any kind or with an economy that is balanced and able to hold its own in the competitive world outside? That philosophy encourages those in militant groups to make extreme demands of all kinds. We have witnessed this so often in negotiations. A wage demand is made and the employer says that it cannot be met. The negotiators then say "We shall take the matter away with us and consider it." The employer eventually makes another offer, and stage by stage the matter moves on and no response comes from the other side. Finally, the parties go to arbitration, and usually there is a fifty-fifty difference between them. The

  1605
  renegotiations then begin, and the final award is made approving the arbitration rinding. This is the reason why arbitration without principles cannot be an effective means of dealing with inflation in this country either in the present critical situation or in a normal situation. Without proper guidelines we see the embodiment of peace at any price.
  I recognise that some members of the Labour Front Bench appreciate what is going on. The right hon. Gentleman the Foreign Secretary spoke honestly about his worries in Brussels recently, speaking from his experience as an ex-Chancellor of the Exchequer. He knows about the policies that led to devaluation and the great loss to sterling on the way. There are some others who see in the crisis an opportunity to introduce a Socialist State. It was the Secretary of State for Industry who told the Labour Party conference in 1973 that the crisis should be
  "… the occasion for fundamental change and not the excuse for postponing it."
  Of course, many fundamental changes may be necessary in this country in industry and the economy, but fundamental change to a Socialist State siege economy is not the fundamental change that the country wants.
  There are reports of differences in the Cabinet about policy and about changes in pay policy. Perhaps the Chancellor of the Exchequer will tell us what his attitude is. Perhaps the Secretary of State for Employment is willing to tell us what his proposals are. The Chancellor apparently wishes to ask the Prime Minister what the policy is first. It all rather implies that we are approaching the Bank holiday, when the Prime Minister will again take over supreme direction of the economy—always on a Bank holiday, and always followed by devaluation.
  The Chancellor was asked during the February election whether he would give a promise not to introduce a statutory incomes policy. He replied:
  "I would not give such a pledge because I am an honest man, and I know how circumstances can change cases."
  It was an honourable reply. At the October General Election the Chancellor, the Prime Minister and all their colleagues bound themselves in no circum-
  1606
  stances to have an incomes policy which required statutory backing.
  The Chancellor of the Exchequer (Mr. Denis Healey): So did the right hon. Gentleman.
  Mr. Heath: If the right hon. Gentleman did not bother to read the Conservative Party manifesto, one can understand his ignorance.
  Mr. Healey: What about 1970?
  Mr. Heath: We are talking about the last election. We have learned from experience, but the Chancellor and his colleagues chose to hide their heads in the sand and to say in October that there were no circumstances in which this could arise. Are we, the country and the world to assume that this inflationary situation, approaching hyperinflation, is to continue at an ever-increasing rate, that the sort of announcement about wage increases we have heard today is to go on, and that the Government will take no action of any kind? Is that the situation? If it is, the Government are heading for catastrophe.
  The truth is that the country needs a new policy to be thrashed out on the whole question of the economy and, in particular, on prices and wages. There are those who say that the Government must introduce a freeze. I hope that those who demand it at the moment will recognise the immense difficulties of going for a straight freeze. I hope that, above all, they will recognise that any action of that kind requires, later on, after a comparatively short period—in our case, five months—embarking on the process of getting out of the freeze, which is one of the major problems facing any economy. It can be done with considerable flexibility, but the difficulties are great.
  I understand the attitude of the Secretary of State for Employment in these matters, because he, not being prepared to take any open line about what ought to happen to wages, or the economy as a whole, or to incomes, is just prepared really to wash his hands of the whole thing because he is so terrified that if he were to take a particular line he would be proved to be wrong, or the regulations would not be observed, or other difficulties would arise. But if he goes on taking that point of view with

  1607
  the economy as it is, he can only expect the sort of figures we have had today and the disaster which follows from them.
  But it is more than just a question of working out these policies. We have to thrash out a programme of measures which could be agreed by all parties in this House as far as possible. I say to the Prime Minister that we Conservatives are fully prepared to co-operate where action is taken to save the mixed economy and prosperity of this country and the freedom of its peoples, which depends upon that economy. We are prepared to co-operate in a genuine attempt to save the mixed economy in this country, and there are items which should be on the agenda for such a programme.
  We have to agree to cut the borrowing requirement which the Chancellor of the Exchequer has embarked upon. The Supplementary Estimate on 9th December was for £1,538 million. Is it not a mark of the times that outside this House, in the country, it has passed almost without notice? There were times when Supplementary Estimates of £80 million or £90 million were a major cause of dissension in the whole of the Press, amongst economists and elsewhere.
  A massive 68 per cent. of the Supplementary Estimate reflected the rate support grant for local authority expenditure, and £550 million was the increase in real terms expenditure, quite apart from pay increases or from subsidies. This increase comes from Government policy. Public expenditure this year in real terms is £725 million more than it would have been after the cuts proposed by Mr. Anthony Barber. For the whole of that increase, the present Government are responsible.
  That is the position on the Chancellor's borrowing requirement. It must be cut. There can be no real increase in public expenditure. I have never believed in a rigid pattern of Government expenditure, because one has to change it from time to time, but where increases have been made, cuts must be made to offset them.
  Although it is always tempting for an Opposition to make capital out of cuts, if the January White Paper on public expenditure follows a sound strategy, in which it is bringing public expenditure
  1608
  under control, we will not draw political advantage from it and will support the Chancellor in what it is really necessary to do.
  Mr. Healey: I hope that we can also rely on the right hon. Gentleman's support for the increases in nationalised industry prices, for which he has been attacking us. Is the right hon. Gentleman aware that the increase in the Estimates published the other day arose from increases in pensions and in expenditure on housing, and also threshold payments in the public sector, for which he alone is responsible? Is the right hon. Gentleman prepared to tell us that he is against any of these elements?
  Mr. Heath: I have pointed out that the amount of the increase in real terms is the result of policy decisions. The right hon. Gentleman has given us credit for increasing pensions. Well and good—I accept that. It is right. He has given us credit for increased expenditure on housing. Yes, that is all right.
  Mr. Healey: What about the threshold payments?
  Mr. Heath: The Prime Minister pressed me constantly when he was in Opposition to introduce threshold payments. He should not now, through the Chancellor of the Exchequer, try to shift the burden. I accepted my responsibility. The Prime Minister had better accept his as well.
  The Prime Minister (Mr. Harold Wilson): I accepted full responsibility on threshold payments during the right hon. Gentleman's period of office and during the election. As my right hon. Friend the Chancellor of the Exchequer has pointed out, in real terms—nothing to do with inflation or thresholds—the whole increase is due to higher pensions and more expenditure on housing. The right hon. Gentleman is condemning the increase in real terms. What is he condemning—the increase in pensions or the increase in housing expenditure? Which would he cut?
  Mr. Heath: As usual, the Prime Minister is trying to change the question. What I am saying is that these increases—
  The Prime Minister: In real terms.
  Mr. Heath: —in real terms are the result of Government policy. It was Government policy which increased expenditure on pensions, and the present Government have always claimed credit for the housing programme. Let them accept responsibility for the expenditure as well.
  The Prime Minister: The right hon. Gentleman has accepted that the real terms increase in Government expenditure is the Government's responsibility. He has not replied to the question put by my right hon. Friend the Chancellor of the Exchequer. The right hon. Gentleman knows the facts. Pensions and housing explain the whole amount in real terms. Will the right hon. Gentleman say which he would propose to be cut? Would he cut pensions or housing, or neither?
  Mr. Heath: The right hon. Gentleman knows that the Government contribution to pensions is small in any case. By far the greater part has to come from the National Insurance Fund. On housing we made it plain at the General Election that we did not agree with the large amount given to local authorities for the purchase of private housing. We never agreed with that policy, and I repeat that statement now. If the Chancellor is prepared to bring Government expenditure under proper control, he has a better chance of keeping the money supply under control as well, and this, too, is necessary. [HON. MEMBERS: "Oh."] Oh, yes. But the right hon. Gentleman seems to believe that money control always has to be at a fixed rate. Nothing could be further from the truth. He should read some of the monetarists' arguments and see. Of course there can be a change of rate. What is essential is that when we have a Budget deficit of this kind we must keep our monetary policy under control.
  As I have already said, as far as the prices and incomes part is concerned this Government have to go out and fight for a proper relationship between wages and the economy. We must agree on a shift of real resources to industry and exports, which implies a cut in standards for the rest of us. It means less for wages and less for other public expenditure. This must be faced. We cannot go on with figures of the kind announced today. It means that priority must go to higher profitability for British industry, however
  1610
  much hon. Members opposite below the Gangway may dislike it. Without it, unemployment will increase. Nothing less than that will happen, unless the Government are prepared to insist that firms maintain people in employment—in which case, the Chancellor must find the money, in which case we become more and more of a subsidised economy, unable to compete in the export markets of the world. That would be the outcome of a policy of that kind.
  We must find a means to restore the capital market, to enable British industry to gain, from institutions and others, the savings that it wants. There must be a realistic approach to all these matters affecting the capital market, including the capital taxes which we debated yesterday, and on which my right hon. Friend the Member for Finchley (Mrs. Thatcher) spoke.
  As for subsidies, we kept them to a low level. This Government have gradually increased them, and they are now finding that there is a danger that these subsidies will increase even more. They have to face up to the fact that we are in no financial position to go on in this way at this moment and that the changes in world prices which are reflecting themselves here must reflect themselves in consumer expenditure. The Government are doing it with nationalised industry prices. With respect, I did not attack the Chancellor; I said that they have to be taken into account in the level of inflation in the coming year.
  That is one of the hard things which must be faced, and the same applies to changes in world prices, which now, at last, the present Government are acknowledging. If they had been prepared to be honest when we were in power, they could have supported a policy which was prepared to tell the unions and the employers that this was what was happening in the world, and to take the action necessary to deal with the situation.
  I can go on to the question of energy saving. The Secretary of State's measures the other day were pitiful. We must realise that we cannot afford a deficit of this kind on purchases of overseas oil. A saving of £350 million, eventually, was the Secretary of State's proposal. That is one month's oil deficit and less than the £404 million of last month's current

  1611
  account deficit. That is the scale on which he is working. [An HON. MEMBER: "Piddling."] As my hon. Friend says, it is piddling.
  Also, far too little is being done about saving the use of energy in industry itself. However much Ministers may criticise our action last December, it showed that industry could dispense with 10 per cent. of its fuel supplies without in any way interfering with production and that, given time, it could save much more than 10 per cent. and benefit the country by that amount.
  We need, moreover, a crash programme on North Sea oil. There is no doubt now—all the evidence is there—that progress in North Sea oil development is being consistently slowed down as a result of the Government's approach and policies. Marginal fields are now not being developed because of the uncertainty. Investment in equipment for oil extraction is now being slashed. Weeks and months have been wasted. One day lost in development of North Sea oil costs us £10 million across the exchanges. The total savings of the Secretary of State, with all his effort, amount to between £10 million and £15 million. So all that he has saved is one day to set against the months which are now being lost in development of North Sea oil.
  I do not believe—all the experts no longer believe—that this country can be self-supporting in oil from the North Sea by 1980, as was originally intended, and most people will say that if we are self-supporting by 1985, that will be a remarkable achievement. These are the consequences of the delay, the indecision and the policies towards public ownership of the Government in North Sea oil—and they are immensely damaging. What is more, the calculation that by 1980 we could have to borrow £15½ billion sterling to pay the deficit on our trading account meantime has to be increased by another five years' worth if we do not supply ourselves permanently until 1985. That is the scale of the problem. Again, the programme of keeping Britain in Europe, as we now agree, must be pursued energetically and speedily.
  There are also some things that the Government must stop doing if they are to produce an answer. In the crisis that I have described, it is madness to press
  1612
  ahead with nationalisation plans. It is absurd to hound the saver, the investor, the small businessman and the farmer in the way that the Government are doing.
  It is wrong just to permit concession after concession to those who try to obtain their ends by extreme and disruptive means, and leave at their mercy those who are working for a moderation in our society in every way. This is so foolish and it is another policy that the Government have consistently followed. The Government have to encourage the creation of wealth and not damage it. They have to produce a training programme because it will be urgently needed. It is needed in Scotland to an extent even greater than we were able to achieve to enable people from Glasgow to go across to the scene of North Sea oil development on the East coast.
  Of course, it is the small businessmen and shopkeepers who have been particularly badly squeezed between taxation and the rates burden which still faces them; with some reduction in consumer demand in the New Year, which must come about, they will be in great difficulties. These are the problems facing the economy.
  We have been talking particularly about our own affairs, but what we are really seeing today in the outside world and in this country is a massive redistribution of power. Unless we in this House recognise that, we shall never have a corporate mind which can deal with these problems. The first thing externally is the massive shift of resources to the oil-producing countries and the raw material-producing countries. At the moment, in many ways, this shift is only financial; it is balances, but in real terms it means a shift of resources and production from the industrial West to the raw material-producing countries.
  At OPEC we are being held on prices which are consistently being increased. When one looks back at the UNCTAD of 1964 and thinks of the low prices and what we try to do to help the balances of payments of the raw material-producing countries, and then considers the level of their prices today and what their balances of payments are getting—look at sugar, for instance—does anyone believe that those countries will ever allow those prices to go down again to anything like their former level? Does anyone think that they have not learned the lesson of OPEC

  1613
  and that they will not be able to join together, to organise themselves? That is what the industrial West must face. That is the transfer of power which is going on in the world.
  I hope that those who have this newfound power will exercise it with responsibility, because of the damage that they can do by changing the other power relationships in the world—whether it is damage to NATO through the West or the strengthening of the Warsaw Pact because of the dangers which face all of us. That sort of power shift can affect their friends and can then be to their own detriment. I cannot believe that it is in accordance with the foreign policies of many of these countries that this should happen, so I would ask them to exercise responsibility.
  It is also true that we in this country are not suffering only from a technical imbalance or a financial difficulty. For a long time a shift of power has been taking place within the United Kingdom, between the constituent parts of the United Kingdom and between those in industry in the United Kingdom. That is the shift of power which is taking place. The real job of political leadership and of this House is to judge whether this shift is genuine and has to be accommodated or whether it is superficial or is the result of lobbying of one kind or another.
  What we have to do in this country is to recognise that the economic malfunc-tionings which are represented by inflation, by the balance of payments problems and by rising unemployment are symptoms of the fact that we have so far failed to adapt ourselves to the power changes which have been taking place in these last few years. I do not believe that the right process is to follow that of the Secretary of State for Employment and just to give way to all the changes in power. I do not believe that for a moment. I believe that they have to be accommodated in changes in our industrial system which will enable all of those in industry to exercise a responsible attitude in the economic crisis we now face. I believe, therefore, that we have to restore confidence to our institutions and to our society by a change of this kind. If we can achieve again that unity, our problems will be much easier to solve.
  The task facing the British people today is, I think, the most formidable that we
  1614
  have faced in peace time. Many criticisms are made of us as a nation—that we are slow to seize opportunities, and slow to respond to danger. Some will say that our social system is outdated. Others will say that our economic attitudes are based on division rather than co-operation. Some will say that we have not reconciled ourselves to the loss of worldwide power, nor have we completely accepted the new European Community of which we are a member. In all these criticisms from the outside world there may be an element of truth. But what no one can deny—within or without—is that the British people throughout their history have beaten off every challenge when they have realised what is at stake.
  Today in this country everything is at stake. Inflation at today's levels, let alone the increasing rate that is now inevitable, can destroy individual and corporate savings. It can destroy our economic potential. It can destroy our social structure and both individual and corporate faith in the future. It can destroy our power in the Community and our influence in the world. It can destroy the very basis of law and order on which our society exists and the very freedom for which so many generations in this country have fought. That is what is at stake today.
  The response required is a national response and it must be one of individual effort as well as corporate effort in the whole length and breadth of the country. It must be a response of preparedness to forgo in the short term in order to ensure the interests of the longer-term future and of future generations.
  I am convinced that at this moment the British people are prepared to make just such a national response to a national economic crisis. It is because so far Her Majesty's Government have failed to acknowledge this crisis or to take the necessary measures to bestir the nation that we shall vote against them tonight.
  5.3 p.m.
  The Chancellor of the Exchequer (Mr. Denis Healey): I must confess to a certain diffidence about intervening in what is clearly a two-day Conservative Party selection conference, and I think that others may share my melancholy at the thought that if this morning's newspaper reports are true, our proceedings may be

  1615
  distorted for a period of weeks every year while the Opposition agonise over the inadequacies of their leadership.
  The right hon. Member for Sidcup (Mr. Heath) opened his speech by saying that he welcome the debate as an opportunity for the Opposition to put forward constructive proposals for solving our national problems. I listened to him very carefully. It is true that at the very end of his speech we had a few paragraphs of perfunctory analysis—all at far too high a level of abstraction to use as a guide for action—but for the most part his speech was one of those familiar shrill tirades on conventional party-political lines. I propose to give him a friendly cuff or two at the end of my remarks so that I may respond in the spirit in which he opened the debate.
  I welcome this opportunity, even so soon after the Budget debates, to discuss the state of the economy before the House rises for the Christmas Recess at the end of one of the most difficult years in our country's history.
  Mrs. Elaine Kellett-Bowman: Thanks to you.
  Mr. Healey: I want to deal with the international and the national aspects of our problem in turn, and first, the international context, to which the right hon. Gentleman gave surprisingly minuscule attention in his somewhat lengthy speech. [HON. MEMBERS: "Rubbish."] The outlook has darkened a good deal even in the last five weeks since the Budget debates. I am talking about the international situation. No one now denies that the world is in a recession. The question is whether it moves from recession into slump. In any case, it now appears possible that in 1975 world output and trade may not grow at all, and recovery could be postponed until 1976. If this is proved to be the case, next year could be even more difficult than this for Britain and for most of her partners in the world. So I make no apology for the efforts that I have made over the last nine months to warn my colleagues abroad of the dangers and to seek united action to overcome them.
  I think that the House will recognise that I have been not without success. By the autumn, there was general agree-
  1616
  ment, both in the Community and in OECD, that unemployment is now as serious a danger as inflation.
  Mr. Peter Rost: At 8·4 per cent?
  Mr. Healey: I pointed in my Budget speech to the central rôle of the United States and Germany in this regard. If there is to be a revival of world activity in trade, these two countries must provide the decisive impetus and the environment in which others can introduce expansionary measures without too much fear of balance of payments repercussions. I think that the whole House and the country will be grateful for the contribution which Germany is now making in this regard under Chancellor Schmidt, both in an international context and in German domestic policies.
  On his recent visit to Washington, Chancellor Schmidt discussed with President Ford the co-ordination of economic policies. They agreed that the world economy had slipped into recession, and President Ford welcomed the measures which the German Cabinet were about to introduce. These measures were announced last Thursday and they reveal the determination of the German Government to bring about a solid upswing in domestic demand though without increasing inflationary tendencies. Indeed, it was recognised that appropriate expansionary measures can moderate inflationary pressure by reducing unit costs.
  This is a welcome counterpart to my own argument—so far, unfortunately, lost on some hon. Members of the Opposition—that restrictive policies which create unemployment can make inflation worse rather than better.
  In France, too, the Government are taking steps to check rising unemployment, with more promised for next year. New measures to stimulate the economy have been introduced in the Netherlands.
  In the United States present policy can best be described as one of continuing caution. There have been some signs of slight relaxation in monetary policy in recent weeks, but the general opinion seems to be that this is unlikely to be sufficient to underpin a sustained recovery in the economy. Indeed, my colleague Mr. Simon warned only yesterday that unemployment in the United States was

  1617
  likely to reach 7½ per cent.—which I understand may mean 7½ million people out of work—before the upswing begins.
  The prospect for the world economy as a whole, therefore, remains uneasily balanced. There will, however, be an opportunity for further discussion of a concerted approach when I meet my colleagues in the Interim Committee on Monetary Reform of the IMF in Washington next month. I believe that some shift in American policy now is inevitable, but it will be critical for all of us how soon and how large that shift proves to be.
  We must all recognise that very little that is done now, either in Britain or elsewhere in the world, is likely to have much effect on world trade during the next 12 months. The major part of the January meeting of the IMF will be devoted to considering new machinery for recycling the oil producers' surpluses. Without such machinery all our efforts to discourage restrictive fiscal policies will be wasted, because consumer countries will not be able to import the oil they need to stay in business. Moreover, the strains on the international banking system could soon prove intolerable.
  At the IMF annual meeting in September I suggested a new facility in the IMF for the investment of petrodollars as a basis on which we could co-operate in the distribution of finance between the oil consuming countries. I envisaged a facility which would be flexible, open-ended and capable of responding to market conditions, and which would also give the producers the advantage of investing in an excellent asset in the form of a claim on the IMF. Since September, the fund staff have been putting flesh on these proposals and I believe that next month we can reach agreement in principle on the scheme. It has already been supported by all my European partners and has been well received by the oil producers, too as I found in Saudi Arabia last week.
  But even this will not be a complete answer. We need a variety of mechanisms, and the latest proposal is that set out by Dr. Kissinger and Mr. Simon, the United States Treasury Secretary. This is not the same as the IMF facility, but it could certainly play a useful rôle. It recognises that we cannot afford to test
  1618
  the limits of recycling through existing private intermediaries and as such it represents an important stage in the evolution of American thinking.
  I hope that it will be possible to make progress on this American concept, too, in January. But it is highly improbable even if in January the IMF members support this in principle—and some Governments are very hostile to the concept at the moment—that this American machinery should be operating before the end of next year. Therefore, there is little chance that it would be available in time to avoid excessive strains on the world banking system.
  Moreover, the American proposal offers no rôle either for the oil producing countries or for the less developed countries which are suffering so seriously from the recent increase in oil prices. Now that, in Martinique, President Ford has recognised the case for a general dialogue between consumers and producers—as President Giscard d'Estaing suggested—I hope that he will also recognise the value of an extended IMF facility as the basis for such a dialogue. The Saudi Government officials to whom I talked last week recognise the value of the enlarged IMF facility in this respect.
  Success in these international negotiations is of critical importance to our national economy here in Britain, but of course it is not enough. What we do by our own efforts is vital. What we can achieve in international negotiations on these issues can simply create the conditions in which our own efforts are worth while.
  I turn to developments in our national economy, since the Budget, and particularly to the events of last week, to which the right hon. Gentleman referred. I shall deal first with the parity of sterling. I must confess that the only word that I can use for the right hon. Gentleman's remarks about this is "impudence", because the value of the £ sterling fell by close to 20 per cent. in the 20 months between my predecessor's decision to float the pound and his leaving office at the end of February. Indeed, the effective devaluation of sterling on 16th January was 20½4 per cent. In the past 10 months there has been a further fall of about 4 per cent.

  1619
  to, I think, at lunchtime today an effective devaluation of 21·5 per cent. But in the first six months of my party's tenure of office the pound remained exceptionally stable at around 17 per cent.
  Since then we have had two recent periods of disturbance in the markets. The first was in November when the value of the American dollar was moving rapidly against the Swiss franc, and the German mark, and sterling, as always, was affected by these movements. The second was last week. That was occasioned by some selling of sterling by American oil companies which had expected to make their quarterly payments to Saudi Arabia in the middle of the month in sterling but appeared to have been told otherwise at a late stage in their preparations.
  The reaction of the Press and other observers to the fact of a change in the payments arrangements for oil was very much overdone—I was glad that the right hon. Member for Carshalton expressed the same view in an interview on television last week—because other Middle East States changed their arrangements some time ago without in any way jeopardising our ability to attract capital inflows to finance our current account deficit. As I explained to the House last Friday—and it should have been clear from the publication that week of the latest quarterly balance-of-payments figures—the use of this or that currency as a vehicle for making oil payments should not be a matter of concern. What matters greatly is how and where the oil producing countries, having received their revenue from the oil companies, decide to invest their money.
  In the first nine months of this year the oil exporters as a group added almost 4¼ billion dollars to their holdings of sterling or sterling denominated securities, and this inflow, together with the programme of public sector borrowing, initiated by the Consevative Government when there was no oil deficit whatever to contend with, and the initial drawing for technical reasons on the Government's 2½ billion dollars facility, has enabled us not only to finance our current account but also to top up our reserves.
  I was greatly reassured by what the Saudi authorities told me last week
  1620
  about their intention to go on investing in sterling, and the House will be aware that since then the Kuwait authorities and the United Arab Emirates have given similar assurances—
  Mr. Peter Tapsell: Does not the right hon. Gentleman realise that the aspect of our debate which causes the greatest concern outside this House is the preoccupation of the two Front Benches with proving to one another that they have been less, or slightly more, successful in securing the parity of sterling? What the whole country, and indeed the world, is waiting for is evidence of some determination by the present administration that this problem is now to be tackled. Is it not absolutely clear that sooner or later, in order to deal with this problem, we must have a wages freeze and import controls, and ought not the right hon. Gentleman to announce such moves now?
  Mr. Healey: I am aware of the point the hon. Gentleman makes, and that is why I was so disappointed by the speech of the Leader of the Opposition. As a Member of the House for many years, the hon. Gentleman must not blame me if on occasions when I am speaking about the policy of the Government I refer to some of the attacks on the Government by the right hon. Gentleman, made in a debate for which the right hon. Gentleman called. I cannot ignore statements made by the right hon. Gentleman, and I do not propose to do so. It has never been my nature, I regret to admit to the House, to turn the other cheek.
  However, if I might now continue, the whole House will welcome the assurances given by the oil producers, because they make an essential contribution towards financing a deficit which is inevitable until the OPEC countries can absorb imports of goods and services equal to the value of the oil they export. But they impose a heavy burden of interest payments which we must reduce as fast as we possibly can.
  Unless we are seen to be making progress in our trade deficit—this is the point which the hon. Gentleman wanted me to make—we may not indefinitely appear to be so suitable a country in which to invest. It is therefore more than ever necessary to carry through the changes in the structure of our economy to which I

  1621
  referred in my Budget speech. We must achieve a substantial shift in the pattern of our output towards exports and capital investment long before we receive the full benefit of offshore oil.
  I left plenty of room in demand for exports, and at present levels sterling remains competitive, but the evidence available so far this year suggests that British export prices have been rising faster than those of our competitors, although there is some evidence that, perhaps, the last month's improvement in the French trade figures may have been due in part to a big increase in their export prices.
  The latest figures for Britain show that the erosion of our competitiveness has been a good deal smaller over the past nine months than earlier appeared. The exchange rate changes in the past few weeks will help to keep our exports competitive, but in order to retain this position and to minimise the effects of international uncertainty, is it essential that we slow down the rate of domestic inflation. British exporters will need to be vigorous and determined if we are to hold and develop overseas markets, and if our exports falter the implications for employment, for investment and for the living standards of the whole country will be serious.
  I frankly admit that the trade figures for November were disquieting.
  Mr. Norman Lamont (Kingston-upon-Thames): Since the right hon. Gentleman has said what he has about his forecast for world trade now being very different, and it was assumed in the Red Book both that world trade would grow at about 5 per cent. and that British exports would grow by not much less, and since the right hon. Gentleman has also made his comments about our exports becoming much less competitive, is it not now clear, only six weeks after the Red Book was published, that the prospects for British exports are radically different?
  Mr. Healey: I think that they have worsened, but, if the hon. Gentleman will took at my words when reported in HANSARD tomorrow, I think that he will find that I said that it was possible, if nothing was done, that there could be no increase in world trade and output in the coming 12 months. With respect,
  1622
  the prospects are worse than they appeared when I made my Budget speech, but, on the other hand—I am coming to this—there are great opportunities for increasing British exports to the oil producing countries of which we are not at present taking anything like full advantage.
  I had just referred to the trade figures in November. There were, as always, some special factors. Perhaps the November figures reflect the first effect of the slow-down in world activity to which the hon. Gentleman has just referred. It is all the more important, therefore, that we look to those markets which offer the prospects of rapidly growing demand for our products, and those markets are to be found in the oil producing countries. There is enormous potential here if we take our chances.
  I believe that my visit to Saudi Arabia last week opens the door to a big increase in British exports at least to that country. As I told the House on Friday, a joint working party consisting of officials of our two countries will be meeting in February to develop a medium-term programme for increasing British exports to that country. [An HON. MEMBER: "Why February?"] For various reasons—if I may answer that question. The importance of the meeting in February is that the Saudi Arabian Government will be finalising their five-year plan in the first three months of next year, and until they are clear about their requirements it will be difficult for us to decide the extent to which we can meet them.
  Mr. Robert Adley: To take up the point made by my hon. Friend the Member for Horn-castle (Mr. Tapsell), and hoping that the Chancellor will not spend too much time on blaming other people, may I put this question? The right hon. Gentleman has talked about exports. Does he not realise that the exports which he requires, and which we all desperately need, are likely to be produced only by companies within the private enterprise system, and many of these companies are finding it very hard to convince themselves that his Government are doing their best to give them every opportunity to make themselves profitable and thus to encourage them to export?
  Mr. Healey: I am not sure whether I hope that the hon. Gentleman will catch the eye of the Chair later, but that was a speech in the form of an intervention, making points with which, of course, I shall deal in a few minutes.
  Apart from the international factors to which I have referred, the key to our success in running the economy next year will be our ability to control inflation. This will determine our ability to sustain exports, to prevent mass unemployment, and to attract overseas finance.
  I must remind the House, since the Leader of the Opposition made so much of the matter, that we inherited a very high rate of inflation. The retail price index rose 1·9 per cent. in January this year and 1·7 per cent. in February—in other words, in those two months at an annual rate of 21·6 per cent. Yet, in spite of the continuing rise in oil prices, we achieved some moderation in the rate as the year wore on, a point which Sir Arthur Cockfield, who was, I believe, appointed by the right hon. Gentleman as tax adviser to his party when in opposition, made in the Report of the Price Commission which he published after the election.
  Sir Arthur Cockfield pointed out—I shall quote the way he put it—that the prices of products which he controlled through the Price Commission rose 23 per cent. last winter, 16 per cent. during the spring, but only 9½ per cent. in the summer.
  Mr. Rost: When will the Chancellor tell us what he intends to do?
  Mr. Healey: I am coming to that. The hon. Gentleman must contain himself, and the less he intervenes the faster I shall reach the point.
  Mr. Rost: The nation is waiting.
  Mr. Healey: The retail price index is now rising again, as I warned it would. [HON. MEMBERS: "Oh."] Yes, I did in September, and hon. Members can look it up in the Conservative Central Office files if they wish. Nobody can be satisfied with last month's figure. It was 1·8 per cent., as high as in the last months when the Conservative Government were in power, although I must point out that a significant part of this increase arose from increases in the price of sugar and second-hand cars, which have very little
  1624
  to do with Government action or with the social contract.
  At least, the House can now be satisfied that Government fiscal policy is no longer the main villain as it was last year, for the money supply is at least under strict control. Both Ml and M3 are well under last year's rate, M3 being well under half last year's rate. Both are well under the growth in money GDP.
  Against this background, a public sector borrowing requirement of £6·3 billion, although disturbingly high, as I said in my Budget speech, is not actually fuelling inflation. Indeed, as the right hon. Member for Down, South (Mr. Powell) pointed out in our Budget debates and again yesterday, to a large extent the size of the public sector borrowing requirement is the inevitable counterpart of the deficit in our balance of payments, and, if I tried to remove it, it would mean squeezing other sectors of the economy, thus producing a large fall in national output and a large increase in unemployment. However, as I say, I do not think that anyone can claim that Government fiscal policy is any longer fuelling inflation as it did last year.
  Public expenditure, too, is under strict control, as will appear from the White Paper to be published next month. I noted, in passing, that the right hon. Gentleman complained that it was not appearing in December. He will recall that in similar circumstances he did not publish his annual paper on public expenditure for 1971 until the January.
  Next year, local authority expenditure, which for the past three years has been rising at 8 per cent. a year, is to be held to an increase of 4 per cent., which, in the circumstances, I think, is the strictest control we can hope to exercise so quickly.
  Last year, part of the rise in the RPI was due to the rise in import prices— above all, the rise in the price of oil. Next year, import prices are likely to rise much less, but, contrary to our earlier expectation, they are likely still to rise substantially. Nevertheless, as I predicted last summer, the key to controlling inflation in 1975 is likely to be the level of wage and salary settlements.
  My right hon. Friend the Secretary of State for Employment will deal with this matter in detail when he winds up, and I

  1625
  shall content myself now with only two points. First, three-quarters of those who settled since July received increases within the guidelines laid down by the TUC. Second, of the increase in earnings over the past 12 months about half is accounted for by the threshold agreements introduced by the Leader of the Opposition, and a substantial further part was caused by public servants, such as nurses and postmen, who had been unfairly penalised by the statutory policy, catching up as soon as opportunity arose.
  The striking feature—it struck me again today—is that in any event the Opposition offer nothing to put in the place of the social contract. There was a time when they were in favour of a statutory policy, but now they claim that they want a voluntary, not statutory, policy, and what they claim is that they will make their voluntary incomes policy work by somehow or other bringing the CBI into the social contract.
  Do the Opposition think, for example, that the attitude of the mineworkers' leaders to their current claim and the negotiations following it will be affected by the inclusion of the CBI in the social contract? That is a preposterous idea. Of course, I agree very strongly that the Government should seek the same constructive relationship with business and industry as it has achieved with the trade unions, but that is not the same as trying to bring industry or the CBI into the social contract.
  The key here is what the Government can do to ensure that industry produces more exports and more investment. In Britain wage settlements over the last 20 years have not been higher than in most of the countries which compete with us.
  Mr. Adley: They are now.
  Mr. Healey: No, they are not. The trouble is that the increases have not been accompanied by the same growth in productivity as has been experienced in other countries, and that is not just a question of investment.
  Mr. Adley: You are right.
  Mr. Healey: I know that I am. I am all for bringing hon. Members along with me and I have no doubt that by the end
  1626
  of the debate we shall have achieved a form of national unity.
  Investment is not the only key to increased productivity and I strongly agree with hon. Members on both sides of the House who pointed out that to reduce the number of industrial stoppages would do more for output in the immediate future than any conceivable increase in investment. Whatever view the Leader of the Opposition might take on the Conciliation and Arbitration Service as a determinant of wage settlements, I am sure that he will agree with me that it can play a major rôle in reducing the number of stoppages at every level.
  Investment is a major component in productivity and the problem here again is not so much the rate of investment. In this respect Britain has not done very differently from many of its competitors, such as Germany. The problem has always been that British industry has a much lower rate of return in output per unit of investment than Germany, Japan or the United States. The NEDC has decided that it will concentrate on this aspect of the problem in the next 12 months because this is a problem that cannot be dealt with by Governments at the macro-economic level. This is an essential problem for particular individual firms and companies in the ordering of their affairs.
  Mr. Eric Moonman: My right hon. Friend has referred to the importance of the micro-aspects rather than the macro-levels of the economy. While he is right to rebut the idea that simply introducing the CBI into the social contract would help, why is it not possible to widen the social contract to introduce a feeling of personal involvement among management and executives?
  Mr. Healey: I shall be dealing with my hon. Friend's point later. The Government have a duty to provide the necessary environment in which what my hon. Friend called the micro-economic changes can take place. The level of demand set by Government policy, the availability of finance, the return on capital, the amount of taxation are all factors which create the climate in which decisions at company level need to be made.
  We face a special problem here during the world recession. It may be very difficult, no matter what opportunities and

  1627
  however much money we offer, to persuade many firms to invest a lot of money in new capacity, in what some call "green field investment", because there is not enough confidence in the level of world demand for the next few years.
  But there is none the less great scope for improving productivity from existing capacity by the sort of investment which, for example, removes bottlenecks in the production process. I have been glad to find in talks with leading industrialists in recent weeks that many of them plan, in spite of all the problems, to concentrate investment in this sector over the coming months.
  The Budget measures and further changes in the Price Code, which my right hon. Friend the Secretary of State for Prices announced this afternoon, prove the good will of the Government towards the private sector. I found no questioning of this good will in my talks with the CBI. I am prepared to consider whether anything else is needed, but I must be assured of some return for anything I do in terms of investment. I do not want to find myself in the position in which the Leader of the Opposition found himself when in Government when he complained to the Institute of Directors that he had done everything it had asked and he had nothing in return by way of investment. The right hon. Gentleman will recall the luncheon, which was fully reported in the institute's journal a year or two ago.
  The Government have some right to demand a return from industry in terms of investment and exports in the same way that it has a right to demand a return from the trade unions in terms of the level of wage settlements. The Government have the same duty to take the necessary measures to protect the nation's interests if they fail to get that return either from the unions or from business. If industry and the unions respond, as I hope and believe they may, then I think this is the way to forge a type of national unity for which the whole nation has been crying out and which I think the Leader of the Opposition genuinely desires.
  Mr. Tom King: Is the Chancellor serious when he says that he knows that private industry feels that the Government have its good will at heart? Does he not realise that industry is acutely
  1628
  worried over the Employment Protection Bill of the Secretary of State for Employment, and over the attitude of many members of the Government, including the Minister of State for Industry, who restated last week that it is his aim to abolish the whole basis of capitalism in this country? Does he believe that industry has confidence in the Government?
  Mr. Healey: I know that there are many in industry, just as there are many in the trade unions, who disagree with many aspects of the present policy. But from the many talks I have had, both official and informal, with industrialists over the last five weeks, I think there is a genuine recognition now of a Government desire to help, but also a recognition that that help can honestly be offered only in return for undertakings on the part of industry, too.
  Let me turn to the speech by the right hon. Member for Sidcup. What disappointed me again today, and I suspect that it disappointed some of his hon. Friends, is that he showed no sign of having learned anything from the experience of his three-and-a-half years in office. The right hon. Gentleman quoted the right hon. Member for Leeds, North-East (Sir K. Joseph). Let me quote him now. The latter pointed out in a letter to the Economist that at the end of the right hon. Gentleman's period of office,
  "We had an historic high rate of inflation, an enfeebled economy, the worst relations with the trade union movement in decades and a lost Election with the greatest fall in our share of the vote since 1929."
  He went on to say
  "Surely this was sufficient incentive to rethink".
  I would have thought so, too, and yet there was no sign of that either in the right hon. Gentleman's speech today or in the speech by the right hon. Member for Finchley (Mrs. Thatcher) yesterday. There has been no rethinking of the problems in the Conservative Party over the last nine months in spite of the patent evidence of failure in the economic situation faced by that Government at the end of their last period of office and their failure to win the General Election at that time.
  The right hon. Member for Down, South yesterday described one of the contenders to the throne, the right hon. Member for Finchley, as Satan rebuking

  1629
  sin. The Leader of the Opposition is the Prince of Darkness himself. He is the Beelzebub of Bexley. There was a time when he had a reputation for clear thinking and plain speaking. But we have had no clear thinking or plain speaking from him today on the major problems on which he sought this debate in order to make constructive proposals.
  Mr. Rost rose—
  Mr. Healey: I will not give way. I am anxious to quote the Leader of the Opposition accurately in what he said when he was interviewed by a television commentator last week. He was asked,
  "Where do you stand on the major dilemma any government faces? Do you go for deflation to preserve the value of money or reflation to save jobs and prosperity? "
  The Leader of the Opposition replied,
  "I do not think you can put it as simply as that. Any government has got to use all the economic measures at its disposal in order to deal with the economy, but we are in a particularly difficult situation."
  The right hon. Gentleman was also asked,
  "Now that the Government's said that it won't have a wage freeze, would you like one? "
  He replied,
  "Well again, what they've got to do first of all is get the employers and the unions together and having explained the position very frankly to them see how far they can get."
  That impeccable sort of sentiment is the only positive contribution we have had from the right hon. Gentleman to the debate ranging on economic policy in all parties, and outside all parties, over the past nine months.
  The right hon. Gentleman said again, and so did the right hon. Member for Carshalton in the Budget debate and on television last week, that the Government should allow no increase in Government expenditure from now on, which would mean cutting £900 million off the expenditure plans published by the previous Government last December. Yet the Opposition told us not to touch defence expenditure, which under their plans was due to rise by £400 million next year. They told us that we should have given twice as much aid to industry as I gave in the last Budget—£1,500 million. They have listed a whole range of additional social security benefits that they want. They committed themselves
  1630
  in the last election to abolishing the rates, and to 9½ per cent. mortgages. The total cost of those proposals, as the right hon. Gentleman knows, is about £3,000 million. On top of that, we had another pretender, the right hon. Member for Taunton (Mr. du Cann), writing in the News of the World, on Sunday that we must cut taxes.
  This farrago of dishonest self-contradiction is made all the worse by the shrill and hysterical abuse that the right hon. Gentleman pours on anyone who has a positive policy to put forward, and by his prickly petulance at any hint of criticism, however friendly. Worst of all—we saw it in spades this afternoon—he takes obvious satisfaction, despite his denials, in any item of news which bodes ill for the nation, and has a determination to ignore anything that bodes well. The fact is—the right hon. Gentleman knows it as well as the rest of us—that he sees his political survival as depending on the nation's disaster. He has a vested interest in catastrophe, and this robs his criticisms of all credibility. Even as a prophet he is no Cassandra. He is more like the Fat Boy in "Pickwick Papers", whose only aim was to make our flesh creep.
  That is no basis for national unity. What we need is a Government who will attempt to understand the problems and attitudes of others, even when they disagree with them, a Government who will take pride in the nation's successes— for example, the big reduction this year in the non-oil deficit; the maintenance of high levels of employment, when unemployment is rising to record levels in many other countries; and the sort of compassion which put pensions, families and houses first, and which the right hon. Gentleman for one moment purported to attack in his speech this afternoon, until he was interrupted.
  Above all, what we need is a determination, while recognising the immense and daunting scale of the problems faced by Britain and the world, to make the sacrifices needed to pull through.
  Mr. Nigel Lawson: Before the Chancellor sinks into a sea of cliches, will he answer the question that he complained my right hon. Friend the Leader of the Opposition did not answer? Does he

  1631
  intend to deflate the economy to preserve the purchasing power of money, or does he intend to inflate it in order to preserve jobs?
  Mr. Healey: The hon. Gentleman counts himself—[HON. MEMBERS: "Answer."] I will answer. The hon. Gentleman will be aware that only five weeks ago I presented a Budget, and I embodied my judgment in the Budget decisions. The Budget increased demand by about £600 million, on top of the £200 million increase in demand in the July measures, on which the Leader of the Opposition put down a motion of attack and then failed to vote when it came to it.
  Mr. Lawson: Will the right hon. Gentleman answer the question?
  Mr. Healey: I have answered it. I believe that it was necessary to increase demand in order to maintain employment at adequate levels, and I did so.
  Mr. Robert Carr: May I put the question in rather more specific terms? As the right hon. Gentleman has said that it is essential to hold down inflation, can be explain why, in the whole period for which he has been solely in control, inflation has risen under his measures from 8·4 per cent. in September to 21·3 per cent. now? What will he do about it? Will he continue to let it go up, or will he bring it down? If so, how will he do it?
  Mr. Healey: I dealt with the whole problem of inflation at some length earlier in my speech. [HON. MEMBERS: "No."] I take it that the right hon. Gentleman wants a reply. As I have made clear, there is bound to be a further increase in the rate of inflation, because of the increase in world prices, which none of us expected a few months ago; the increase in nationalised industry prices, on which I hope we shall continue to have the support of the Opposition; and the relaxations in the Price Code, which were strongly supported by the Opposition, and which they have consistently maintained did not go far enough.
  But I believe that it is possible to reduce the amount of wage inflation through the successful operation of the social contract.
  Mr. Rost: When does it start?
  Mr. Healey: I have dealt with that, too. If the hon. Gentleman takes the trouble to turn up after dinner, my right hon. Friend replying to the debate will blow the hon. Gentleman out of the water—if he cares to interrupt again on that matter.
  As a nation, we have never in peacetime—here I agree with the Leader of the Opposition, and I have been saying it consistently since last December—faced economic problems of the scale and complexity of those which we face this year, and which may well be even more daunting in the year ahead and on the world scene.
  However, I think that the tide will turn in 1976. I shall do my best, as the British Chancellor, to persuade my colleagues to take the measures which may enable the tide to turn before next year is out.
  Our nation will receive sorely needed help, on which others cannot count, from the oil round our shores, which will start flowing in quantity round about 1976.
  Meanwhile, however, we must accept a period in which living standards cannot rise and could even fall. We shall have to be fitter. We certainly shall not be fatter. We shall have a leaner and more efficient economy. I believe, too, that under this Government we shall have a society invigorated by a unity which has eluded us for a generation of peacetime, because it is a unity based on compassion and justice.
  5.48 p.m.
  Mr. Jeremy Thorpe: I believe that the Chancellor of the Exchequer gave us a concentrated biographical sketch of himself when he said that he found it hard to turn the other cheek. That is what I found disappointing in his speech, because I believe that the British people today expect the House to express its concern about our present economic situation, to show signs of its determination to attack it, and at the end of the debate to give them some sign of hope. For that reason, I do not think that discussion about the contenders for the throne of the Tory Party, the costing of the Tory economic policy, and the hard work that must have gone into such phrases as "Beelzebub of Bexley". are

  1633
  relevant or helpful in dealing with the economic situation.
  On the credit side, the whole House listened with great interest to the right hon. Gentleman's proposals and hopes about the recycling of world oil surpluses. Here the Government not only have played but are playing a very constructive part. They are not dragging their feet. Probably the right hon. Gentleman will be the first to agree that it is disappointing that it is nearly 13 months since Dr. Kissinger made his speech to the Pilgrims and it has taken the world so long to move such a short way. On that matter we wish him well.
  I therefore found little in the Chancellor's speech which showed that there was a new direction, or new hope, or indeed a recognition of the desperate seriousness of the situation.
  I was hoping to hear from the Leader of the Opposition something about the Tory Party's current thinking on the question of prices and incomes. This is not a matter—and this will be my only reference to other events—on which one has a second ballot. One has a view now.
  The background to our economic situation could not be more bleak. In 1939 this country was the most prosperous in Europe. Today only Ireland and Italy are poorer than we are. The balance of payments deficit for November was £534 million—more than we are accustomed to in a full year. The non-oil deficit doubled. On the basis of the November figure, we could have a balance of payments deficit of up to £6,500 million in one year.
  Our volume of exports in September— October was 6 per cent. down. Our volume of imports in October was 2·5 per cent. up. Production is falling by 1·5 per cent. compared with September last year. Although since December 1971 we have had an effective devaluation of sterling of 22 per cent., the pound today appears to be over-valued and has had to rely on massive support from the Bank of England—and it is anybody's guess how much that was. According to today's figures from the Department of Employment, wage rates have increased by 26 per cent. compared with last year. Prices have increased by 18·3 per cent. compared with last year. Both figures
  1634
  are accelerating. The figure of 2 per cent. growth on which the Chancellor of the Exchequer based his Budget is not likely to be achieved.
  Taking the OECD projections of the gross domestic product of various countries, in 1960 our GDP was 112 per cent. of that of France. It is estimated that in 1980 it will be 60 per cent. In 1960 our GDP was 156 per cent. of that of Japan. It is thought that by 1980 it will be about 33 per cent. In 1960 it was 93 per cent. of that of West Germany. It is thought that by 1980 it will be about 60 per cent.
  That is not all. The Bank of England, in its "Quarterly Bulletin" for December, said:
  "More cannot be expected of price control; on the contrary, some domestic prices may have to rise faster to reflect more of past cost increases than has hitherto been allowed."
  In the Financial Times of 14th December, Mr. William Keegan, its economics correspondent, wrote:
  "Wage pressures have now taken over from commodity prices as the main upward push on the cost of living."
  In 1966, 1972 and 1974 we set out as a nation to achieve an export-led recovery. Instead we have ended with an import-led collapse. As the Economist said about sterling on 14th December:
  "In October British exports fell even in value by £97 million and in volume by over 4 per cent. In November the value of exports fell by another £49 million. There has to be a question whether Britain is not following the worst possible exchange rate policy; pricing itself out of export markets by clinging to too high an exchange rate on the eve of world recession. That is the case for letting the exchange rate drop sharply instead of trying unsuccessfully to prop it up".
  Against that extremely bleak situation, which no right hon. or hon. Member would deny, what should we as a nation do? I trust that I shall be allowed to put forward one or two suggestions in the hope that they are practical and constructive. The first is a psychological question. It is essential that the Government bring home clearly the gravity of our economic situation. I do not believe that the people yet accept it. It has to be made crystal clear that the problem is not curable by further borrowing on an excessive scale. We shall already owe about £13,000 million by 1980 and, with the best will in the world, the Shah of

  1635
  Persia will not be able to cure our deep-seated economic problems even if we wish to go on borrowing. We shall not cure them by further mortgaging of the North Sea. Goodness knows how much of that has been pledged in advance.
  We shall not cure our problems with blanket subsidies which produce an unreal situation and shield the people from the realities of economic life. To that extent, I welcome the Government's move concerning the nationalised industries which is economically correct. It is wrong that we should be paying £700 million in blanket food subsidies which subsidise the bread of Mr. Harry Hyams as much as they subsidise that of the old-age pensioners.
  If the Government make clear to the people the gravity of the situation, the country's response, however tough the measures, will be practical and constructive, providing the people are convinced that those measures are fair and are likely to be effective.
  During the election—and this is my second suggestion—I prophesied that within six months, whatever party was returned to power, the Government would be compelled to introduce a statutory prices and incomes policy. I stick to that prophecy. The Labour Party rejected it during the election. The Conservative Party—whose manifesto, I assure the Leader of the Opposition, I read—was incredibly equivocal.
  The social contract has been a valiant attempt to solve the problem. In one sense, it is far too rigid because it restricts increases to an across-the-board norm linked to the cost of living and does not permit of adequate machinery to deal with special cases. On the other hand, it is too flexible because the Government have been able to show or to declaim that practically every settlement miraculously comes within the confines of the social contract.
  The fact that the social contract has defects can be proved out of the mouth of the Prime Minister in his speech at Cardiff during the election and out of the mouth of the Secretary of State for Prices and Consumer Protection in her speech a month ago following the Budget. Both of them indicated that they were giving serious consideration to penalising
  1636
  employers who went beyond the norm of the social contract. In other words, they expected that claims would be made which went beyond the social contract and, by inference, that they would be granted by employers. Last week the social contract, in effect, turned on whether Mr. Gormley was able to get out of his sick bed and attend his union meeting.
  Even if the social contract were working, do the Government believe that this country can absorb a 20 to 25 per cent. increase in prices and wages year in, year out in the present state of the economy? Is it right to say that we can guarantee the living standards of the people however much we want to do so? Is that a fair economic yardstick by which to ask for the people's support?
  As I have said, I believe that we shall require a statutory prices and incomes policy and, unlike the Leader of the Opposition, I have no hesitation in saying what I think it should be. We in the Liberal Party have long advocated the concept of an inflation tax which, I understand from one newspaper, the Cabinet is alleged to be considering. However, I do not believe that an inflation tax which will claw back an excess, either through national insurance contributions in the case of wages or corporation tax in the case of companies, will be acceptable unless at the same time massive help is given to the low-paid and low-income families. The concept of the guaranteed minimum earnings and the extension of the credit income tax system are two ways of bringing that about.
  Next, we must restructure industry. Our biggest growth potential is in the sphere of public administration, whether in local government or in the National Health Service. In the NHS there is a grave shortage of doctors and ancillary staff but no shortage of administrators.
  If we have to face a recession, that means that people will lose their jobs. I very much doubt whether any Government have yet done a sufficiently clear survey of the growth industries in which there will be opportunities for employment, and whether those potential vacancies will be matched by adequate retraining schemes, so that those who lose their jobs can be prepared immediately for

  1637
  alternative employment. I suggest that when those people are undergoing retraining they should be paid a proper salary.
  The mechanical and electrical engineering industries, the metal goods industries, the extractive industries and housing offer enormous scope for absorbing, after retraining, people who may find that the industries in which they work are declining, partly as a result of Government policies but more as a result of world recession.
  I should like to see a genuine float of sterling, possibly within monthly limits, and I believe that that is preferable to straight devaluation. What happens after devaluation is that we have a feeling of well-being which we continue to enjoy until we have dissipated the benefits, when we think to ourselves that we might do it all over again. I should like to see a genuine float of sterling through a crawling peg. That would restore confidence.
  It is difficult to advocate import controls. I should like to see a considerable cutting back of imported luxury goods, but there are difficulties. I have no doubt that the Government will look into that, but under GATT and our commitments to the Community that would be difficult, and it could produce contraction. We in this country must do more to help ourselves. There is scope for an enormous increase in food production. I see no reason why over a five-year period we should not knock £600 million off our import bill. When we consider that in 1974, with a £4,000 million deficit, £2,700 million of which was on imported food and £1,600 million on temperate foodstuffs which we could have produced in this country, the Government must surely agree that there is great scope here.
  The proposals by the Secretary of State for Energy for saving energy were a welcome start but a small one. They will save £350 million, and that will leave a £2,000 milion oil bill still to meet. When one goes around the country and sees lights blazing, offices overheated and an appallingly profligate waste of energy, one would not believe that there was any requirement on anyone to conserve energy.
  Mr. David Marquand: The Liberal Whips' office is overheated.
  Mr. Thorpe: The hon. Gentleman is wrong. I have turned off the radiator in my room, and it will remain off until it gets really cold. The radiators are turned off in the Liberal Whips' room and they will remain turned off. If the hon. Gentleman cares to make a further discovery, he will find that some contribution is being made. In parenthesis, I am not impressed when we in the House sometimes turn down the heat simply by opening the windows.
  Does our shift system in industry make the best possible use of natural light? Experience during the period of the three-day week showed that people could be much more flexible. By those two methods of energy-saving alone we could knock an immense amount off our balance of payments deficit.
  If ever there were a time when we needed international co-operation with our European partners, it is now. The Prime Minister agrees with that and so does the Leader of the Opposition, so I need not open the argument between the Prime Minister and those who sit behind him.
  On 5th July 1974 the New Statesman said:
  "Managers of the economy are judged by their performance on growth, unemployment, inflation, the balance of payments. All of these are going badly."
  What the New Statesman said in July has managed to survive the test of time right up to December, and I believe that it is right.
  The people want evidence from the Government that they are fully aware of the reality of the crisis. The sixth-form debating speech made by the Chancellor of the Exchequer did not assist in that direction. If the Government with conviction are able to make the people aware of the crisis, they will be entitled to ask the people to accept stringent measures. If those measures are fair and are likely to be effective, the Government are entitled to the support of all parties in the House for those measures, and I am confident that they will receive the support of the British nation.
  6.5 p.m.
  Mr. David Marquand: As so often happens with members of the Liberal Party, I detected a curious mixture of frivolity and seriousness in the

  1639
  speech made by the right hon. Member for Devon, North (Mr. Thorpe). However, I agree with him that we are facing a much more severe crisis than either of the Front Bench speeches suggested. I was glad that the right hon. Gentleman struck that note at the beginning of his speech and, now that the Front Bench gladiators have departed, I hope that the rest of us will be able to retain that note.
  The country is facing its most severe economic crisis since the war, in many ways a more severe economic crisis even than the crisis of the inter-war period. The present crisis, if it were to accelerate, could actually destroy the United Kingdom and possibly even undermine the foundations of parliamentary government, and that did not happen between the wars. That is the magnitude of the problem.
  The crisis has many elements in it, one or two of which I will mention. First, we have a balance of payments deficit of about 8 per cent. of our national income. In other words, we are consuming 8 per cent. more than we produce. We are able to do that because the rest of the world is lending us the money and it is doing so in effect at a negative real rate of interest because of the rate of inflation and the depreciation in the value of our currency.
  At the same time, there is undoubted evidence that the rate of inflation is accelerating. None of us in the House takes as gospel what appears in the bulletins of the National Institute of Economic and Social Research, and I was glad to have the assurance from my right hon. Friend that the National Institute is wrong in what it says about the way in which the social contract is being interpreted. If my right hon. Friend gives that assurance, of course I accept it.
  Nevertheless, the National Institute forecasts a rate of inflation next year of between 20 per cent. and 25 per cent., and I should be surprised if the forecasts within government were very different from that. The methods used by the National Institute to make its forecasts are similar to those used inside the Government economic machine.
  It must be remembered, moreover, that these forecasts cannot take account of
  1640
  the psychological impact of accelerating inflation itself. Forecasting techniques make use of econometric assumptions based on past behaviour. They cannot take account of the changes in behaviour which are likely to take place if inflation gathers speed. Therefore, I fear that the forecast errs on the optimistic rather than the pessimistic side.
  I agree with the right hon. Member for Devon, North that the most alarming feature of the crisis is that there is little sign that the British people feel in their bones that they face a crisis at all. During the February election campaign I was impressed by the number of people who spontaneously came up to me in my constituency and said, "My God, what a crisis you will inherit when you come into power". Some even asked, "Why on earth do you want to get into power at a period of such severe crisis?" That was the mood in February. There was a disposition then for the British people to accept sacrifices and austerity. I am sorry to say that that mood has been dissipated. I see very little sign of it now.
  This situation clearly cannot continue indefinitely. If there is no improvement in the balance of payments, the foreigners who are so kind as to lend us their money at a negative return to themselves will take it out of the country. There can be no dispute about that. If domestic inflation is not brought under control, if the forecasts of the National Institute prove true, the balance of payments next year is bound to deteriorate, because inflation in the United Kingdom will be worse than the inflation experienced by our competitors. I also believe that if we fail to bring domestic inflation under control we shall, sooner or later—although it is impossible to say when—proceed from the cantering to the galloping phase of inflation. We may even start to experience what has sometimes happened in some Latin American countries and what happened in the Weimar Republic between the wars, when whole societies lost confidence in money. That may sound a wild prophecy to make in this House, but it may be fulfilled if we fail to control domestic inflation.
  What, then, do we do? I believe that the first objective must be to bring home to our people—not only to the people at large but to the key decision makers,

  1641
  those whose bargaining ultimately determines what the rate of inflation will be— just how serious inflation has now become.
  Sir John Hall: How?
  Mr. Marquand: I should like to answer that question as I develop my remarks.
  The first thing to be done is this—and I do not think Ministers have done it sufficiently although they have begun the process. They must ram home again and again the simple truth that inflation redistributes income from the weak to the strong at any level in society. Because of our history, because our working people, in contrast, for example, to those in Germany, suffered in the past much more harshly from deflation than from inflation, there is a residual feeling at the back of the minds of many trade union negotiators at the grass roots level that although inflation is very inconvenient and unpleasant it is not as bad as all that, and that inflation is certainly not as bad as deflation. That attitude of mind exists. I understand the reasons for it, but I think we must do our best to eradicate it. I suggest that my right hon. Friends make use of every opportunity, not only in national speeches— although my right hon. Friend made a marvellous speech during his recent party political broadcast—but at the shop floor and trade union level to ram home the lesson that inflation robs the poor and benefits the strong and that its effects are totally contrary to the whole philosophy of democratic Socialism.
  But preaching is not enough. We must somehow take the people of this country by the scruff of the neck and show them that we are facing a crisis. I believe that some extraordinary measures are essential to bring that fact home.
  Let me give one example. The Chancellor of the Exchequer made a profound mistake when he tried to promote conservation of oil supplies by means of raising prices rather than by means of rationing. I know the economic arguments in favour of raising oil prices, and they are very powerful in some ways, but they ignore psychological realities. When we raise the price of petrol to the consumer he grumbles and complains, and may even cut his consumption for a week or two, but before long he has absorbed the price
  1642
  increase and is simply pressing for a higher money income to compensate. If we want to show people that there is a crisis, the way to have done so would have been by physical rationing rather than by rationing by price.
  Mr. Atkinson: Does not my hon. Friend agree that price control has the same effect, since wages are rising faster than, or as fast as, the cost of living.
  Mr. Marquand: I do not think that my hon. Friend has grasped my point. It is that the people of this country do not realise how serious the crisis is. Some dramatic action must be taken by the Government to bring this home, and I think that the rationing of petrol would have been a useful start.
  Another suggestion is one which was originally made, I think, by the right hon. Member for Orkney and Shetland (Mr. Grimond). I shall take my ideas, if they are good ones, from any source. The Government should give serious thought to cutting the remuneration of the highly paid members of our society. There should be direct cuts made in high incomes. I am delighted that the Secretary of State for Employment has referred the question of high incomes to the Royal Commission. I am delighted that the Royal Commission has been set up. Let us now go further and make exemplary cuts in the incomes of the highest paid. I can think of nothing which would do more to a ram home the fact of the crisis
  I also believe—if this suggestion is not considered treasonable—that the Royal Family have a part to play. A constructive and valuable measure would be for the Royal Family to make a voluntary sacrifice of a dramatic kind, which would show the people that they took the situation seriously. That, too, would help to create the right psychological atmosphere.
  However, I do not think that psychological warfare, if I can call it that, is any longer enough. We also need to toughen up the institutional framework of the social contract. The National Institute is right in saying that to operate a social contract in the way it is now being operated, whereby the negotiators themselves have to decide whether or not a given claim is or is not within the guidelines, imposes an intolerable burden

  1643
  on the negotiators concerned. Trade unions are formed to protect the living standards of their members. They have a duty to the wider society, of course, and in many cases they have responded to that duty. The fact remains that their primary purpose is to protect the living standards of their own members. It is asking an enormous amount of trade union negotiators to expect them to act as instruments of Government policy. There must be an impartial board or body of some kind which can say whether or not particular claims fall within the guidelines. Such a body would also make clear what the guidelines actually are and what they are supposed to achieve. I can see no objections to that.
  Some of my right hon. and hon. Friends would probably say that this suggestion would be the thin end of a wedge leading back to the horrors of a statutory policy. Some might add that such a step would be seen by the trade unions as the thin end of the wedge and that it would therefore encourage the sort of claims that we want to discourage.
  But what is the alternative? I am confident that the alternative is that the forecasts of the National Institute will prove to be true and may even be exceeded. That is far less acceptable than what I am suggesting and is contrary to everything for which the Labour Party and movement have always stood.
  Mr. Atkinson: On the question of wages, there is no doubt or ambiguity about the statement made by many trade unionists and the TUC statement concerning the guidelines, which said clearly that wage negotiators should bear in mind the national situation and should not go beyond maintaining the living standards of those they represent. If my hon. Friend wishes to go further and is now saying that somebody should judge wage negotiations against that criterion, he is thinking of giving sanction powers to that body, which is what the trade unions are opposed to.
  Mr. Marquand: I am not asking for that. I am saying that an independent body, representing the community and both sides of industry, is in a better position than negotiators themselves can possibly be to know whether the guide-
  1644
  lines are being applied at a given moment, and in a much better position to set out in objective terms what the guidelines are supposed to achieve, so that the rest of us may know whether the policy is working.
  This is not a departure from the concept of a voluntary policy. I believe in the idea of the social contract and in a voluntary incomes policy. No one in his senses would want deliberately to go back to a statutory policy. No one in his senses would prefer all the rigidities and difficulties that that involves. One of the weaknesses in the speech of the right hon. Member for Devon, North was that he did not admit that there were difficulties in a statutory policy and say how he would deal with the problems which would arise from one phase to the next.
  If I were to be presented with a choice between the collapse of the social contract, with resulting mass unemployment, and a return to a statutory policy, with all its disadvantages, I should opt for a return to a statutory policy—and so, I think, would the Labour Party in general. What I call for now, however, is a last effort to make the social contract work. The ideas which I have tried to throw out represent, in my view, the last chance of making it work. My right hon. Friend the Secretary of State for Employment has probably put more into this policy than anyone else. He carries a tremendous responsibility to make it work and to bring its requirements home to people at every level.
  Mr. Foot: I have listened with great care to all that my hon. Friend has said. But one disadvantage of what he is now saying—the same is true of the speech of the right hon. Member for Devon, North (Mr. Thorpe)—is that a return to a statutory policy creates difficulties in the meantime. I say again that I am bitterly opposed to any return to a statutory policy. That is Government policy. I hope that it will be understood, and I hope that my hon. Friend, despite his right to make his comments, will understand that there are dangers in presenting the case as he has done.
  Mr. Marquand: Perhaps my right hon. Friend will take this point. I have heard that argument before. I heard it when I first came to this House in 1966 and again in 1967, about devaluation. I was one of those, as was my right hon. Friend,

  1645
  who argued for devaluation in spite of all the objections to putting the argument publicly because we thought it to be necessary. I realise the responsibilities in relation to incomes policy and I did not say what I said lightly. But I believe that, in the end, each of us has an obligation to say what he feels to be right— and I know that my right hon. Friend does not want to prevent me from doing that. And if I may say so, the trade union negotiators, whose reactions my right hon. Friend is worried about, can read the National Institute report and see the facts themselves. They know what is happening just as much as the rest of us do.
  6.24 p.m.
  Mr. Edward du Cann: For myself, I cannot say I am sorry that 1974 is coming to an end. The Chancellor of the Exchequer said, in what I thought was a profoundly disappointing speech, that this had been a difficult year. The right hon. Member for Devon, North (Mr. Thorpe) was much nearer the mark when he said that he thought it had been disappointing. We have made too little progress in the effective management of our affairs. That may be thought to be a matter for regret. I say that it is a matter for shame on the part of this House of Commons.
  In what I know everyone will say was a fine and courageous speech, the hon. Member for Ashfield (Mr. Marquand) said that we were suffering an economic and financial crisis of the greatest magnitude. That is true, and I am sure that it is right that, like him, we should not endeavour to meet the situation with party dogma but, rather, by saying plainly that our concern is for our country and for the future of our children. That is the priority, and nothing else should be.
  The situation is most severe—there is no lack of evidence of that—and my right hon. Friend the Leader of the Opposition said that it was deteriorating. I am sure that it is right that we in this House should warn. We have a duty to do that.
  However, my theme is a different one. It is that much public discussion at present is misdirected. We should look to the causes rather than to the symptoms of what is wrong. So I speak hopefully of remedies rather than indulging in the current petty fashion of constant carping cynicism and complaint which seems to
  1646
  occur so frequently in dinner table and other conversations. I have no sympathy with what may be called, listening to the wireless in the morning, the gloom-and-doom brigade.
  Thus I do not ask whether the strength of our people is adequate for the tasks facing the nation and moan that they are not. I prefer to think of ways to refresh or renew the resolution which lies untapped or too little tapped in our people. The needs are to stimulate, maintain and develop the national will to succeed and to give the leadership by which it can be achieved.
  What is to be done in practical terms? We live in a practical world, and we should speak in practical language. Our overriding problems, of many, are inflation and the balance of payments. Like the right hon. Member for Devon, North and the hon. Member for Ashfield, I have some proposals to put forward which in conjunction could affect both beneficially.
  I was flattered to hear that the Chancellor of the Exchequer had read the article which I wrote last Sunday in the News of the World. It was probably better reading for him than the stuff which must be served up to him constantly. I shall endeavour to amplify some of the remarks that I made in that article.
  First, cannot we construct a comprehensive programme to save energy? What has been suggested to date is hardly impressive. Nor is there evidence of a determined search for or encouragement of the exploitation of alternative sources of supply. I give some instances. So far as I am aware—and I have made inquiries—there is little or no research into the possibility of methane production from farm waste. There is little research into the uses of solar energy. There is still less research into the uses of the wind for electricity generation.
  Another matter referred to by my right hon. Friend the Leader of the Opposition concerned the development of our resources. It seems to me that the Government are much more interested in taxation than in production. Looking at the financing of North Sea oil exploration and how far it has got, I am bound to say that it is too slow and exists far too little. What I argue for—and this is one aspect of it—is a credible programme of self-help. I see no sign of that at present.

  1647
  Second, the Government should mount an import-saving drive. I do not mean that I am in any way an enemy of a liberal trade policy. I remember well that UNCTAD conference in 1964 to which my right hon. Friend the Leader of the Opposition referred. He and I were colleagues in government at that time. I am much in favour of broadening the basis of trade throughout the world.
  I object strongly to imports which enter the United Kingdom because we are careless, idle or wasteful. For example, for every ton of paper that we recycle we save importing a ton of pulp. Surely that is obvious. We can look at the bill. The figures are there for all to see. Yet my local authority has now stopped waste paper collection. Meantime, United Kingdom imports, to quote a single figure, constitute 20,000 tons of waste paper per month. That is nothing short of scandalous. I understand that there is now a danger that some waste paper merchants, at any rate in the West Country, will go out of business. This state of affairs seems so extraordinary that it is hardly credible.
  In the United States the recycling industry—paper, steel, iron, plastics, and so on —enjoys a system of special tax relief. In Holland, the Government finance the stockpiling of waste materials for future recycling.
  Surely, with imagination, it should be possible to mobilise public enthusiasm for this cause. The hon. Member for Ashfield was entirely right to point out that the public is largely unheeding of our cries of "Wolf" at present. I suggest that we should let that imaginative programme be done, and be done at once. These may appear to be small matters, but I say that in the aggregate they are substantial in terms of cash contribution to the balance of payments.
  Even more important is the psychological effect of these matters. It is right that we should endeavour to promote public awareness of the dangers that we face, and the consequence of failure. Many people in our society have taken prosperity for granted for far too long. Indeed, one must be well over 40 years of age to have experienced anything other than a comfortable life. It is urgent to
  1648
  mobilise public enthusiasm to counter those dangers.
  I turn now to larger matters. I would pick up the theme of my right hon. Friend the Member for Finchley (Mrs. Thatcher) in the excellent speech that she made at the opening of yesterday's debate. My right hon. Friend was, in effect, saying that we depend for our very life and livelihood on commercial success. Can we not agree between us to remove the discouragements to commercial success which politics seem constantly to impose? In one way they are practical—the kind of discouragements that we hear every small business and saver in the country speak about. It would not be difficult to remove them.
  The discouragements are also political. It is urgent that we remove from industry, commerce, insurance, shipbuilding, steel—I could give a longer list— the threat, if not the reality, of political interference of the gravest kind.
  I thought that my hon. Friend the Member for Bridgwater (Mr. King) did the House a service when he interrupted the Chancellor and asked how he thought industry and commerce could sincerely believe that the Government have their best interests at heart when we still have in the Government the right hon. Member for Bristol, South-East (Mr. Benn). There could be no greater improvement in confidence than to see changes in certain Departments at this time. We need more practical success and less intellectual dog-fighting over industry. Could we not agree to a 10-year moratorium from political pressures on industry? Why cannot we leave industry well alone to do the job that it is supremely qualified to do?
  I now turn to the fourth point that I should like to make. On this subject particularly—the social contract—I found the Chancellor hardly inspiring, let alone convincing. My view about the social contract is simply described. I hope to see it succeed. Manifestly it is not succeeding. It must have stronger backing.
  I do not argue for a freeze for anyone, least of all for senior executives who so often seem to be a target of one kind and another, but excessive settlements must be brought under better control. There are various possibilities, as the House knows. The right hon. Member for Devon, North

  1649
  referred again today to the possibility of taxes on higher percentage increases. That is one possibility. Indexing, which I favour, is another. But there is a need to remove uncertainty from people at the lower levels of remuneration, and especially the continual scrapping to which this country is now subject. We also need to encourage greater emphasis on increased earnings through increased production or productivity.
  We are doing none of these things. We are not handling satisfactorily any of the matters with which we should be coping. For the Government to pretend that the social contract, as it exists, is ideal, is patently absurd. It requires amendment, and soon, if the prevailing mood of cynicism about it is not to grow to an extent which will inevitably destroy it.
  Fifth and last in my list, I would write a new industrial charter. It should be easy to write an obligation to bring about a greater degree of consultation in industry and commerce. The strategy of a business should not be the exclusive prerogative of the boardroom. Equally, its profitability is highly relevant to the work force. Industry is a partnership, not a battleground. Let us promote unity in industry by every available legislative device for consultation, for directorships, if people wish to have them, for profit sharing—heavens, if the French can do it, why cannot we?—and for share ownership, a matter in which I have long taken a personal interest. These and other devices are readily to hand. I am sure that they provide a vastly better recipe for industrial harmony than all the apparent delights of State ownership.
  My list of five points is by no means exhaustive. Other right hon. and hon. Members will have many proposals to make involving such matters, perhaps, as the restoration of confidence in markets —so very much needed—and better control of Government and local authority expenditure. Whatever the Chancellor may have said, neither local government nor central Government expenditure is under control. I am as certain as I am standing here—I speak as a past Chairman of the Public Accounts Committee and as the first Chairman of the Public Expenditure Committee—that it would be possible to get vastly better value for money than we currently do.
  1650
  Other right hon. and hon. Members will wish to talk about the regeneration of industries—for example, the construction industry, which, in the South-West at any rate, is having a miserable time—or the deficit financing which we are enjoying, if "enjoying" is the right word.
  Returning to the general, I was extremely pleased that my right hon. Friend the Leader of the Opposition this afternoon spoke about support for the Government for every proposal where common sense and patriotism are the sponsors. I endorse that approach. We on the Opposition side of the House should and shall, I believe, always support the Government in such circumstances, not least the Chancellor's efforts to counter on a world scale the imbalances which result from the sudden increase in oil prices to which he referred.
  I should like to make a supporting proposal. I suggest that the Chancellor should mobilise the support of the developing world, not least in Africa. It is true, as many speakers have remarked in the past, and will again, that to a large extent the balance of power in the world is changing. The sufferings of some of the developing countries are great, and they need help, and they could well support us in the councils of the world.
  Some of us welcome the Chancellor's Budget as a step in the right direction of liberating industry from the shackles that he previously imposed upon it. Of all the examples that one might quote, I suppose that the most important discussions that we shall enjoy—again, if that is the right word—in 1975 in this House will be those about the European Economic Community.
  I was an opponent of our country's entry into the Community. I thought then that there were better alternatives, and I still think that. I have never seen any reason to change my opinion, but, the House having made a democratic decision, we should now work for success in Europe and try to shape its destiny as we believe to be right. If we succeed, well and good. If we do not, then will be the time again to consider the alternatives. Meantime, let enthusiasm be in order. What we need above all—I am trying to say this by means of illustration— is certainty in what we do.

  1651
  I return to my main theme. It is within the knowledge of many hon. Members that, lately, I have seen something of many whom I am pleased to regard as personal friends in both Africa and the Gulf, notably in Kuwait. They all seem to say much the same thing to me, and I dare say, to other right hon. and hon. Members from time to time. I can summarise it like this: "We who have confidence in you and your nation beg you to have equal confidence in yourselves". I would pray, so let it be.
  It is true to say that this country is at a crossroads, but the reality is that our destiny is in our own hands. I just hope that in 1975 we are more worthy of it than we have been this year.
  6.41 p.m.
  Mr. Norman Atkinson: The right hon. Member for Taunton (Mr. du Cann) will not be surprised if I do not share his laissez-faire attitudes or agree with his remedies. In fact, it was somewhat odd to hear him say that there were faults within the existing system and then go on to say that it should be left alone and we should preserve it, as though the debate was being held as a result of the success of the system rather than as a means of discovering how we can remedy its failures. It is odd that someone should want to protect something that has failed the nation, so I make no apologies for being a political interventionist and putting a Socialist point of view. I believe that it is by a planned economy that we shall find a remedy for the problems facing us.
  I want to set out the Socialist case and argue for greater intervention, a planned economy, and free wage bargaining within that set up. I believe that that is not a contradiction in terms but that, on the contrary, the two things go together. In fact, one depends upon the other.
  I want to comment first on some of the things that were referred to by the Leader of the Opposition and then to take up some of the other arguments that have been advanced today about investment, about the need for import controls and, finally, about wages and prices.
  I take up first the point made by my hon. Friend the Member for Ashfield (Mr. Marquand). If the National Institute is
  1652
  correct in its prediction of a 25 per cent. rise in the retail price index, and if that is wage-led, it must of necessity mean an average increase of 35 per cent. as a result of present wage negotiations, but on the basis of our recent experience I do not think that even my hon. Friend would suggest that wage bargainers are getting anything like that average increase. In fact, some wage bargains are not keeping up with the rise in the retail price index, with the result that in terms of take-home pay some people will suffer a reduction in their living standards in the months ahead.
  We were all sadly disappointed in the Chancellor's speech. He gave us a survey in trivia. That is to be regretted, because it demonstrates the attitude of those who believe in some kind of elitism. They do not think it is necessary to present to the House a solid and well thought out argument in order to convince Parliament and take Parliament along with them. They take it for granted that the party system guarantees them support in advance of any arguments they advance. It is an insult when they give us a half-hour lecture of the kind that we heard today, and deal in trivia. I am sorry that my right hon. Friend is not here, because if he were I should have even more pertinent things to say to him.
  As the Leader of the Opposition said, we have a mixed economy. It is mixed to the tune of 25 per cent. public sector and 75 per cent. privately owned. Therefore, the predominant ethics against which we must judge the situation are the ethics and ideas of a free market economy, and it is with those ideas in mind that I propose to make my remarks.
  Again, as the Leader of the Opposition said, fundamental changes are taking place in Western capitalism. These are structural changes that we can identify and see clearly. Incidentally, some of these structural changes are beginning to expose fundamental defects in the system. That is why some of us say that whatever remedial measures are taken by the Government must be judged against the criterion of change. If we are to think of unity in our party, it must be made clear that whatever remedial measures are taken recognise the need for change within society and are aimed at bringing about a shift of power in accordance with the principles which we believe should be

  1653
  found within the Labour Government. That is one reason why we criticised the Finance for Industry bank. That was the basis for a long controversy about the Lever arrangement, and why we said that the whole purpose of our policy should be concentrated upon the immediate creation of a National Enterprise Board.
  Another important aspect of the matter is the clear relationship between cost inflation and the structural changes to which I have referred. We all recognise that the old entrepreneurial characteristics of the system have gone and that what we are now seeing is capital intensification and a regrouping of small enterprises into larger groups. Secondly, we are seeing the internationalisation of manufacturing processes and the introduction of international commodity pricing policy. The two things go together. They are interrelated, and it is important to understand why that is so.
  It is no accident that multinational manufacturing concerns are dominating the scene and that we see coming into being international agreements on pricing policies for the supply of commodities. Here I refer to three areas in particular which demonstrate clearly what I am saying. One organisation is OPEC, which comprises the petroleum producers, another comprises the copper-exporting countries, and yet another organisation represents the bauxite-producing countries. All those organisations are undertaking for commodity-producing countries what the multinational companies have done for Western capitalism. These matters are interrelated, and it is no accident.
  Again, it is no accident that as a result of those structural changes in Western capitalism, one of the largest contributory factors in the inflationary process has come from the supply of basic commodities and the under-utilisation of the extra capacity which the merging of smaller enterprises has created. Those are two major reasons why we are now suffering the sort of inflation through which we are passing and why there are problems in the Western world such as those which have been outlined in this debate.
  Let me make one final point about capital intensification and some of the difficulties which arise from the merging
  1654
  of smaller enterprises. That process, in itself, does not guarantee a growth in market potential. We have come to recognise that where a multinational structure has been established without an increase in market capacity, the problem of under-utilisation is very real. The nature of the capital intensification that is brought about brings with it an inflationary trend. The whole shift away from labour intensification has been a major contributory factor.
  The question of investment is uppermost in our minds and is one of the essential ingredients of our ideas concerning planning agreements. We are probably in for one of the worst investment recessions we have seen in post-war years, and possibly this century. It has not been a good record, and those of us with any knowledge of the machine tool industry have seen a practical demonstration of the inadequacy of the investment method, culminating in the inability of the system to generate the sort of investment which we continually need to allow us to move towards any improvement of our living standards.
  When we consider that the major part of our economy is still in private hands, that there is no strategy to control investment policies, and that each individual enterprise takes its own investment decisions, we can see that there is an absolute need for some sort of planned agreement by a Government concerned about the well being of our nation to intervene in the system so that the whole business may be orchestrated. We have argued as strongly as we can for the creation of a National Enterprise Board and for a strengthened prices board in bringing about the orchestration which we believe to be so necessary.
  We believe that in the present situation private investment should be conscripted in the national interest. We do not believe that individuals or individual companies should have complete freedom in terms of investment policy. We believe that in regard to the restricted resources which have been illustrated in this debate the Government should intervene. They should ensure that whatever the investment taking place and whatever the allocation of resources, they should not be handled on the basis of individual decisions taken in various boardrooms. These

  1655
  decisions should be made centrally by the Government, so that we can ensure that the allocation of resources accords with the national need and not with the investment policies of some independent firm.
  It was in this sense that I intervened in the speech of the Leader of the Opposition to comment on the irrelevancy of the Stock Exchange. It is true that, last year, the only fresh issues raised on the Stock Exchange amounted to a sum of £135 million. That figure is irrelevant in the present situation. The Stock Exchange is not now a serious source of new capital investment in this country; it has ceased to fulfil its original function. Not only has the system changed, but the purpose of the Stock Exchange also has changed. A total of 60 per cent. of investment is being raised by individual companies and this strengthens our arguments for a planned strategy for investment.
  I should like to deal with the question of overseas trade and the need for planning agreements. I believe that there is now a case for the imposition of import controls. Many Labour Members are determined to campaign for the creation of such controls because we do not believe we can solve many of the major problems that face us within the economy unless we have some sort of planned arrangement over those commodities which are freely imported into the United Kingdom.
  The Chancellor of the Exchequer recently said that it would be wrong to interfere with the freedom of importers and that any action on those lines would only add to world recession. I believe the opposite is true. If we accept the conventional view of the Treasury when there are balance of payments difficulties, the remedial measures involve deflating the economy and reducing demand levels domestically to correct our external trade. If that is to happen, surely the Chancellor of the Exchequer is ignoring remedies which he has long advocated. Rather than the imposition of import controls having a recessionary effect, surely the reverse is true. When we have run into balance of payments difficulties the Treasury, backed by successive Chancellors of the Exchequer, has cut back on our demand levels. Therefore, if we take
  1656
  the view that we should have planned arrangements for imports, we can go for growth domestically rather than the other way round. When the situation is left to conventional Treasury methods, the practice has been to bring about a deliberate deflation of the economy because of the imbalance overseas. If we can bring about some planned order in terms of external trade, we can then begin to boost the economy and bring about a growth rate which we have not known in the last 20 years.
  Mr. Donald Stewart: The hon. Gentleman has emphasised his view that there should be a cut in imports. That argument may be superficially attractive, but does he not agree that other Governments may take unilateral action? If we say that we are cutting back imports from country A by an amount of £50 million, will it not immediately take retaliatory measures?
  Mr. Atkinson: It may do so, but with the deficit which we now face any retaliatory action would be in our favour.
  Mr. Marquand: How?
  Mr. Atkinson: Perhaps I may answer my hon. Friend the Member for Ashfield by giving an illustration. If we are so deeply in deficit that some country wishes to take retaliatory action, that country will start cutting back on its exports to this country. If it wants to see a growth in world trade and flourishing domestic economies, it must seek a higher growth rate all round and must recognise the sense of trying to obtain some sort of planned balance in world trade, rather than leaving it to each country to make its own arrangements.
  I think that the argument is in favour of import regulation if we are talking about a growth in world effort. If we want to avoid some of the problems caused by the imposition of the conventional policies pursued by the Treasury, there is no alternative but to introduce some degree of planning into our external trade. We go further, and say that there must be a severance of external trade arrangements from the management of our domestic economy. The one should not depend upon the other. It is ludicrous to try to get an external balance on the basis of

  1657
  deflating our domestic arrangements. The one is contradictory of the other. Of necessity, there must be some planning.
  I turn now to the question of free wage bargaining and some of the things that have happened in our experience of price regulation. It is exactly two years since price regulation was brought about. Since then, we have seen two or three changes, most notably getting rid of wage control on 25th July this year. We are at the end of phase 3, and we can look, with a judge's advocacy, as it were, at what has happened during the phase 3 period.
  The Leader of the Opposition seems to have forgotten that the figure of 18·3 per cent. now given as the price rise was up to that phenomenal level over the period of phase 3 and price regulation. We do not know what precise effect price regulation has had on the index, but from what statistical information is available to us it would seem that there is an argument that about 3½ per cent. is being suffered as a result of that policy. There is possibly no way of knowing for certain. All we can say is that during the phase 3 period there have been price increases of 22½ per cent., which, reduced by 3½ per cent., brings the figure down to that which has been given to us as a result of the abolition of price control.
  I come back to the comments that the Labour Opposition made when the Conservative Government introduced the price arrangements. We said, in the famous words of one of my hon. Friends, that it was a bureaucratic entanglement. That I still believe. When the TUC and certain unions talk about a permanent system of price regulation, they are not talking about making permanent the system we have seen in operation—far from it. They are talking of a very different system indeed. The present system cannot distinguish between the various sizes of companies which have to operate within it. The criteria apply right across the board, by and large, apart from certain productivity variations, and so on. The system's weakness, therefore, in having largely the same criteria, will mitigate against our use of planning agreements.
  We go further. If the Government are serious about the introduction of planning agreements and the establishment of the National Enterprise Board, we can-
  1658
  not continue with a system of price regulation of the kind we now see because the two things will not work together. Therefore, we say that there must be fundamental changes in the whole business of price control if we are to have planning agreements of the kind we envisage.
  I come back to the point that the remedial measures must be directed towards the whole process of social change. It is at the heart of the social contract when we say that we must have a much more simplified system of price regulation. We believe that if wage negotiators are to be allowed freely to negotiate against price ceilings, but those price ceilings cannot be established by the mechanism outlined in the price regulation policy, we have to have a completely new system of price ceiling arrangements if we are to succeed in the whole business of freely negotiating wages against fixed maxima. This is of absolute importance.
  Let us judge the question of the coal industry negotiations going on today. The National Union of Mineworkers, the Government and the National Coal Board should now be talking about the price of coal and not the whole business of a wage agreement within it. We believe that it is part of the union's responsibility to present to the country what it believes the price of coal should be. It has a shared responsibility in that. Therefore, our approach is to look at price first, then to achieve the various elements within the price, where they belong and where they can be negotiated.
  We think that in this situation, because of its seriousness, there must be an almost revolutionary approach to the whole business of trying to save the situation by allowing wage negotiators a complete freedom, because we think that the wage negotiator also has a responsibility— which is to allocate the resources of the country in accordance with our criteria and our priorities, and not those of the normal price mechanism.
  Mr. Daniel Awdry: The hon. Gentleman keeps using the expressions, "We believe", "We think". Who are "we" in this context?
  Mr. Lamont: On a point of order, Mr. Speaker. Have you any guidance to

  1659
  give hon. Members about the length of time they should speak?
  Mr. Speaker: My guidance is that I hope that all speeches will be as short as they can be.
  Mr. Atkinson: I am trying to be as brief as I can, Mr. Speaker, in setting out the case as I see it.
  Mr. Lamont: Twenty-five minutes.
  Mr. Atkinson: I believe that I am about to take the same amount of time as my hon. Friend the Member for Ash-field did. I think that is a reasonable proposition.
  Mr. Speaker: I can help the hon. Gentleman. The hon. Member for Ash-field (Mr. Marquand) took 18 minutes.
  Mr. Atkinson: I return to the question of the important matter of free wage bargaining against price maxima. In order to obtain the sort of policy we envisage, we see many aspects that need changing, and I was hoping to spell out one or two more illustrations dealing with some of these things being talked about —involving the food processes, for example. Perhaps that is for another time. I accept that perhaps this is not the time to have a serious discussion about some of these problems. Perhaps we should ignore them. But I notice, Mr. Speaker, that some of your strictures and those of others do not apply to hon. Members who seem to speak pretty frequently. This happens to be my first intervention in this Parliament. I cannot apologise to anyone for the time I am taking when I consider the amount of time which some hon. Members opposite take very frequently.
  Mr. Speaker: Order. Perhaps I should explain to the hon. Gentleman that I have a list of about eight hon. Members on the Opposition side who wish to speak in the debate and who have not yet spoken in this Parliament either.
  Mr. Atkinson: In that case, Mr. Speaker, I shall sit down and allow my case to rest, hoping that I have at least stirred the imagination of some hon. Members, or have alerted them to the fact that we are serious about our demands for changes in these three areas.
  First, we believe that there is now an absolute necessity to go for a much
  1660
  greater degree of Government intervention in the economy, to go for as much planning as we can, particularly of a physical kind, to intervene physically in the economy, to try to reduce to a minimum the influence of the free market system, and to do so first of all in the whole area of investment.
  Secondly, we believe that we must introduce a system of import controls in order that we can get the kind of balance that we require. Thirdly, we believe that we must start to reconstruct the whole business of price regulation in order that we can ensure a fair redistribution of the wealth we produce and —probably equally as important—ensure also that wage bargainers can freely negotiate against price ceilings, and by this means make a serious contribution towards bringing down the galloping inflation rate from which we suffer at the moment.
  7.10 p.m.
  Mr. John Biffen: There is, in all parts of the House, a mood of deep apprehension about the current state of the economy and the inflationary prospects. As a result, almost every hon. Member has been prepared to regale us with a litany of disasters, either actual or impending. I thought that that mood was affronted by the manner in which the Chancellor responded to the speech of the Leader of the Opposition. Although the hon. Member for Tottenham (Mr. Atkinson) has drawn a handful of strictures from some of my hon. Friends, there will be widespread acquiescence with his point about the unsuitability of the way in which the Chancellor treated this debate.
  In a situation of inflationary flux, when institutions come under question, we would be well advised to take account of what hon. Members like the hon. Member for Tottenham think, because he knows what he wants done in this situation. It is as well that those views, which are widely entertained in certain sections of the trade union movement, are also expressed and taken into account in this House.
  I want to confine myself, partly because many hon. Members wish to speak on these occasions, to one aspect of the economy which is central to all our discourse and which was touched upon by

  1661
  my right hon. Friend the Leader of the Opposition—namely, the tremendous size of the public sector deficit, which, for the current year, has been running at £6,300 million, or, as I prefer to put it, at a rate of £2·50 per man, woman and child per week.
  As this is a ranging shot of a debate before the Budget in March or April, we have to ask ourselves whether we dare contemplate that kind of deficit being perpetuated for a further year. The answer must be "No". It carries profound inflationary consequences. I was encouraged to see that the Financial Times, in an editorial on 16th December
  "Now we are seeing supposedly tight monetary policies offset by indisputably weak fiscal ones."
  I shall turn further to that in a moment.
  There is one particular reason for the deep anxiety about that deficit—not merely on account of its size but on account of one of the major means which has been used to finance it—namely, recourse to oriental capital. The anxiety is that that source—that vital contribution to the Chancellor's arithmetic—is politically precarious. There would be few in this House, certainly on these benches, who would not feel an uneasy instinct that, at some time in the next six months or so, there will be a preemptive strike by Israel as a means of protecting her position in the Middle East. I pass no judgment on the virtue or otherwise of such action by the Israelis, but this is a calculation which we have to take into account, because the consequences for this country and for its domestic financing arrangements would, in my view, be significant and severe indeed.
  Second, if our domestic policies are being financed by borrowing from abroad on such a large scale, ultimately—I think in the not-too-distant future—the whole means becomes an affront to our sense of self-respect. If we are unable properly and adequately to finance what we wish to do from our own resources, we shall find, over time, that we put into pawn not merely our foreign policy but our domestic policy as well.
  Therefore, there is a widespread belief, a widespread wish—not confined to these benches, I suspect—that the Chancellor should proceed with a stabilisation programme. If we are to make a con-
  1662
  structive contribution to this debate, we cannot leave these topics hung in mid-air, in cliché and generality. We have to be prepared to indicate just how we should like to see the Chancellor set about his stabilisation programme. Therefore, I do not apologise for the fact that I intend to indicate one or two areas where I believe that he should act as expeditiously as he can, although I realise that the Budget is probably the most appropriate occasion for such action.
  First, I make no apology for recommending to the House again that there should be a speedy diminution in the size of the food subsidies bill.
  Mr. Patrick Cormack: Hear, hear.
  Mr. Biffen: I am glad to have the throaty agreement of my hon. Friend. I assure him that he is in distinguished company, because I read in "Redistribution: A Review of Progress", by Mr. John Mills on behalf of the Labour Economic, Finance and Taxation Association that
  "The main danger from inflation is … that the Government may use the limited taxable capacity of the country to fight inflation with general subsidies"
  That is a conclusion, coming from the Labour Party, with which, in this spirit of national unity we should all be happy to agree.
  When we are looking for areas of retrenchment in public sector spending, few of us will agitate for further cuts in social service expenditure or education in the light of retrenchment already being undertaken at the behest of the previous Chancellor, now Lord Barber. Certainly my hon. Friends will not agitate for further cuts in defence expenditure. So we have to face some of the realities—and, in terms of expenditure, the overwhelming reality to which one is propelled is that underlined by the author of the pamphlet from which I have just quoted.
  Confronted by so daunting a deficit, we should have to increase Excise duties. Again, in my anxiety to enlist support from various parts of the House, I have heard with approbation the remarks of the hon. Member for Meriden (Mr. Tomlinson) who also feels that this particularly non-buoyant tax should be increased. I believe that that is so, and I would go further. I do not believe that

  1663
  we can sensibly approach a significant diminution in the size of the public sector borrowing requirement without an increase in income tax.
  There may be others who would prefer an increase in the value added tax. We can debate the advantages and disadvantages of whichever method is chosen, but one of the neglected parts of the Chancellor's speech in November was his hint that there would be a possible increase in income tax. I believe that it would be much better if we had a much clearer and more tangible idea of how the Chancellor wished to proceed in diminishing that enormous public sector borrowing requirement, because it cannot be done by stealth. The whole psychology of this policy will be undermined if the Chancellor believes that he can proceed without causing pain and hurt, for there will be a painful convalescence from the fever of inflation. I do not believe that there is any other way.
  The quality of debate and the character of political decision are not assisted by the kind of remarks made by the Chief Secretary the other day, when he accused some of my hon. Friends of relishing certain levels of unemployment. My hon. Friend the Member for Blaby (Mr. Lawson) quite rightly objected to the debate being conducted in those terms. For what we ought to be doing, not in any concocted form of political national unity but out of a wider regard for what advantages one can seize from this fairly unhappy situation, is to see whether, as we return to reality, we can proceed to public debate which will be more happily conducted and more firmly rooted for the future than it has been in the past.
  Heaven knows, it does not lie easily on my tongue to be an advocate of increased taxation, but that is what is immediately obliged by the present situation. I believe that once appropriate and honest levels of taxation are being levied there will be a much wider questioning of the vaulting ambitions of the Government. My right hon. Friend the Member for Taunton (Mr. du Cann) gave a very robust exposition of the virtues of free enterprise. Again, I should like to turn to Mr. Mills, the author of the Labour pamphlet to which
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  I have already referred. In one of his conclusions he says:
  "As personal taxation in Britain is already high there is therefore a strong presupposition that any increase in government income and expenditure will be regressive. In these circumstances the proposition that increased public expenditure has a general tendency to lead to a more equal society is a dangerous fallacy."
  Therefore, I hope that out of our present agonies we can proceed to a situation in which political debate can be about the size of public sector spending, how the revenues are raised, and to what purposes they are put. That would be a valuable and constructive area of dissent and would contrast very favourably with so much of our recent sterile political argumentation over the lines of economic growth and the virtues of size.
  But there is a second advantage which can be gained from our present unhappy situation. That is that as public sector finance is freed from overseas borrowing, so we have a chance for a restoration of self-respect, which is the indispensable prelude to a restoration of national self-confidence. For I truly believe that we are mesmerised by fear. I think that the impact of inflation brings about precisely the situation which was outlined by the hon. Member for Ashfield (Mr. Marquand), in which there is one level of perception in the House and among opinion formers, perhaps, of deep anxiety, and one of profound apathy on the part of the general public.
  But it is an extraordinary condemnation of us and of this institution if we have been unable to convey to those whom we serve what are the underlying realities of our situation. I believe that the English sickness, if such there is, is centred at Westminster more than anywhere else, for I believe that we demonstrate all too little faith in our own institutions and that we show all too little confidence in the innate manufacturing skills and commercial arts of those whom we are privileged to represent.
  I hope that from the analysis I have made and from the course of action I have suggested—which makes this contribution, perhaps, a little more distinctive than some others—we can proceed to this happier situation. I say to my hon. Friends, and particularly to those from

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  England, that if we cannot recreate a sense of patriotism and a sense of success in the United Kingdom, the union itself will be at risk. I do not say that light-heartedly in the presence of the hon. Member for Banff (Mr. Watt) and his hon. Friend the Member for Western Isles (Mr. Stewart).
  I have no doubt that the more that we reflect on our own shortcomings and fears, the more may people in some component parts of the United Kingdom think that they can restore to themselves the traditions of nationhood. That will be part of a wider debate to which the House must attend no less than to economics. For the question of the union will not be resolved entirely in terms of economics. That is why, in the extrication of ourselves from our present dilemmas, the language of economics is not enough. I hope, therefore, that in the time that is available, which is short, a sense of meaningful patriotism and direction will be injected into our economic policy.
  7.26 p.m.
  Mr. Donald Stewart: I was greatly impressed by the realism in the concluding remarks of the hon. Member for Oswestry (Mr. Biffen). If I may say so, as a Scot, it is something which English Members ought to regard very seriously.
  The problem of the United Kingdom is a problem largely confined to England. However, four nations are concerned in the United Kingdom at present, and we must face the facts as they are. When my hon. Friends and I advocate that Scotland should have self-government, we do so not arguing that we ought to leave a sinking ship. We of the Scottish National Party argued this case in the days before we knew that there was a single spoonful of oil under the North Sea, and in the days when England was a prosperous country and when Scotland and Wales were apparently poor countries. We advocated this purely on the ground of nationhood—the ground which the hon. Member for Oswestry said ought to be applied to England as well.
  As I listened to the Leader of the Opposition and to the Prime Minister today I could not help thinking that whatever the country was short of, it was not short of cliches. The argument almost induced me to fall into the trap of talking
  1666
  about pots calling kettles black, people in glasshouses not throwing stones, chickens coming home to roost, and all the rest. As has been mentioned in the debate, the country is fed up with the Conservative Party and the Labour Party trying to establish which bears the greater blame in this situation.
  Is the country in danger of imminent collapse? The Government must come clean about that and tell the people. We sometimes hear scare stories before a Budget to the effect that a great tightening of the belt is due, but we then find—as with the last Budget—that the Budget is largely an anti-climax. The most serious aspect of the last Budget was the incerase in the price of petrol by about 10p a gallon. That is serious enough in many places, but it can hardly be described as a national crisis.
  The Leader of the Opposition today asked the Government to tell the truth. I certainly back that request. However, I remember that less than a year ago, when the first signs of the economic catastrophe —if that is what it is—were on the horizon, the right hon. Gentleman was assuring hon. Members that the problems we were facing were the problems of success. The request to tell the truth, therefore, should apply right across the board.
  The Government ought to take fundamental measures to ensure that agriculture is put on a sound footing. If there are hard times ahead—and I believe there are—any country that can feed its own people by means of its agriculture industry will be in a strong position.. The same applies to the fishing industry. I do not propose to go into details, because of lack of time, but both these industries are in need of help, and the Government should help, for the sake of those industries, the people in them, and the contribution made by those industries to the country's larder.
  The problem of the Scottish steel industry is now coming to a head. When the industry was nationalised on a British basis many of us forecast that it would mean doom for the industry in Scotland. We had no great feelings one way or the other on the question whether the industry should be nationalised or should continue under private enterprise, but we were certain—we are now seeing it proved

  1667
  —that the nationalisation of the industry on a British basis was the signing of its death warrant.
  The Benson Report made clear that the Scottish steel industry was a separate entity, and since the British Steel Corporation adopted that report as its basic philosophy we should have gone all the way and kept the Scottish steel industry separate. The Scottish people are becoming aware of the plans to destroy the industry in Scotland—the proposals cannot be described in any other way. I warn the Government that if the proposals are permitted to go ahead there will be a whirlwind against which the row over teachers' pay and such things will appear merely as minor inconveniences.
  The British Steel Corporation has an option on the land at Hunterston. Many of us believe that the corporation is holding that land for the purpose of what I would call sterilising it and keeping out any further developments. The Government should face the BSC with an ultimatum that it must produce plans for the development at Hunterston or let the land free for others to develop.
  I shall now list the action that I think is needed. First, the Government should put the facts plainly before the people and should then end divisive measures. I do not say that a Government elected on a Labour or Socialist philosophy has no right to introduce Labour or Socialist policies; or course they have. But there are certain proposals that are divisive apart from their political content. I have in mind, for instance, the proposal to increase the cost of the national insurance stamp for the self-employed. Many self-employed people are fairly affluent, but many others are not. This seems to me to be a totally irrational and vicious proposal, and an indirect and dishonest way of collecting more income tax.
  We should also have genuine cuts in defence—not the kind of charade we had on Monday night. I do not believe that the country would be one whit more at risk if substantial cuts were made in the defence programme. Most of the defence projects are a conspicuous waste, and add nothing whatever to the defence of the United Kingdom.
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  The Government should also take a look at overseas aid. I am in favour of overseas aid, but it ought to be on a selective basis. For instance, the Indian Government, despite the fact that there are millions of starving people in that country, have constructed a sophisticated bomb and are now in the big boys' league. I suggest that the Government should cut off overseas aid to India. If India, with its starving population, can afford to waste money on something as wicked at a bomb, we should ignore its begging bowl when it is held in front of us.
  There should also be improvements in industrial relations. I know that it is easy to say this, but with the country in its present position more effort should be made in this respect by both sides. We have heard a lot about industrial strife in Scotland recently. Incidentally, it was curious how indifferent the Government in London were regarding this. One would almost have thought that Scottish government had arrived and that the Government in London had nothing whatever to do with the matter. There was no invitation to trade union leaders, or strikers, to have beer and sandwiches at Downing Street at midnight. It seemed to be a problem in which the London Government were not at all involved.
  We should have some regard for the facts behind the claims made by people in industry. There are many substantial claims. We hear of the miners asking for an extra £30 a week. I believe that the miners have more right to a decent wage than most people, but if they get wages of the sort they are seeking they must realise that it will mean the cost of a bag of coal going up to perhap £1·50 or £2, and this will particularly hit old-age pensioners. I do not want to single out the miners. The effects of wage increases cannot be confined to particular industries. They spread throughout the economy.
  The Government should say whether, in fact, we have a crisis and, if that is the case, they should get down to the measures needed to put the position right.
  Mr. Deputy Speaker (Sir Myer Galpern): I remind the House that there are still 19 hon. Members anxious to take part in the debate. I do not know how

  1669
  these Members can be accommodated, but I am sure that hon. Members do.
  7.36 p.m.
  Mr. Ian Gow: Despite some appearances to the contrary, the crisis facing Britain today is real. It was spelt out with unusual uniformity by the three main parties at the General Election. It has been recognised, almost ad nauseam, in all parts of the House. It is the constant refrain of the Prime Minister, of the Chancellor of the Exchequer and of my right hon. Friend the Leader of the Opposition, and yet those who sent us here have hardly begun to understand the gravity of the peril which we face.
  For this I do not blame mainly, or even exclusively, the Government. The responsibility for the nation's well-being rests primarily with Parliament, by whose leave alone the Queen's Government can be carried on and which is still, in all the matters which we are debating today, sovereign and supreme. It is not open to any hon. Member of the House, just because he happens to sit on this side, to wring his hands and say, "My party is not in power. What can I do about it?" We are all in this together. That is why I want to start my speech by explaining what seems to me to be a fundamental unity shared, I would think, by almost every Member of the House.
  Hon. Gentlemen opposite attach, rightly, great importance to their manifesto. On inflation their last manifesto said:
  "Britain faces its most dangerous crisis since the war. The first priority must be a determined attack on inflation."
  The manifesto of my party was in almost identical terms:
  "The dangers now facing Britain are greater than any we have seen since the last war. Everything else is secondary to the battle against inflation and to helping those who have been wounded in it."
  The Liberal Party manifesto stated:
  "The Government which takes office after the Election will face the greatest peace time crisis we have known since the dark days of 1931. This Election is being fought against the threat of economic disaster."
  The quotations are interchangeable. Any of them might have appeared in either of the manifestos of the other two parties. More than 93 per cent. of those who voted at the last election supported
  1670
  candidates of parties which were warning of imminent peril, but the warnings were simply not believed and are not believed to this day.
  There are three main reasons for this phenomenon. First, inflation is not as deadly as the bullet and the bomb. The present crisis has been compared with the last war. Then, at least, the enemy was readily identifiable. He could be seen, heard and felt. By comparison, at least for the majority—and certainly not for the time being—inflation seems to be an abstract enemy, and to some a positive ally.
  Second, we politicians have for too long been the handmaid, or even the midwife, of inflation. For us to condemn inflation is too like Satan rebuking sin.
  Third—the most important factor of all, I believe—the people have come to learn, and too often with good reason, not to believe what politicians say.
  So much for the diagnosis. Is there a cure? The medical analogy is not false. It is neither kind nor conducive to recovery to say to a man desperately ill, "Do not worry, old boy. A couple of Alka-Seltzers, and you will be feeling better in the morning". There are some grave illnesses which require prolonged treatment and on which there is a genuine difference of view among experts as to the treatment necessary and as to the timing of a change to a new prescription, but there would be agreement among all doctors on two points at least, that the object is to achieve a return to full health and vigour, and that the psychological will of the patient to recover is of enormous importance.
  I take those two objectives in reverse order. The current psychology of winning the battle against inflation and restoring national solvency and self-respect is all wrong. Again, I do not blame the Government alone, or even mainly, for that. We on this side of the House, wherever we sit, must accept our fair share of the responsibility. But if we are to convince others of the need to take the crisis seriously, we must take it seriously and be seen to take it seriously ourselves.
  In 1951, when the economic crisis, by common consent, was infinitely less grave than our crisis today, the then Prime Minister announced cuts in ministerial

  1671
  salaries. Almost exactly 23 years ago, speaking from that Dispatch Box, he said:
  "We have thought it right to make certain reductions in ministerial salaries. They are not intended as a reproach upon the party opposite, but only as a signal which may be helpful for all… The reductions are intended to mark the emergency character of the period upon which we have entered. …"—[OFFICIAL REPORT, 6th November 1951; Vol. 493, c. 70.]
  I underline the words,
  "a signal which may be helpful for all … to mark the emergency character of the period upon which we have entered."
  That example should be followed now. There should be a 5 per cent. cut not just in ministerial salaries but in the salaries of Members of Parliament. The money saved would be the proverbial drop in the ocean, but the effect on morale and public confidence in the will of Parliament to set a lead would be profound.
  The second psychological factor which we have neglected is the need to save energy. The measures announced by the Secretary of State on 9th December were nothing like severe enough. We should make a start by reducing the lighting and heating in this place and in the other place. The maximum heating level of 68 deg F in non-residential accommodation is far too high. It should be reduced by at least 10 per cent. Ministers and others should use "mini" rather than "maxi" cars.
  So much for the psychology. I turn now to the medicine. It needs to be administered at once. We are living far beyond our means. We have been accustomed to be told that there will be no increase in our standard of living for the next two or three years. It would be nearer the truth to say that, while the Government have a special duty to protect the least well off sections of society, most of the rest of us will have a real reduction in our standard of living over the next few years.
  In his Budget statement last month, the Chancellor of the Exchequer said that he regarded the public sector borrowing requirement of £6.300 million as being
  "a disturbingly large figure which one would never accept in normal circumstances".— [OFFICIAL REPORT, I2th November 1974; Vol 881, c. 279.]
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  The Chancellor of the Duchy of Lancaster, in the Budget debate, spoke of an "astronomical balance of payments deficit" and of the need to
  "run our own affairs in ways which do not discredit us abroad."—[OFFICIAL REPORT, 14th November 1974; Vol. 881, c. 600.]
  Since then we have learned that inflation is running at an annual rate of 21 per cent., with the prospect of an even higher rate next year.
  We cannot go on as we are. In the short term, we must bend the curve of public expenditure downwards, and that of taxation, especially on non-essentials and on imported luxuries, upwards. We must resist the temptation, to which, I am afraid, the previous Conservative Government succumbed, to allow the money supply to expand faster than real growth will allow. We must secure a genuine and substantial switch of resources from domestic consumption into savings and into exports. The saver and not the spender must be encouraged. We must accelerate the process of removing subsidy from the nationalised industries.
  These policies will be painful and unpopular, but the pain and unpopularity will be far less than if we continue as we are, hiding the harsh truth of economic reality from the British people and creating an ever-rising mountain of domestic and foreign debt.
  National recovery cannot be achieved without the support of Parliament as a whole. I do not believe that this Government as at present constituted can overcome the crisis on their own, any more than Mr. Chamberlain's Government in 1940 could overcome that crisis. The pressure of events will soon require a more broadly based administration. The title of that administration whether coalition or national is unimportant. What matters is that it should, over a period of two or three years, follow an agreed stabilisation programme with the broad assent of the majority of the House.
  Some seem to think that the mere existence of a national or coalition Government could of itself solve our problems. That is a cruel deception. Such a Government could succeed only if it were to persevere fearlessly and with an iron resolve with the policies which most of us recognise to be essential. If from this Parliament such a Government were to emerge, it would render as great a service

  1673
  to our country as was done by the last national Government. A new administration is inevitable. The sooner it comes the better.
  7.48 p.m.
  Dr. Jeremy Bray: No doubt due to a change in the occupancy of the Chair, there have been three speeches in a row from the Opposition benches. I had wished to have the opportunity to speak directly after the hon. Member for Western Isles (Mr. Stewart), not to take up his debating argument extensively but to answer his comments on the Scottish steel industry.
  Some of us have been acting on this matter instead of merely talking about it. The hon. Gentleman will be glad to hear that the Lanarkshire works this afternoon had another 1,000 tons a week added to its rolling programme, and it is to maintain 15-shift operation instead of reducing to 10 shifts in the new year. It is that kind of action which we shall continue to see from the Labour Government in Scotland, looking after the true interests of the Scottish steel industry.
  Mr. Douglas Crawford: Will the hon. Gentleman agree with his right hon. Friend the Secretary of State for Industry that a Scottish steel corporation should not be set up, or does he think that a Scottish steel corporation should be set up?
  Dr. Bray: That is wandering somewhat from the substance of the debate. What I am sure of is that the Scottish steel industry should be able to pursue policies aimed at the expansion of employment in Scotland and the meeting of full demands from the Scottish engineering industry.
  We have a grave subject for debate today, and I return now to the starting point this afternoon when the right hon. Gentleman the Leader of the Opposition repeated his accusation against the Government of not telling the truth. Like, no doubt, George Washington's mother he has repeated this injunction several times and this time he specified that he wanted the truth on inflation and the truth on unemployment. I have scanned the Press releases on unemployment, inflation, the trade figures, wage rates and earnings to see whether there is any way in which the Government have been suborning the statisticians, in which they have been
  1674
  interfering with comment and interpretation by officials on this vital data on which our understanding of the situation is based. I have found absolutely no evidence to support that suggestion.
  The Leader of the Opposition is running the grave danger of undermining the public's belief in the integrity of the information provided by the Government statisticians, so that in the vital matters of wage negotiation with which my right hon. Friend the Secretary of State for Employment is so concerned they are misled by the Opposition Front Bench into an utterly misconceived interpretation of the true position.
  In delving back through the Press releases I came across those which related to the trade figures for 1973. Here one understands the difficulties of interpretation. The right hon. Member for Worcester (Mr. Walker) had an engaging habit of instant comment—not to replace the civil servants, I am glad to say, because the Conservative Government allowed their officials to comment on the figures. But the right hon. Gentleman always jumped in with his comment. There was an appalling figure for March last year with a deficit of £205 million on the visible balance. When in April the deficit had shrunk to £45 million the right hon. Gentleman said
  "The April trade figures are excellent. I only wish that those who were predicting gloom on last month's trade figures will begin to realise that Britain's economic expansion is at last becoming export based."
  That was the right hon. Gentleman speaking in the middle of May.
  When the May trade figures were published the deficit on the visible balance had risen to £209 million and the import bill by a further £120 million. But not to be outdone the right hon. Gentleman said:
  "A comparison of the export figures for the first five months of this year with those of the same period of 1972 highlights the fine performance of our exporters. There is an ever-increasing volume of raw materials, industrial materials and machinery coming into this country.… It is clear evidence that the expansion of the economy is continuing on a sound basis."
  The deficit on the visible balance that month was £138 million. The right hon. Gentleman made no comment in the ensuing months as the deficit rose to £135 million, £158 million, £196 million, £364 million, £278 million and £330 million.

  1675
  There was no comment on the trade figures but there were Press releases on export opportunties in Germany, small firms, Sherlock Holme's dog, company law reform and "A super department— does it work?".
  In September the right hon. Gentleman found himself in Tokyo where he said,
  "Many congratulations to Britain's exporters."
  That month the deficit was £196 million. There were no further comments until 1st February 1974, the middle of the three-day week period, when, speaking at Davos in Switzerland, he said,
  "What a fascinating and challenging period the last quarter of this century is going to be."
  There is a grave danger of the mood of this House and the country polarising itself on the one hand into the" hair-shirt brigade"—we have heard some of my hon. Friends speaking along these lines today—and on the other hand the "soft-head brigade", and we have perhaps heard some of those, too. The difficulty about this is that the hair-shirt brigade might very well find the Chancellor giving us increases in personal allowances for income tax in the Budget within a few months because of fiscal drag. One of the ironies of inflation is that in order to keep up with it there have to be tax cuts. The hon. Member for Oswestry (Mr. Biffen) is always worth listening to. He may talk about tax increases without advocating unemployment, but by crikey he would give us unemployment in a very big way.
  The fact is that we are in for a very high rate of inflation for a number of years. That rate may increase or fall, but the realistic attitude of this House must be to consider how we cope with it. Take, first, the question of the practicality of operating on the relationship between prices and incomes. Prices will increase substantially with the increases now on the way from nationalised industries, increases in rates and rents and undoubtedly with some restoration of profit margins. This means that there are going to be, if we are to avoid appalling levels of unemployment, substantial wage increases also. The Government have been scrupulous in their revelation of the true position. They have made available the full story of the way in which the
  1676
  Treasury looks at the economy, and details of the Treasury's macro-economic model so that people may study for themselves the relations between wages and prices.
  It is quite clear that average earnings are primarily a reaction to the retail price index. The actual relationship is in terms of half the effect coming through in the first half-year, four-fifths in the first year and the balance of the effect in the second year. On the other hand price increases are determined by a wider range of considerations—certainly by wages, but also by changes in import prices, taxes, subsidies and profits. There are now very big movements in these last four, and keeping a delicate balance between the movements of prices and earnings should be what concerns the House today.
  I take the view that a statutory policy, whether based on a sophisticated indexing system or any other system, can only exacerbate the situation. This point needs to be argued objectively and there is a good hard-headed case to be made against a statutory policy. But we need reinforcements in the way in which that fine balance can be kept. I would prefer to see some means of adjusting in the fairly short-term the level of taxes on income or of national insurance contributions so that the balance could be sufficiently finely adjusted to assure people both of full employment and of a reasonable maintenance of their standard of living.
  The effect of fiscal drag is that we are going to have to make continued increases in personal allowances, and effectively that means continued cuts in the rates of tax that people would otherwise pay. Can we not find a means by which such cuts can be made quickly, instead of having the long drag of the Budgets and the adjustments of PAYE?
  We need a quick-acting system of tax holidays or national insurance contribution holidays announced at the end of each quarter, to be applied in the following quarter, so that the level of real spending power in the nation is guaranteed. That system would be redistributive towards the lower-earners. A flat-rate tax remission, or reduction of national insurance contributions, would be highly favourable in its distribution to low-paid

  1677
  workers. I do not press that particular method but let us find some way of achieving the objective.
  The second way in which we must look for a means to bring about that fine adjustment between the movement of the total of incomes and prices is to consider what we want to make happen in the economy. There is no doubt that major increases in exports and investment are required.
  We have at present a low pressure of demand, which on present indications is likely to fall, so we shall see investment falling next year, and probably slow to respond when demand does increase.
  Mr. Hamish Watt rose—
  Dr. Bray: I have already given way to one of the hon. Friends of the hon. Member for Banff (Mr. Watt). I am anxious to let other hon. Members speak.
  We shall not have the increase in capacity that we require over the next two or three years merely by the voluntary investment activities of private enterprise. The only practicable way is by a substantial investment in public enterprise or by investment of public money in private enterprise. It must be in those areas of industry where there is potential demand. Heavy engineering and steel in Scotland are examples of such industries. There are shortages of certain kinds of steel. We want to make sure that the development areas as a whole share in the investment. The only way in which that can happen is by public intervention.
  I hope that we shall soon be having consultative documents on the Scottish Development Agency and the National Enterprise Board. I hope that the board will be set going quickly, as a major contribution to the macro-economic balance in this country, and not merely as window dressing in nominal fulfilment of an election manifesto.
  If we are to live with inflation, we must find a practical way to cope with the balance between the short-term and longer-term uses of money. The most obvious example is in housing. I do not wish to speak of the public sector housing finance problems, because we have debated the matter recently and shall do so again. But in considering the mortgage
  1678
  market and building activity in the private housing sector we should seriously examine the real value mortgage system. I am puzzled, because Conservative Members, with all their City connections, have failed to pursue the constructive developments needed in some of the most fuddy-duddy sections of the City, where a bit of enterprise, although it would not bring direct financial gain to those in the City, would be of great value to the country.
  With a real value mortgage system, the burden of repayments in the early years of the mortgage is eased. It is spread into the later years, when the chances are that incomes will have reflated, and there will be a possibility of repaying faster. The mortgage can be adjusted year by year. There is an interesting article on the system in the National Institute Economic Review. Others seem to have flagged in their reading of that much-discussed journal before reaching that article.
  Underlying the discussion in the House and the country is a fear of what is happening at the grass roots. My children, and many of your constituents' children, Mr. Deputy Speaker, have been at school for only two days this week. There is a degree of unease and unrest in the country which can easily get out of hand. It will get out of hand if the Government lose their head and listen to some of the advice they have been given by the Opposition.
  Terrible things could happen as a result of the withdrawal of Arab oil money now in this country. But there are vast resources for recycling, without the participation of the Arabs, if need be, by the countries which control the other currencies in which the Arabs would necessarily then have to hold their funds. But what no one can do is to force the people of this country to accept income distribution, uncertainty, hazards in their working lives and fears of unemployment. If the people are forced into action, the danger is of a breakdown in our civil structure.
  I am confident that my right hon. Friend the Secretary of State for Employment and his colleagues in the Cabinet will hold fast to the course they have set themselves. I believe that they will do so after the soundest and most objective analysis of the needs of the country in the present situation.
  8.6 p.m.
  Mr. Ralph Howell: The whole House will agree that we face an economic crisis of great proportions. I fully agreed with the hon. Member for Motherwell and Wishaw (Dr. Bray) that it is not just an economic problem but a danger confronting every aspect of our national life.
  We should not allow ourselves to be deceived into thinking that the crisis has been brought about largely by the huge increase in the price of oil. Other countries have to cope with it. We see that the West Germans, for example, have the lowest inflation rate in the EEC, at about 7 per cent., while we are grappling with 20 per cent.
  The trouble we face is not the fault of one Government but of all Governments in recent years. We have failed to face reality. In the main, the fault is that of the system we have been operating. The country is weighed down by misguided welfare and smothered with subsidy, so much so that we are completely divorced from reality.
  Fifteen years ago the then Prime Minister said that we had never had it so good. Looking back, I think that that was very true. Since then we have had it too good. We have been living beyond our means to a tremendous extent.
  What shall we do? The two main questions we should ask ourselves are: "Why are we in this predicament?" and "How shall we get out of it?"
  The main reason why we are in our present position is the combination of our tax system and our welfare system, which results in almost every person—certainly every married person, whether or not he has children—being as well off out of work as in work for about three months of the year. This creates a ridiculous situation in which people feel that jobs are not important, and it is virtually impossible for managers to manage.
  Mr. Ray Carter: Is the hon. Gentleman aware that Germany, the land of economic prosperity, with an inflation of 7 per cent., has a system of welfare benefits much better than ours? Why is it that Germany, with such benefits, can achieve economic prosperity, yet we, with our benefits, apparently cannot?
  Mr. Howell: In Germany there is no PAYE system. No person in Germany can be better off out of work than in work. First, in this country, people can be as much as £9 a week better off in the first 12 or 13 weeks of unemployment than they would be if they were in work. This causes irresponsibility at work.
  Secondly, we insist on paying social security benefits to strikers. No other country does that. No other country has a worse record than ours in strikes and wildcat strikes which cause so much damage and disruption to industry. It is in the interests of any Government to alter this situation. A mistake was made in 1966 and it should have been corrected long ago.
  Thirdly, we insist on using false unemployment figures and on believing that we have an unemployment problem. We have no unemployment problem. There is still a shortage of labour. We deceive ourselves in believing that the figures for unemployment and for vacancies are correct. The Ministry of Labour admits that it records only 25 per cent. of the vacancies.
  Fourthly—and perhaps this is the most serious point—since 1960 and the days when we never had it so good 1 million more people are working in local government, and 500,000 people—teachers, cleaners, canteen workers, and so on—are working in education. We cannot afford to go on at this rate. More than 1 million people who might have been working in productive industry are working in service industries. The load remaining on those in production is too great and it is dragging us all down.
  There is only one way in which we shall get out of our economic difficulties, and that is by sheer hard work and by creating conditions in which it pays to work. We must alter our tax system. It is all very well for hon. Members opposite to talk as if this is some way-out Tory thinking. Many people who vote Labour agree entirely with the view I am putting forward. Many people are heartily sick of seeing people who are out of work better off than they are.
  If we are to remedy the flaws in our PAYE system, which could be done simply by one small clause in the Finance Bill, and if we were to make all short-term benefits taxable, not only would we

  1681
  save the rest of the tax-paying public about £200 million a year but we would create an incentive to work and people who were working regularly and consistently would be happier in their work.
  There is only one difference between this country and Germany and one reason why Germany's performance is so much better than ours. Germany has created incentives to work, and the Germans are keeping themselves out of trouble merely by working much more sensibly than we are.
  8.14 p.m.
  Mr. Eric Moomnan: I hope that the hon. Member for Norfolk, North (Mr. Howell) will forgive me if I do not follow him down the road he has taken. It is useful to compare the practices of other countries with those of this country, but in this debate—and it has been a very good debate—hon. Members have dealt with the strengths and weaknesses of our society, and I should have thought that that was a sufficient brief to keep most of us busy until 10 o'clock.
  I would like to correct my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) who said that some Members had struck an optimistic note and others a pessimistic note. It is wrong: every speaker has referred to the seriousness of the economic position. Indeed, the right hon. Member for Taunton (Mr. du Cann) said that he was glad to see the back of 1974. I am, too.
  My hon. Friend the Member for Tottenham (Mr. Atkinson) referred to the question of public ownership. He made it the centre of the stage for his remedies. He attributes too much to the impact of public ownership. I agree with him about what is required in establishing our basic industries for the national good, but we must recognise that there are operational problems about implementing such major decisions. We should try and make effective the communication, operational and managerial aspects of the public sector as a first priority. We need to get the debate on public ownership into perspective. It is only one of the options open to this Government.
  The fact that my right hon. Friend the Secretary of State for Employment is to wind up the debate illustrates perhaps the bizarre nature of any debate on economic affairs in this House. It is a wide-
  1682
  ranging analysis which takes into account his Department, but also the Department of Industry—yet we have not had the Secretary of State for Trade represented here. The discussion has taken into account the Treasury and the way in which the social contract—that is, the Department of Employment—will tackle some of the problems, but I am concerned that we have heard no voice from the Department of Industry. Perhaps that will be taken into account in the winding-up speech.
  I can ignore that part of my script which merely confirms what other hon. Members have said about the gloomy state of the economy. Last week struck an all-time low. There was a slump in exports. Wholesale prices had increased by 28 per cent. in 12 months and are still accelerating. The pound reached a startling position. Some of the factors which make up the present depressing situation are outside our control. Nevertheless, it is useful to consider what we can do to influence matters in areas within our control.
  The House must welcome the efforts of the Chancellor of the Exchequer towards producing a workable scheme for the recycling of the Arab oil surpluses which will take the pressure off the world's banking system and aid countries, in particular the developing countries, which have been hardest hit by rocketing oil prices. We must welcome the German Chancellor's announcement that Germany will not adopt a protective attitude in dealing with its economic problems but will take reflationary measures. I hope that the United States will follow suit and thus avoid the dangers and probable disasters inherent in a trade war.
  I am not an economist and I do not intend to pursue economic arguments. I am interested in two matters—one, the way in which we manage the economy, and the other, the role of the ordinary people, for it is people who will ultimately decide the economic battle. In my constituency, and I am sure throughout the country, people are saying, "If things are so bad, how can we help?". They have been answered with exhortations about the social contract, and they have been told how they can save energy. Perhaps the statement by the Secretary of State for Energy last week did not go far enough. Plainly there is more to come.

  1683
  The social contract, or, to be more accurate, the social compact, because it contains no legal sanctions—my right hon. Friend the Secretary of State will agree with that; there are no signatures and there is no other binding formality about it—holds the key to winning the battle. It would be a foolish hon. Member—even a Member as distinguished as the Leader of the Opposition—who would suggest that if we cannot make the social contract, or compact, work there are many other options open to us. This fragile instrument of the compact offers a new approach to Government by consent, valid for hard times as well as for good times, provided we put some effort into making it work instead of merely paying lip-service to its existence.
  The strengths are worth mentioning. The Government's recognition of the power and importance of the trade unions and the workers they represent derives from their contribution to the economy and our need for their labour. We cannot shut our eyes to that. Hon. Gentlemen opposite might say that if we shut our eyes to them the unions will go away and we can legislate them out of existence. That was not on a few years ago, and it is not on now.
  The second strength of the social contract is the way in which trade unions have grasped the opportunity to exercise not so much power but responsibility. The 8 point guidelines prepared by the TUC for wage negotiations and the concern for the interests of the weaker membership are positive benefits.
  The third strength is the flexibility of the social compact. Anyone who has anything to do with industry knows that the hour-by-hour and day-by-day problems of the shop floor will never be solved until management and men meet to try to solve them.
  Perhaps there is one word of optimism. Reference has been made to the report of the National Institute of Economic and Social Research which seems to have become essential reading, to many hon. Members. That report said
  "that the rate of inflation is in principle and up to a point within British control. In August we took the view that the social compact should be given a year's trial to prove itself, notwithstanding our doubts about it."
  If there are strengths in the social compact there are also weaknesses. It
  1684
  would be foolish not to emphasise what they are.
  I have spoken previously of the failure of some workers to realise for the time being what the social compact means in terms of wage restraint. Last week Len Murray pointed out the problems that would arise from the NUM claim for a £30-a-week increase. Failure of the social compact jeopardises every other aspect, for example, the Government's commitment to maintain full employment and the level of social security benefits. But the risks of settlements above the level at which inflation is fired must be taken in the interests of the economy as a whole.
  One of the greatest weaknesses of the social compact lies in the number of people who feel themselves to be excluded from it. Those people include most wives and mothers who have to cope with the effects of inflation and who have to live on a day-to-day basis. A couple of years ago, a magazine suggested that it is easier for busy mothers to shop weekly, but they cannot because of the pressure on their purse. They have to do their shopping on a day-today basis. They, and many others who, because of the circumstances in which they work, are not members of a trade union or a political party, feel that the social compact does not concern them. I suggest to my right hon. Friend that the fact that they feel in this way should concern him. It is to the senior members of the Government that the public look for a lead.
  Those people may receive some benefits from the social compact in terms of an increase in the social services, and so on, but we must be more specific. The social compact has been running for a few months now and I would urge that in 1975 the Government should take the opportunity to explain the obligations of the social compact for the widest possible public.
  Management also feels excluded from the social compact. For the sake of the health of industry, management must be brought in. The suggestion that the CBI might be included in the social compact was greeted with some derision. That may be, but if we require advice on industrial matters it is usual to consult the TUC and CBI. We must talk to management on a wider basis.

  1685
  The British Institute of Management, the central body of management which was set up many years ago by Sir Stafford Cripps, has a membership of 47,000 managers. There are many, many more managers who would like to know what they can do to help with this idea of the social compact. It should not be beyond the wit and intelligence of Government to devise a formula. My hon. Friend the Member for Tottenham suggested a link between the social compact and the planning agreements. Certainly management could be encouraged through the agreements.
  If we want to make this aspect of the economy work we must accept that there are three parties to the social compact, not just two. The Government must set up formal communications structures. Most of the communications about the social compact seem to be made in public speeches to third parties. If the compact is to become a contract the parties to it must be made to state economic as well as social objectives for their policies.
  Incidentally, Norway has had an interesting experience of a social compact over several years. Norway has not tried to isolate groups of people, nor has it assumed that other people in the community know what is going on.
  Another factor associated with the economy is confidence within industry. There has been too long a gap between the publication of "The Regeneration of British Industry" and the present. There has been no follow-up statement. I hope that soon after the Christmas Recess information will be published on how the voluntary planning agreements will operate. Many of us are disappointed not to have had the detailed statements that must accompany the planning agreements.
  The Department of Industry should also be showing positive interest in the small and medium-sized firms. It is wrong that such companies feel that there is a "Labour" Government attitude which makes their work more difficult. In short, we have to start convincing people. We have to become more credible, of course. Many of these problems can be looked at on an international level. We should look at the macrostructure as was sug-
  1686
  gested by my hon. Friend the Member for Motherwell and Wishaw.
  Yet when we come down to it, we have to make people feel that Labour not only cares about the way companies take decisions but has the wit and intelligence to help them to achieve their objectives.
  Several Hon. Members rose—
  Mr. Deputy Speaker: I remind hon. Members that the wind-up speeches are due to begin at 9 o'clock.
  8.28 p.m.
  Mr. Norman Lamont (Kingston-upon-Thames): In his speech the Chancellor of the Exchequer made a rather unkind reference to the fat boy in "Pickwick Papers". All I can remember about him is that he was described as beaming benevolence in one eye and calculation in the other. That is quite a good description of the Chancellor's slightly schizophrenic attitude. On the one hand, he tries to be reassuring and suggests that we may be facing difficulties but there is no possibility of a catastrophe and, on the other, he tells us that we face the most serious crisis since the 1930s.
  Perhaps that is why people come up to me and ask, "When will the crash happen?". One has difficulty in persuading people that we may now be in the middle of the most serious crisis the country has experienced for many years. As one journalist argued recently, it is rather like the academic dispute about the origin of the universe, between those who believe it began with a big bang and those who believe in the static state theory. There will not come a precise moment when everyone will say, "This is it, this is Armageddon day". If we go on as we are, we shall see a gradual continuing deterioration which will become more and more serious.
  Last week I visited the Turner Exhibition, at the Royal Academy. I noticed a large number of Turner sketches of the burning of the House of Commons. I saw sketches which appeared to have been drawn after successive glasses of port, with more and more intensive flames, brighter and brighter colours surrounding the Chamber, and flames going higher and higher. When that great event occurred during the life of Turner, his immediate reaction, on hearing that Parliament was burning, was to rush out into the street

  1687
  and begin to paint the scene. I feel that today if, God forbid, this Chamber were to go up in flames, that would be the immediate reaction of most people. We do not produce Turners today, alas, but people would appear on the scene with imported Japanese cameras and take pictures. I do not think they would consider that this was the disappearance of an institution which had protected them in the way in which they ought to have been protected.
  In past debates on the economy it has been usual to chronicle the miscalculations in economic judgment that the Government have made during previous months. If one wanted to do so again there would be no lack of opportunity. We can cast our minds back to the first Budget in March, when the Chancellor set himself the objective of reducing the Budget deficit, which was then thought to be skyscrapingly high at just over £3 billion. In that Budget he put the great squeeze on corporate liquidity, despite the fact that very strong representations and very firm predictions were made to him about what would happen.
  We then moved to the second Budget in July—the mini-Budget with the mini-reflation measures. At that time the Chancellor told us that the measures he had taken between his first and second Budgets had added only a very small amount to the borrowing requirement. That happened early in July. Either the increase in the borrowing requirement has all happened since July or the Chancellor of the Exchequer did not know what was happening to the borrowing requirement at the time of his second Budget, which to my mind raises a serious question about his judgment and the advice he received.
  Then we had the third Budget, in which some of the mistakes made in the first Budget were rectified. Some of the excessive squeeze on the corporate sector has now been turned round. I say this not to make a usual party point but because I think that one must have considerable anxiety about the way in which the Chancellor of the Exchequer and the Treasury arrived at their judgment on the economy and their decisions.
  We remember the contrast between the Chancellor of the Exchequer as he now is and when he was in opposition,
  1688
  when he exuded certainty as to how he would be able to cure inflation and reduce the Budget deficit. Yet now we see him floundering around on the Government benches rather like a duck that has just alighted on a frozen pond, and finds itself skidding all over the ice not knowing quite where it is. Perhaps even the hon. Member for Tottenham (Mr. Atkinson) would agree with me to the extent that we must be very anxious about the quality of official advice that has been given to successive Chancellors of the Exchequer. Many mistakes may have been predicted beforehand, as many people outside the Treasury pointed out to the official advisers and to the Ministers.
  I should like to see one thing. I hesitate to suggest this, because the British people perhaps have the somewhat unhealthy habit of contemplating their navels far too much. However, the one thing we have not actually contemplated is our navel. I should like to see some sort of committee or commission set up to inquire into the Treasury and to look at the basis on which it makes its judgments. I am so sceptical about the conventional wisdom displayed, including the many economists, who advise even as outsiders, the Treasury. For this reason I suggest that the body set up to investigate the Treasury should comprise a minority of English people and that there should be a number of officials from the United States Treasury and from the Treasuries of Continental countries, because their track records have been much better.
  It would be a healthy step to hold a thorough investigation into the conduct of our own advisers in Great George Street. Even if the inquiry only produced the evidence that politicians overruled their official advisers, it would be useful to know that. However, I do not believe that. I believe that the mistakes have been made by many of the officials. I wish sometimes that those officials would come before this House. We are always told that we must not make any criticisms of those officials because they cannot answer back. I make these criticisms because I believe they ought to be able to answer back and that they ought to come to Parliament and explain how they have made many of their decisions.

  1689
  Many of the forecasts which appear in the Red Book are very difficult to believe. A distinguished former Prime Minister remarked that trying to steer the British economy was rather like looking up train times in last year's Bradshaw. Judging by this Red Book, I fear that it is rather like waiting on a very draughty, cold suburban platform while the train goes shooting past without stopping.
  What are we to make of the forecasts in the Red Book about exports for the first half of 1975 compared with 1974? We heard from the Chancellor of the Exchequer today that the world recession meant that the forecasts in the Red Book of a growth of 5 per cent. in world trade and of about 4½ per cent. in British exports did not look as though they would be realisable. But many people made that point when the Red Book was produced. We are told that there is recession in Germany and in the United States. Six weeks ago, when the Red Book was produced, it was known that recession was coming in the United States and in Germany. I find the Chancellor's admission astonishing.
  The same is true of the Red Book's figures for investment, which show, in the first half of 1975 compared with the first half of 1974, a drop of 2 per cent. Again, I suggest that the figures are absurdly optimistic. I do not wish to go into the details now, but they do not even square with the figures of the Department of Industry about investment expectations for this year or with the figures of actual investment in the last quarter. I have read all the footnotes and I know that there is a caveat about the expectation of additional investment in oil-related industries and in the chemical industry—industries which, according to the Financial Times Industrial Survey of Investment Intentions, expected no increase in investment at all.
  At a time like this we should be having a long, cold look at the methods by which the Treasury comes to its judgments about the economy, about the corporate sector and about energy saving. I agree that what is proposed in respect of the latter is quite inadequate. Then there are the proposals about public expenditure, of which we have no details
  1690
  yet. Unless we have real cuts in public expenditure, we have no hope of getting on top of inflation.
  Another strong doubt which I have about the strategy of the Chancellor of the Exchequer concerns the Budget deficit which he is allowing himself to create. It is an absolutely skyscraping £6 billion. This is an extraordinary development from a man who, in opposition, seemed to become such a high priest of financial orthodoxy. No Persian could have been a more devout worshipper of the rising sun than the right hon. Gentleman when he went on and on, in opposition, about the need to balance the Budget to control monetary expansion. Today, we have a Budget deficit of at least 9 per cent. of our GNP, exceeding even that of Italy.
  The sophisticated explanation put forward is that it will be financed in a way which is non-inflationary, but I wonder whether a Budget deficit of this size which, by the time it is finished, will vastly exceed our deficit on our balance of payments, can be financed in a non-inflationary way. It is one thing to borrow to finance investment, but merely to borrow to finance consumption is the road to ruin.
  What will the Budget deficit do to interest rates? I can remember the Chancellor of the Exchequer, in opposition, criticising the then Chancellor, Mr. Barber, for his Budget deficit because it would raise interest rates sky high. This is what we can expect in the future.
  We can now see the Government's strategy in the election was based on three frauds. There was the inflation fraud, whereby suppressed inflation has now become unsuppressed. There was the fraud about the exchange rate which, it was boasted, was strong and firm, but is now clearly being allowed to depreciate. Then there was the fraud about the social contract.
  The Prime Minister always seems to adopt the motto of an American salesman; always sell the myth, never the reality; always sell the tinsel, never the Christmas tree. We were continually told that the social contract was the gateway to the promised land and that there was no other way to deal with inflation, but we know now that there is another way. We heard it from the Chancellor in his

  1691
  Budget speech. That other way is unemployment, because the right hon. Gentleman went out of his way to explain that if the social contract did not succeed he would have to take measures to curb demand and that would bring about a rise in unemployment.
  I am glad that the Chancellor is now being realistic and recognises the realities facing this country. I hope that he read the article by Professor Beckerman in the New Statesman recently, in which he argued that if the Government cannot secure the compliance of the trade unions with their incomes policy, why should they be responsible for the unemployment that will follow from the actions of the trade unions?
  To the extent that the incomes policy is successful, the less unemployment will need to be tolerated. But how can we argue that the Government's commitment to full employment should be absolute, but that the trade unions' commitment to the social contract should be conditional?
  People may ask "How can we expect the trade unions to co-operate unless we maintain conditions of full employment?" The trade unions may be more willing to co-operate, but will they be more able to co-operate in the conditions that we have now?
  The Chancellor doubted whether running the economy at a lower level of demand could do anything to reduce the pressure of inflation within a relatively short time. I hope that he will pay attention to the advice of realistic people like Professor Beckerman in the New Statesman.
  I am not saying that unemployment cures inflation. That would be like saying that staying in bed cures a cold. It does not. However, one has to stay in bed as part of the process of curing a cold.
  Inevitably, a rise in unemployment is one side of the side effects of dealing with inflation. This is not a moral question. It is not a question of black and white, or of blind reaction against a more compassionate approach. How can we argue that to allow a small rise in unemployment now is unacceptable compared with waiting for inflation to develop and for a much greater rise in unemployment to
  1692
  occur at a later date? How can we say that it is wrong to allow 4 per cent. of workpeople to be unemployed, if that will safeguard the jobs of 96 per cent. of the labour force? That is what Professor Beckerman was saying in the New Statesman, and I believe that that is a realistic approach.
  I remember reading that Abraham Lincoln was asked why he looked so sad and wise. He replied that it was because he knew that he could not get all that he wanted. We all want everlasting sunshine, we all want price stability and full employment, but the reality is that we cannot go on as we are. We must tell the people the truth. Unless we do that, there will be an awakening of bitterness such as we have never seen before.
  8.44 p.m.
  Mr. John P. Mackintosh: I want to make only one comment on what was said by the hon. Member for Kingston-upon-Thames (Mr. Lamont). Although I take note of some of the criticisms which are often made about the expert advice which is tendered by civil servants, I think that in the last resort the key decisions facing this country will have to be taken by politicians. We cannot duck our responsibility by passing those decisions on to other sectors of the community. Therefore, we must face the key choices that lie before us.
  I will begin with a statement with which I hope all hon. Members will agree. We cannot have an indefinite continuing increase in the rate of inflation in this country without disaster. If inflation here goes on increasing, particularly when inflation in Germany and the United States is going down, in time we shall reach a position where not only countries with large oil revenues but other countries will not be prepared to hold money in this country. Then we shall get a run on the pound, and a classic sterling crisis and disaster. Therefore, we have to focus our policies, from whichever side of the House we speak, on the objective of stopping the present rate of inflation from going up further still.
  At this point, one turns to the strategies available to handle this matter. I think that the reason why the Opposition lost the last election was that they had no strategy. Only one strategy of any

  1693
  serious nature was put forward, and that was the one advocated by my right hon. Friend the Member for Ebbw Vale (Mr. Foot) and his colleagues and by most hon. Members on this side of the House, which was to use what is commonly called the social contract.
  Let us consider precisely what that strategy implies, because we have got into rather arid arguments about it. The argument was that we should hold wage increases by voluntary agreement to a level equal to previous price increases but there were also other elements in the strategy. It was assumed that raw materials and other component prices would not continue to rise on the world markets and thus, if we held wages at the agreed level, productivity gains would mean that the rate of inflation would come down as a result of this higher level of productivity. The strategy was specifically designed to produce a decline in the rate of inflation in 1975 and we were told that then the rate of inflation in 1976 would be down into single figures. That was the totality of the strategy.
  One has at some point to ask how far the strategy is succeeding.
  Mr. John Gorst rose—
  Mr. Mackintosh: I have to restrict my speech to enable others to take part in the debate, and I think that it would be better if I were not to give way.
  I have outlined the totality of the strategy, and we have at some point to ask whether it is working, or what evidence there is that it is not working.
  I am told by the Leader of the Opposition that the present rate of inflation is not 18 per cent., as the official figures show, but 21 per cent., and I know that figures bandied about by Government Departments and experts suggest that by March it will be 23 per cent., which is roughly the level of the forecast made by the National Institute.
  My right hon. Friend the Member for Ebbw Vale (Mr. Foot) interrupted my hon. Friend the Member for Ashfield (Mr. Marquand) and said, "Do not say that the strategy is failing, because if you say that you make it more likely that it will fail, you make it more dangerous".
  Now, we must realise that the strategy could fail on any of three different fronts:
  1694
  first, because wages are going up too fast; secondly, because world raw material prices continue to increase and if this happens, then wages have to be held at a lower level for the strategy to work; thirdly, because we may not get the forecast productivity gains. We need all those three things to go as forecast to have the end impact on prices that was originally planned. If the Government want to act on any of these fronts, they must recognise that it is difficult to get productivity up easily especially when investment is declining. It is difficult to get world commodity prices down, particularly when the Arabs are still putting up oil prices. The one thing that one can operate on is wages, and it is the residual factor.
  Now on the wages front, there is some evidence that the strategy is not working as well as we had wanted. I appreciate what my right hon. Friend said. If one talks in this fashion one may encourage trade union negotiators to ask for more or to go further, but there is the valid point that if one never asks how the policy is working, or at what point it begins to fail, one may proceed with the policy until great damage is done, and until it is even more difficult to turn back or change course.
  I recall the damage that we did by refusing to face the need for devaluation before November 1967. We went on pretending that supporting the pound at its old value was working. We went on long beyond the point at which we should have continued to support the policy. There ought to be some criterion in the Government's mind, some fall-back position to which they can retreat if and when the overall strategy for containing inflation does not work, because if it is allowed to fail over a prolonged period, we are heading for disaster.
  I do not expect great announcements on this. We do not expect clear points, but we want guidelines. It is particularly important to prepare the public, trade unionists and industrialists for the idea that beyond a certain point the policy will no longer be working. This is why the appeal which I made in the Budget debate and which my hon. Friend the Member for Ashfield made tonight is so important. He said, "Tell us what settlements are within the strategy, and what settlements

  1695
  are without it". My hon. Friend the Member for Ashfield said, "Give us some indication of the situation."
  It is not clear to many rank and file trade unionists what is within the social contract and what is outside it. Trade unionists say to me, "We fought the election together on the social contract. We are now involved in detailed negotiations about night work, shift work payments, "dirty" money payments, special bonuses and so on. Which network of claims would be within the social contract?" I cannot answer them because I am not up on these matters. If I cannot understand the situation, how can I expect them to know all the answers? If the Government will not vet wage claims and say what will be within the strategy or what will result in failure, how can we expect them to work? This is a point we have missed.
  I was interested to hear that the CBI considered setting up its own vetting machinery to decide which claims were within the social contract and which were outside it. However, the CBI decided not to follow it through. They decided to take no action because too many industrialists found that if precise guidelines were stated they would be morally obliged to resist claims outside the guidelines and they considered that if they did so, they might face strikes and might then become bankrupt.
  So we have little strength on that side of the industrial bargaining process. The only strength in terms of a voluntary system lies in a clear indication by the Government of the point at which the system will break down. Unless we get this into people's minds, they will not be prepared for any change of strategy which may be forced upon us. I hope that a breakdown does not happen and that the Secretary of State for Employment succeeds in his efforts to make the social contract work. Every Member in this House should back him. However, we must be ready to face the point at which the contract may not work and we may wish to make a change.
  I fear that there are many ways in which we can continue to delude ourselves. Indeed, there are many ways in which the public can pretend that things are better than in fact they are. Many members of the public are not all that
  1696
  worried about inflation. I do not think the public have fully taken on board the fact that inflation inflicts terrible damage on pension schemes and hurts people who are due to retire. They are not aware of how many small organisations are at the point of collapse because of inflation. I do not think many people realise that a redistribution of income in an egalitarian way arises from inflation. We have to do more to prepare the public psychologically for a change in strategy if it becomes necessary.
  There are other ways in which we can persuade ourselves that no action need be taken. We can take the view that we are heading off the danger of the situation because the Arabs are keeping so much of their money in sterling. I sometimes get a little worried about such a policy. I am not happy that by 1980 we should be so much in debt to other people. I am surprised that people are content with that policy, and I am not sure that we shall get to 1980 without a major crash or withdrawal of those funds.
  We can also hide from ourselves the tremendous decline in investment which is taking place. We are told that next year investment will be down 10 per cent.-plus. We shall not feel the impact of that factor until we experience falling productivity and further balance of payments problems in the years ahead.
  But we cannot stay in this situation indefinitely and I have a real fear of hyper-inflation.
  If this situation continues, the time will come when countries will not be prepared to hold their money in sterling and, despite the floating rate, we shall not be able to maintain our reserves. There will be a run on the pound and we shall be faced with a crunch situation instead of a slow slide. I do not know which of the two I prefer, and I would prefer that we had neither. However, I am worried that we shall go on pretending that the situation is not as serious as in fact it is.
  I come to possible remedies. What alarms me is that if and when the crunch comes, or if my right hon. Friend the Secretary of State for Employment fails in the policies on which he has embarked, there will be a midnight meeting at Chequers or Downing Street, with the TUC, the CBI and the Government present, and that on that occasion when

  1697
  the Government turn to those outside agencies for advice and says "What shall we do? ", it will be the first occasion on which there will be no answer. Those outside bodies have no clear idea of which way to go.
  There is no escaping the responsibility which faces the Government. One choice that is being peddled is that we should have another devaluation. That would be disastrous in terms of import prices. We could not face a further sag in the value of the pound. Some people believe that the easiest residual solution is heavier unemployment. That is the orthodox view advanced by the hon. Member for Oswestry (Mr. Biffen). It is a view that is held in other quarters. Not only do I dislike the social implications of unemployment, but I believe that heavy unemployment reduces productivity and tends to exacerbate inflationary forces. It is not an adequate answer. Also unemployment does not reduce the bargaining power of those in critical sectors of industry and it is that bargaining power which is pushing up wages.
  I understand that in a Cabinet Paper an idea—put out at the General Election —is being peddled that we should freeze the prices of certain firms, and those firms, presumably, not being able to put up their prices, would have to resist wage increases asked from them or face bankruptcy, and this would in turn force down the rate of wage increases. But this policy is also unsatisfactory because it would not operate in the public sector, which would be dangerous, because the price mechanism does not operate there. Secondly, in the private sector, it would operate only through heavy bankruptcies, which I certainly do not want to see.
  Whichever way we turn, the voluntary incomes policy being pursued by the Government is still the right way, in the sense that the most rational and sensible way to proceed is through operating directly on the level of wage settlements. But if that voluntary policy does not work, the question is whether we ought to face a return to a statutory incomes policy of some kind rather than face the greater dangers of devaluation, or bankruptcy, or heavy unemployment as alternative changes of strategy dictated by the situation.
  This is where I quail for the future of democracy. I know that many hon.
  1698
  Members on both sides of the House say that the most rational and sensible thing to do is to operate on wages, if necessary by a statutory policy—and then those hon. Members turn back to me and say, "Both Labour and Conservative Governments have tried it. Each in turn have then faced confrontations and has been beaten. We cannot do it."
  But it is the death of democracy if one says that the most rational, least socially-damaging way of doing something is something that one's institutions cannot handle. This is a matter we have to face and tackle. We have to say, "This is the least harmful way of doing it." Let us sell it in the interests of justice and of prosperity. If we do not, then a more disastrous strategy may well be forced upon us. I hope that it is not inevitable that we will be faced with this kind of choice, but if so, then we must accept our responsibilities and tell the country what is the best alternative open to us.
  8.57 p.m.
  Mr. Michael Grylls: I want to touch on one subject which has not been dealt with very much in the debate, and as I have only three minutes I hope that the hon. Member for Berwick and East Lothian (Mr. Mackintosh) will forgive me if I do not refer to his speech.
  Perhaps one of the most worrying aspects of the situation is the apparent total collapse of investment in industry. It is vital that the Government do something about it. What worries people when they see that investment is not going on is that the Government really do not know what is happening. The CBI survey a few weeks ago showed that there had been the steepest fall in industrial investment for 11 years.
  The problem is that real profits are too low. I agree with my right hon. Friend the Member for Taunton (Mr. du Cann) —who made an excellent speech—that there has been too much sniping at profits, that profits are the thing which will make investment. There is no other way. I am sure that the Chancellor of the Exchequer agrees that he, as a member of the Government, does not want to see the Secretary of State for Industry going round giving out money in this situation in order to prop up industries, because, generally speaking, those he props up are

  1699
  usually the least profitable—the ones which should not really be propped up.
  If industry does not have enough profit to be able to invest in new plant, to increase working capital, and to deal with inflation and all the other problems we have been talking about—replacing outdated machinery and buildings, and attaining higher productivity—I believe that whatever successes the Government may have in other areas their economic policy will be doomed. If industry does not have money it will cut back its investment plans and stop investing. It will pull up the ladder and aim simply to survive.
  Listening to the Chancellor of the Exchequer today, it seemed to me that he did not realise that a problem existed. As I have taken only three minutes, I hope that the Secretary of State for Employment will do me the courtesy to answer one point. What is the Chancellor going to do about encouraging confidence and investment in industry?
  Will the right hon. Gentleman act, or does he believe that everything is all right? Perhaps I and other commentators tonight are wrong, but will he tell us what he is going to do? If he will tell us that he will put curbs on the Secretary of State for Industry and lock him up for a few months, we shall get more industrial confidence. Or perhaps he will cancel advance corporation tax, or lower the rate of corporation tax, or just easy the Price Code a little more. If the Government will give us that answer tonight, it will be the biggest contribution that they can make to improving industrial confidence.
  9.1 p.m.
  Mr. Robert Carr: One is always tempted by the context and atmosphere of a House of Commons debate to make a speech from the Opposition side condemning the Government for their mismanagement and complacency —and that would not be difficult tonight. People outside may sometimes underestimate the value of such hard, pounding debates, but I am sure that the national need at the moment is too great for that tactic tonight and that the national mood rightly demands that Parliament should seek constructively to find as much common ground as possible and to lead the way out of our crisis. That has been
  1700
  the dominant mood of this debate. That has been obvious from speeches from both sides.
  The background of the debate is that the immediate state of our economy and the underlying economic prospects combine to face us with a situation which is more grave than any hon. Member has ever had to face before. A position which was already serious in the summer and autumn has become substantially worse in the two months since the election. Indeed, I believe that the Chancellor himself admitted as much today. That cannot go on without disaster; strong new action is required urgently.
  There are two underlying requirements which have come out strongly in speeches by my hon. Friends and by my right hon. Friend the Leader of the Opposition—and also, to be fair, by hon. Members of other parties. The first is that the Government must now tell the country the full truth of the situation and stop concealing —whether intentionally or otherwise I do not know, and I will not go into the question now—both the present gravity of the crisis and the future dangers which face us. Until they do that, the Government will not be credible in putting over whatever policies they think right.
  This is also necessary because large numbers of people—I suspect still the majority—do not yet feel a sense of crisis in their personal lives. One of the difficulties faced by successive Governments over a number of years has been how to bring home effectively the major structural changes in policy in industry and in social affairs which this country needs, when in the short run the majority of people feel that life is probably better than they have know it before. The Government must tell the full truth of the gravity of the crisis, actual and impending.
  Second, they must put forward a national recovery programme of policies which concentrate on essentials and which jettison inessentials, particularly those which are socially and politically divisive, and put forward a programme of policies with ingredients which bring home to people in their daily lives the fact that we are in a crisis which both requires and allows them to give their active co-operation.
  I very much agreed with what my right hon, Friend the Member for Taunton

  1701
  (Mr. du Cann) and, indeed, the hon. Member for Ashfield (Mr. Marquand), among others, had to say about that need. It was the feeling—not only from the Opposition side of the House—that the Government have failed so far and are still failing in both these matters, and that they must respond quickly to this need.
  One of the basic facts about our economic position, with which we must come to terms, however much we may dislike it, is that we have a great and rapidly growing dependency on foreign borrowing. That, in turn, makes the maintenance of foreign confidence in our affairs probably the most important single factor in avoiding catastrophe, at least in the short run. That is our first major criticism of the present Government. It is not that we believe that foreign borrowing is wrong in itself, or that it is unnecessary in present conditions. It is the scale of it which we criticise, and the almost voluptuous pleasure which the Government seem to take in piling up foreign debts.
  This points immediately to three of the most urgent needs and, as we believe, the most culpable failings of the Labour Government since March. First, the country must—I use the word "must" because it is the only word to use—economise in the use of energy, in particular by reducing the need for oil imports. Yet after nine months in office, last week the Government produced a miserable little package, in which, for example, they said that talks were only just about to begin with the local authorities. By now, every third street light ought to be out, or something like that. There ought not to be as much floodlighting and display lighting as there is. We have waited nine months for talks to begin.
  Quite apart from the savings, actions of this kind will help to bring home to people the fact that business is not just going on as usual, and cannot go on as usual. Even in the one matter of petrol pricing, where the fuel economy campaign—I do not complain about this—is being carried to a stronger degree, what did we see yesterday? We saw the Government announcing their latest decision in a Written Answer to the House. From the parliamentary point of view, what a row there would have been had any other party, in government, tried to do
  1702
  that. But from the psychological point of view, what madness it is to announce measures which will hurt lots of people who have been hurt fairly badly already— and to announce them in such a casual way. I nearly said that it was an underhand way.
  Secondly, we must get our own oil supplies flowing at the earliest possible moment. Yet whatever may be the ultimate rights and wrongs about the question of ownership, it is surely indisputable that by raising this question now there must be delay. Whatever may be the rights and wrongs in principle, the proposals for nationalisation, as well as the particular proposals for taxation which are passing through Parliament at present, are causing confusion and delay. As my right hon. Friend the Leader of the Opposition pointed out, every day's delay costs us millions of pounds across the exchanges.
  A third area in which our needs are most great and the Government are most culpable is the need to keep to a minimum the Government's borrowing requirement necessary to balance the Budget. That is a point about which the Chancellor used to criticise strongly my then right hon. Friend, now Lord Barber, and which in March he made a major point of reducing. Far from carrying out the reduction, the Chancellor has put the borrowing requirement to levels which no one previously would have imagined possible without very serious and almost immediate results.
  However that may be, for the moment we are largely dependent on borrowing from abroad, and particularly on borrowing from the Arab countries. We are therefore largely dependent on sustaining foreign confidence. If foreign confidence were to collapse, so would the pound. There would then be no doubt whether disaster would come quickly or slowly.
  In these circumstances other countries will be looking not just at our balance of payments position but at the whole range of our policies and performance. Regardless of whether we wish to take these matters seriously, other countries will—so we must take them seriously. Whether or not certain hon. Members of the Opposition wish to see large sectors of our economy nationalised, the large majority of the British people do not want this, and those from whom we borrow

  1703
  overseas, on whose confidence we depend, most certainly will not have their confidence supported by measures of this kind.
  Our present policy as seen through our own eyes, and still more as seen through the eyes of other countries, throws up a number of major danger points, in addition to the fundamental one which I have already mentioned.
  Danger point No. 1 is the high and rising rate of inflation. If the rate of inflation, although high, were falling—as the Chancellor was claiming during the General Election campaign—the confidence factor would be very different. But it is now not only high; it is rising. As departmental figures published in the past few days show, the retail price index has risen by about 18½ per cent. in the past 12 months, and over the past three months it has risen at an annual rate of over 21 per cent. That is not only a cause of suffering, injustice and anxiety here at home but a potential cause of loss of confidence abroad.
  Of course, the Chancellor was right when he said in his speech that the most essential need is to reduce the rate of inflation, which is at present rising, and that the most single important element in doing that is to get more restraint over pay increases. Having made those two statements about the country's greatest need, however, he gave us little clue as to how the Government were proposing to achieve that need. He has left it to his right hon. Friend the Secretary of State for Employment to deal with this. Many of us thought that clues regarding this most vital need might be better given at the beginning of the debate rather than at the end, but so long as the Chancellor's right hon. Friend tells us about these clues we shall say, "Better late than never".
  Danger point No. 2, which has been brought out by the debate, is the recent deterioration in our balance of trade. Last month's figures, as has been pointed out, were the worst ever. The Government were boasting both during the General Election campaign and before it that at least the non-oil part of our trading deficit was decreasing; indeed, the Chancellor made some claim about that in the closing part of his speech this afternoon. The deficit was reducing, but
  1704
  it is no longer reducing. In the past three months it has increased each month —from £53 million in August to £65 million in September, to £105 million in October, and to £227 million in November.
  Danger point No. 3 is the current level of pay increases. Figures published this afternoon show that over the past 12 months basic hourly wage rates have risen by 27 per cent. What is more, in the period since March they have risen at an annual rate of 33 per cent. It is impossible for that to continue without massive inflation and, before very long, massive unemployment.
  Danger point No. 4 is stagnating production, which is all the more dangerous when we have wage rates rising at the sort of pace we have now. Figures published last week, I think, or certainly very recently, show that the index of industrial production has fallen for three months in succession and is now 1½ per cent. lower than it was in July. What is the basis for confidence that the Chancellor's forecast, in the Red Book, about the very modest rise in production next year, will come about?
  Danger point No. 5 is industrial unrest. Commenting on the latest index of production figures to which I have just referred, the Central Statistical Office said in its Press release:
  "It is difficult to assess the present trends owing to the effect of industrial disputes."
  In absolute terms that is a serious matter, and it is especially serious as seen through the eyes of foreign observers.
  From April to October this year we lost nearly 6 million working days, almost exactly a 50 per cent. increase on the number of working days lost in the same period last year. It has been estimated that the motor industry this year—
  Mr. Healey: Does the right hon. Gentleman not agree that it is 30 per cent. less than the number lost in the seven months before the February General Election?
  Mr. Carr: I am not quite sure where that gets us, for it was this Government who claimed, "Get rid of all the previous Government's anti-inflation policy, and, in particular, abolish any form of pay control, repeal the Industrial Relations

  1705
  Act, and institute an independent conciliation and arbitration service "—which, as we have heard today, is evidently to pay no regard to any principles or rules about national policy and national interest—" Do all those things and confrontations will reduce and come to an end".
  I am pointing out that far from moving in that direction we are moving in the opposite direction. There were 1½ million days lost in October alone this year, and I repeat that the number of days lost in the period from April to October 1974 was 50 per cent. greater than in the same months last year.
  Danger point No. 6 is the collapse of productive investment, to which special reference was made by my hon. Friend the Member for Surrey, North-West (Mr. Grylls). Greater productive investment has been one of this country's chief needs not for a few years but for many decades. Britain's poor performance—to be fair, under successive Governments of both parties—has been one of the most worrying features of our economic and industrial affairs for a long time.
  A year ago—very late, it is true; disappointingly late from the viewpoint of the policies of the last Conservative Government—we had at last reached a point at which investment intentions were rising strongly, and future investment intentions had attained a record high level. A year later those intentions are in collapse.
  Danger point No. 7 is the size of the public sector borrowing requirement, mentioned in particular by my hon. Friends the Members for Oswestry (Mr. Biffen) and Kingston-upon-Thames (Mr. Lamont), though not only by them and not only in Opposition speeches.
  We believe that this carries the grave danger of inflation and perhaps the even graver danger of instability. I use the comparative in reference to stability because I accept that at least so far this very large extra borrowing requirement has largely been financed in a non-inflationary manner by foreign borrowing. Nevertheless, that does not make it safe, advisable or acceptable. It is too precarious, as my hon. Friend the Member for Oswestry pointed out, and as the hon. Member for Berwick and East Lothian (Mr. Mackintosh) also said, in effect. It may be all right to borrow to finance productive investment, but it is
  1706
  not right to go on borrowing endlessly to finance consumption and to pay for public services.
  These, therefore, are some of the danger points which I believe have been brought out in the debate. Just as the debate has highlighted the danger points, so I think it has directed us towards the solution of our problems. The essence of the matter is, of course, that we are now living far beyond our means.
  In the short run we must cut back on current consumption and on our expectations for our standard of living. In doing this we must above all do what we can to protect those in need—the pensioners, the sick and disabled, the unemployed and the lower-paid. We must do this by special help and not by wasteful general subsidies. The rest of us, however—which means the great majority— must now accept some real sacrifices, some real cut in our personal standards of living. That needs saying, and the Government have not yet said it loudly, clearly or without equivocation. Let them say it now and we shall back them, because I believe that the majority of us in this country must accept some cuts in our standards if we are to get through the crisis.
  At the same time, if we are holding back consumption we must take action to increase our national means, so that in the future we can afford to live better. We must therefore devote more of our resources to productive investment and export. That is exactly what the Chancellor said in his Budget in November and what he said again today. We strongly agree with him and we shall back him in any moves that he makes in that direction. But we must tell the Chancellor that he is simply not doing enough to achieve the necessary transfer to meet our crisis. It requires on the one hand stronger restraints and on the other stronger boosts to productive investment, exports, and home food production.
  Let us look at the restraints. The first is in pay. There has been debate today on how it should be done. For better or worse we are now committed to the social contract and it does not seem to be standing up very well. Whether it is right or wrong, it is a road we are committed to travel. The Government must try to make it stronger and more specific, and

  1707
  bring more people into it. They must set down stronger guidelines and provide some sort of referee for judging special cases so that people will know where they stand. This appeal comes not only from these benches.
  There must be more restraint in public spending. There cannot be any real increase in public spending for the next year or two, and if there are increases in some areas there will have to be savings in others to match. We cannot afford increases at their present levels. There must also be a reduction in the public sector borrowing requirement. To the extent that we cannot get sufficient restraint in these ways we may have to face increased taxation, because that is the only way to reduce the public sector deficit other than by reducing public spending.
  I put these proposals forward reluctantly, but if they are necessary they must be carried out. As we said quite clearly in the General Election campaign, extra spending must be covered by savings, or, if that cannot be done quickly enough, it must be covered by extra taxes.
  Let the Government also examine ways to increase savings. That is an important method of holding back current consumption—much better for the ordinary person than paying extra taxes.
  In total, all these measures of restraint must be strong enough to free enough resources to transfer to investment and exports. They must be matched by stronger boosts to investment and efficient production, and more help to agriculture. We must restore to industry profitability, or the hope of profitability. However, to overcome the crisis, however strongly some Labour Members may believe in nationalisation, we must also remove the threats of nationalisation and ministerial direction in industry. We must remove the threats to farms and businesses brought about by the capital levies proposed by the Government.
  We must encourage savings by creating the belief that inflation will be tackled, by adopting an income tax system which does not penalise savings and savings income, as the Government's proposals do, and by abandoning the present proposals for capital transfer tax and wealth tax, which, if levied on top of our present income tax system and levels, and on top
  1708
  of our present personal capital taxes, will encourage spending rather than saving.
  We must give a major new boost to training. I hope that the Secretary of State for Employment will say something about this. I am glad to say that it is a non-party matter. When we were in power we put in hand a major reform and expansion of the Government training programme, with a plan for rapid expansion to put us more on a level with countries such as Sweden, in labour market policy terms. It is vital—even more important than a few years ago— that that programme should be carried through with great urgency on the most massive scale possible.
  What we need is a massive transfer of resources to investment, saving, training and exports. This transfer must be at the expense of immediate consumption.
  Let me face the bogy of unemployment fairly and squarely. Whatever the Chancellor does, unemployment will rise next year. I do not think that he will try to deny that. The only question is how far, how fast and how much further it will rise in 1976. There is no longer any question of choosing between unemployment and inflation. As the Prime Minister said, they are now the same problem.
  We do not want to see anyone unemployed who need not be; unemployment cures nothing. But if we let wages rip and boost consumption now, we shall not be preventing massive unemployment; we shall be causing it. We must free resources from consumption, but at the same time we must re-absorb those resources by pursuing strong, positive policies to encourage profitability and savings, and therefore to encourage productive investment and by an active labour market policy, to help people train and move quickly into new jobs and expanding industries, which have too often been starved of labour. That is the only way to provide secure jobs and prosperity for the future.
  The debate has shown that there is some common ground in the House. With the exception of the more extreme Left wing, perhaps, we find that the differences between us are now more of degree than of kind. I believe that it would be possible to construct a national recovery programme which could command large majority support in the House. If we had a programme that was seen to command

  1709
  such support, I believe that it would command great respect and following in the country at large.
  Such a programme should be, and certainly could best be, constructed and carried out by the sort of broad-based national Government for which we pressed in the election—formed for a limited period until the crisis was overcome. But, although less easily, such a programme could be carried out and constructed by this Government or any other party Government if that Government were determined to put national need and national unity first.
  If the Government propose such measures, we shall support them. What we shall oppose tonight, and go on opposing, is continued drift and complacency, and a continued insistence on narrowly based partisan measures. The right hon. Member for Ebbw Vale, about 40 years ago, had a lot to say about guilty men. Let him and his colleagues be very careful that they do not become guilty men themselves.
  9.30 p.m.
  The Secretary of State for Employment (Mr. Michael Foot): Apart from a few words spoken by the hon. Member for the Western Isles (Mr. Stewart)—and I apologise for my absence for a few minutes then—I think that I have heard every word spoken in the debate, which has covered the whole range of interlocking crises which face the country. If I were to seek to reply to all the different aspects of the matters mentioned in the debate, I should more than exhaust the time available to me. Therefore, I hope that no one will think me discourteous if I concentrate on the matters which fall most directly within the scope of the departmental questions for which I am answerable to the House, particularly those concerned with wages, with the social contract and with the way in which it seeks to affect wage settlements and income settlements in general.
  That does not mean that I think that the other subjects which have been raised are not of paramount importance. I hope that we shall have a debate on the Manpower Services Commission and the working of the training services. That is a matter to which the Government attach the greatest importance. Even in these times of financial stringency, the Chan-
  1710
  cellor of the Exchequer has, I am glad to say, provided increased resources for that purpose. We hope greatly to strengthen the activity and operations of the Manpower Services Commission and the two executive arms which operate under it.
  Mr. Heath: If the right hon. Gentleman is prepared to speak only on the narrow front which he has described, can he say why the Prime Minister is not replying or why he is not even present on an important occasion such as this?
  Mr. Foot: The right hon. Gentleman made his speech and then cleared off very fast. He might show me a little courtesy and, before interrupting, allow me to say a few sentences. I shall try to deal with the central questions about pay and the social contract, which I should have thought it was perfectly proper for me to deal with, and the matters upon which he and the right hon. Member for Carshalton (Mr. Carr) have touched. I do not think the right hon. Gentleman can have any complaint on that score.
  Some hon. Members have criticised my right hon. Friend the Chancellor of the Exchequer for having replied rather forcibly to some of the criticisms made about himself and some of his policies. I should not have thought that that was a ground for complaint. They did not criticise the main part of his speech, which referred to the international situation and other aspects of our problems. My right hon. Friend explained that he was not the sort of person who would turn the other cheek; it was not his normal custom. He reminded me of the statement made by the explorer Dampier—[HON. MEMBERS: "Get on with it."]—who, after his explorations, reported that the Papuans were a fierce and intractable race of savages who, when fired upon, had no scruples about retaliating. What the Chancellor of the Exchequer did was to retaliate to some of the attacks made upon him, as he was perfectly entitled to do.
  As I said, I intend to reply directly to the figures which the right hon. Member for Carshalton quoted. I hope that that will not be thought to be the wrong way to proceed. I start with the figure which was published by my Department today of the 26·4 per cent. increase in the weekly wage rate index over November of last year. Last week we published the

  1711
  November retail price increase of 18·3 per cent. over the previous 12 months. The figures are serious, and the Government do not intend to minimise their significance. We are prepared to face the argument about them, and our desire and purpose as a Government is to see that those figures are reduced by all the sensible policies which we can bring to bear.
  Before anyone runs away with the idea that responsibility for these matters rests entirely with the Government, before anyone, either inside or outside the House, starts rushing to conclusions, let us examine a little more closely what the figures contain.
  The weekly wage rates were not settled by me; they were not predominantly settled by the social contract; they were not in the main settled by the negotiators who were engaged in the operations. In the main they were settled by the stage 3 Pay Code laid down by the previous administration. My right hon. Friend the Chancellor of the Exchequer has already explained that 11·7 per cent. of the 26·4 per cent. is accounted for by the threshold payments. Another ½ per cent. is accounted for by the London weighting allowance, on which we followed, not in every detail but in the main, the report which came from the Pay Board. We did not follow it inflexibly because that would have led to disasters of which the right hon. Gentleman knows.
  There have also been some special cases, and I grant that. The Conservative Party, which so often boasts of its candour, has never told us whether it agrees with the special arrangements we made for nurses, postmen, railway men and London Transport. Those were special cases which added about another 2 per cent. to the figure. Right hon. and hon. Gentlemen opposite during the election campaign and thereafter have never said whether they agreed or disagreed with those settlements. I assume that most hon. and right hon. Gentlemen are aware of the excellent reasons we had for those special settlements. They were the groups of workers who had fallen furthest behind during the period of statutory restraint. As the reasons for those special arrangements are, I believe, now accepted on both sides of the House, I do not think that any criticism can fall on us on that account.
  Mr. Peter Tapsell: However these figures are accounted for, and whoever may be responsible for them, will the right hon. Gentleman tell the House what the Government intend to do to control the raging wage inflation which is threatening us all with disaster?
  Mr. Foot: The hon. Gentleman should be a little more patient. I shall deal with the matter in my own way and in what I think is the proper way.
  Of the figure of 26·4 per cent., 12 per cent. remains, which is rather less than the kind of figures achieved under the basic stage 3 rules. Where is the wages explosion which the right hon. Gentleman says we are experiencing? Most of the 26 per cent. is accounted for by the methods I have described. The right hon. Gentleman has never understood the situation and has never attempted to understand it. Moreover, never having understood the situation, he never wanted to understand it.
  What was the range of settlements— [Interruption.] I hope that the House will permit me to continue, as I have the same right of reply as that which the hon. Gentleman had a little while ago.
  I do not know why the hon. Gentleman should regard the figure of 26 per cent.—
  Mr. Gorst: On a point of order. May I appeal through you, Mr. Speaker, and say that the right hon. Gentleman does not have the same right of reply? He is treating this House to a grave discourtesy. He has made it clear that he will not reply to the whole of the debate but only to half of it. Could you not ask the Chancellor of the Exchequer, who was not here through the whole of the debate, perhaps to reply on the Minister's behalf?
  Mr. Speaker: Order. The hon. Member knows quite well that that is not a point of order.
  I understand that the Opposition spokesman, when winding up, was listened to in reasonable silence. I hope that the Minister will receive the same courtesy.
  Mr. Foot: The right hon. Gentleman, of all people in this country, has less right to criticise that figure of 26·4 per cent. than anyone else. I remind the right

  1713
  hon. Gentleman of what he said during the General Election. It happened on other occasions, but it bears very directly on the matter. The Leader of the Opposition spends most of his time boasting about the truth he is supposed to have told at the General Election. However, when I come to the point of what he said about wages, he is not so eager to hear. During the General Election, the right hon. Gentleman said that wages settlements were being made at a rate of 40 per cent. That was wrong. The right hon. Gentleman said we had experienced some months of settlements on the 40 per cent. scale. Therefore, on that basis, the Government have made a reduction to 26 per cent.— on the right hon. Gentleman's own figure.
  The right hon. Gentleman went up and down the country making the claim that wage settlements were taking place on a 40 per cent. basis. When it was pointed out to him that figure was based on the most absurd statistical fallacy, he continued to make the same suggestions and to pretend that it was a legitimate figure. It was very dangerous for anyone to say that. It is no good the right hon. Gentleman grinning now. That was a very dangerous thing to do because it led people to believe that settlements were being made on a 40 per cent. basis, and he could have given great encouragement to the inflationary situation.
  The right hon. Gentleman did exactly the same today by suggesting—and I asked him to withdraw it—that the National Institute's statement that settlements were being made within the guidelines by anticipating future increases in prices, as well as by taking into account keeping up with cost of living increases which had already taken place.
  I pointed out to the right hon. Gentleman that the National Institute was wrong on both counts. It is not true that the trade union guidelines say anything of the sort. Indeed, it is not true that settlements are being made on that basis. Only one or two settlements of which I know would come within that category. The overwhelming bulk of settlements covering large numbers of people since the lifting of the pay controls defy that proposition. Therefore it is wrong of the right hon. Gentleman now to spread the story again, after he has been corrected. It
  1714
  may be that the right hon. Gentleman was deceived by—
  Mrs. Kellett-Bowman rose—
  Mr. Thorpe rose—
  Mr. Speaker: I am not sure to whom the right hon. Gentleman is giving way.
  Mr. Foot: Ladies first. I give way first to the hon. Member for Lancaster (Mrs. Kellett-Bowman) and then to the right hon. Member for Devon, North (Mr. Thorpe).
  Mrs. Kellett-Bowman: Will the right hon. Gentleman say which of the wage settlements in his opinion have exceeded the social contract?
  Mr. Foot: I have called attention to some of them—the ones which I thought had exceeded it with the least excuse— and I have already mentioned other cases, too. What I am saying is that—[Interruption.] If the hon. Lady had followed these matters a little more closely, she would have known that I had mentioned them on several occasions.
  Mrs. Kellett-Bowman: The Secretary of State does not even answer questions, let alone the debate.
  Mr. Thorpe: Is the right hon. Gentleman aware that the House will be grateful, as will the country, if he can help us on this one matter relating to the future? He has mentioned 18 per cent. as being the increase in prices and 26 per cent. for wage increases last year. He said that, of that 26 per cent., in his view at least half was either inherited or for special reasons. Accepting that for the sake of argument, is not a rate of increase of that kind one which the economy cannot sustain in the future? If that rate of inflation were sustained, would not we move into really desperate recession?
  Mr. Foot: I agree that if that rate of inflation were sustained, we should face increasingly grave difficulties. I acknowledge that fully. From the very beginning. I have never sought to minimise the figures, as I said at the beginning.
  I shall come in a moment to the way in which this House should look upon these matters. But when some hon. Members headed by the Leader of the Opposition have gone out of their way to misrepresent what is happening and

  1715
  why it has occurred, we are entitled to put matters right, especially when the right hon. Gentleman also seeks to assist the situation, if that is his purpose, by attacking the Conciliation and Arbitration Service which we have established. I do not know whether the right hon. Gentleman thinks that that is helping the situation.
  The Conciliation and Arbitration Service was established by the Government, but we sought to secure the co-operation of both sides of industry in establishing it. The CBI was consulted about it and has representatives on its board. We believe that one of the essentials to restoring respect for arbitration was that we should have a board which was independent of the Government. That was our purpose, and we have sought to carry it out. We believe that the increasing part which the Conciliation and Arbitration Service will play in settling disputes derives precisely from its independence. That is a proposition which not only was put to us by the trade unions but has been agreed by the employers as well.
  I hope that the Leader of the Opposition will withdraw his misleading remarks both about the previous settlements and about the Conciliation and Arbitration Service. If he will not do the first, I hope that he will at least have the courtesy to do the second.
  Mr. Heath: Will the Secretary of State explain how to quote the words of the chairman of the Conciliation and Arbitration Service is to make an attack upon it? When the chairman of that service says that he and his colleagues do not care at what rate they settle as long as there is a settlement, and I quote the words, how is that an attack on him? He has admitted it himself.
  Mr. Foot: The right hon. Gentleman should not misquote himself. Having selectively quoted from the chairman of the Conciliation and Arbitration Service, he went on to say that this was the embodiment of the principle of peace at any price. It is not so. If the right hon. Gentleman thinks that, he should take his complaint to the employers' representatives who sit on the board of the Conciliation and Arbitration Service, and who are seeking to solve these problems, instead of pouring abuse on a Govern-
  1716
  ment who are seeking to re-establish the authority of arbitration.
  The Leader of the Opposition went on to say how, therefore, we should proceed from our present situation. First, we say that it is necessary to understand not only the failures of the wage negotiations under the social contract, but the successes. If we were able to secure settlements on the basis of the guidelines laid down in the social contract over the coming six to eight months, we would be playing a major part in curbing inflation.
  If anybody wants to study the matter seriously, this is the fact of it. The real test of the social contract depends on what will happen in the six to eight months ahead. It depends whether, for example, we can get a settlement in the mining industry which sustains the rights and general position of miners compared with other workers, which they achieved in the settlement earlier this year, within the guidelines of the social contract. We believe that it is better to proceed on those lines and to work on that basis. That is why we appeal to the miners to support the social contract. It is better to do that than to return to the statutory policy of the Conservative Government or the statutory policy advocated by the Liberal Party.
  If right hon. and hon. Gentleman had listened to the debate more carefully, as I have, and heard the speech by my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) and the speeches of other hon. Members, they would have heard about the operation of the statutory policy which I have observed from practical experience. I was opposed to the statutory policy on theoretical grounds when. I went to the Department of Employment. Believe me, there are many practical grounds why a return to any statutory system would be a disaster for this country. Certainly that is not the policy of this Government.
  Mr. Julian Amery: The right hon. Gentleman has spoken in firm terms about a statutory incomes policy. Are we to understand that he would resign from office rather than be party to implementing such a policy?
  Mr. Foot: I have made clear in this House and during the election, and I

  1717
  make clear again, my absolute abhorrence of any idea of returning to a statutory incomes policy. I believe that to return to a statutory policy would soon bring us back to the catastrophes of last winter. Indeed, had it not been for the fact that we had the possibility of escaping from the rigid statutory controls left by the Leader of the Opposition, we would not merely have been unable to solve the mining dispute but would have been landed in one intractable dispute after another.
  It would be wrong for anyone to suggest that we should return to such a statutory policy. We must make it clear to the people of this country that we are determined to carry through the policy of consent upon which we were elected. We do not propose to abandon that policy in a somersault, as the Leader of the Opposition did after having promised not to have a statutory policy. [HON. MEMBERS: "It was done in 1966."] It was done in 1966 and it failed then. It failed under the Tory Government. The difference between us—
  Sir Paul Bryau: Would the right hon. Gentleman resign rather than introduce a statutory incomes policy?
  Mr. Foot: I have made clear my attitude on this matter, and I do not believe there is any misapprehension about it in any quarter.
  The right hon. Gentleman the Leader of the Opposition led this country to disaster last winter precisely because he applied the policy that he is advocating, but he does not have the courage of conviction that one finds in the Leader of the Liberal Party. The Opposition are advocating a return to the policies which contributed so disastrously to the situation which the Labour Government inherited on taking office, and we shall not follow them.
  The right hon. Gentleman would have benefited from hearing the speech of his hon. Friend the Member for Oswestry (Mr. Biffen). The hon. Gentleman said that the language of economics by itself would not be sufficient to solve the country's crisis, and I agree with that proposition. I agree also with those who oppose the idea of a one-party State by consent or anything of that sort. I am opposed to any idea that we can solve the country's
  1718
  problems by merging our policies and attitudes into one indiscriminate blur. We do not propose to abandon the National Enterprise Board, the planning agreements, and all the measures that we set out in our election manifesto for dealing in particular—
  Mr. Tapsell: On a point of order, Mr. Speaker. Is there any precedent in the whole of British parliamentary history for a major censure debate on the economy of the country not being attended by the Prime Minister?
  Mr. Speaker: Order. The hon. Member must sit down when I am standing up, or else leave the Chamber. The content of a speech is not a matter for the Chair.
  Mr. Tapsell: Further to that point of order, Mr. Speaker.
  Mr. Speaker: Order. If this is a point of order with regard to the content of a speech—
  Mr. Tapsell: It is not. I did not refer to the content of the Minister's speech. I referred to the absence of the Prime Minister and the unprecedented example that has been set.
  Mr. Speaker: Order. That again is not a matter for the Chair.
  Mr. Foot: I am not sure how many bogus points of order the hon. Gentleman is entitled to make, but he has made three or four and he does not seem to have contributed to the success of the debate.
  Mr. Donald Stewart: The right hon. Gentleman has taken up a lot of time answering the attacks from the Opposition benches. In the time remaining, will he say whether there is a crisis, and if there is, what the Government are going to do about it?
  Mr. Foot: I have been dealing with the matters that were raised during the debate, which is what I was asked to do.
  The determination of the Government is to enlist the support particularly of the trade union movement but also of others throughout the country to carry out by consent and democratic means the proper way of overcoming this crisis, and not to abandon that policy because people lose

  1719
  their nerve, patience and determination in the midst of it. We propose to carry our policy through by the only democratic means by which it can be done.
  Question put, That this House do now adjourn: —
  The House divided: Ayes 280, Noes 301.

  Division No. 40.1

  AYES

  [10.0 p.m.

  Adley, Robert

  Gardiner, George (Reigate)

  Loveridge, John

  Aitken, J. W. P.

  Gardner, Edward (S. Fylde)

  Luce, Richard

  Alison, Michael

  Gilmour, Rt Hon Ian (Chesham)

  MacCormick, lain

  Amery, Rt Hon Julian

  Gilmour, Sir John (East Fife)

  McCrindle, Robert

  Arnold, Tom

  Glyn, Dr Alan

  Macfarlane, Neil

  Atkins, Rt Hon H. (Spelthorne)

  Godber, Rt Hon Joseph

  MacGregor, John

  Awdry, Daniel

  Goodhart, Philip

  Macmillan, Rt Hon M. (Farnham)

  Bain, Mrs Margaret

  Goodhew, Victor

  McNair-Wilson, M. (Newbury)

  Baker, Kenneth

  Goodlad, A.

  McNair-Wilson, P. (New Forest)

  Banks, Robert

  Gorst, John

  Madel, David

  Beith, A. J.

  Gow, l, (Eastbourne)

  Marshall, Michael (Arundel)

  Bell, Ronald

  Gower, Sir Raymond (Barry)

  Marten, Neil

  Bennett, Dr Reginald (Fareham)

  Grant, Anthony (Harrow C.)

  Mates, Michael

  Benyon, W. R.

  Gray, Hamish

  Mather, Carol

  Berry, Hon Anthony

  Grieve, Percy

  Maude, Angus

  Biffen, John

  Griffiths, Eldon

  Maudling, Rt Hon Reginald

  Biggs-Davison, John

  Grimond, Rt Hon J.

  Mawby, Ray

  Blaker, Peter

  Grist, Ian

  Maxwell-Hyslop, Robin

  Body, Richard

  Grylls, Michael

  Mayhew, Patrick

  Boscawen, Hon Robert

  Hall, Sir John

  Meyer, Sir Anthony

  Boyson, Dr Rhodes (Brent)

  Hall-Davis, A. G. F.

  Miller, Hal (Bromsgrove)

  Braine, Sir Bernard

  Hamilton, Michael (Salisbury)

  Mills, Peter

  Brittan, Leon

  Hampson, Dr Keith

  Miscampbell, Norman

  Brotherton, Michael

  Hannam, John

  Mitchell, David (Basingstoke)

  Bryan, Sir Paul

  Harrison, Sir Harwood (Eye)

  Moate, Roger

  Buchanan-Smith, Alick

  Harvie Anderson, Rt Hon Miss

  Monro, Hector

  Buck, Antony

  Hastings, Stephen

  Montgomery, Fergus

  Budgen, Nick

  Havers, Sir Michael

  Moore, John (Croydon C)

  Bulmer, Esmond

  Hawkins, Paul

  More, Jasper (Ludlow)

  Burden, F. A.

  Hayhoe, Barney

  Morgan, Geraint

  Carlisle Mark

  Heath, Rt Hon Edward

  Morgan-Giles, Rear-Admiral

  Carr, Rt Hon Robert

  Henderson, Douglas

  Morris, Michael (Northants)

  Chalker, Mrs Lynda

  Heseltine, Michael

  Morrison, Charles (Devizes)

  Channon Paul

  Hicks, Robert

  Morrison, Peter (Chester)

  Churchill, W. S.

  Higgins, Terence L.

  Mudd, David

  Clark, Alan (Plymouth, S)

  Holland, Philip

  Neave, Airey

  Clark, William (Croydon, S.)

  Hooson, Emlyn

  Nelson, Anthony

  Clarke, Kenneth (Rushcliffe)

  Hordern, Peter

  Neubert, Michael

  Cockcroft, John

  Howe, Rt Hon Sir Geoffrey

  Newton, Tony

  Cooke, Robert (Bristol W)

  Howell, David (Guildford)

  Normanton, Tom

  Cope, John

  Howell, Ralph (North Norfolk)

  Nott, John

  Cormack, Patrick

  Howells, Geraint (Cardigan)

  Onslow, Cranley

  Corrie, John

  Hunt, John

  Oppenheim, Mrs Sally

  Costain, A. P.

  Hurd, Douglas

  Page, Rt Hon R. Graham (Crosby)

  Crawford, Douglas

  Hutchison, Michael Clark

  Page, John (Harrow West)

  Critchley, Julian

  Irvine, Bryant Godman (Rye)

  Pardoe, John

  Crouch, David

  Irving, Charles (Cheltenham)

  Pattie, Geoffrey

  Crowder, F. P.

  James, David

  Penhaligon, David

  Davies, Rt Hon J. (Knutsford)

  Jenkin, Rt Hon Patrick (Redbr.)

  Percival, Ian

  Dean, Paul (N. Somerset)

  Jessel, Toby

  Peyton, Rt Hon John

  Dodsworth, Geoffrey

  Johnson Smith, G. (E. Grlnstead)

  Pink, R. Bonner

  Douglas-Hamilton, Lord James

  Johnston, Russell (Inverness)

  Price, David (Eastleigh)

  Drayson, Burnaby

  Jones, Arthur (Daventry)

  Prior, Rt Hon James

  du Cann, Rt Hon Edward

  Jopling, Michael

  Pym, Rt Hon Francis

  Durant, Tony

  Joseph, Rt Hon Sir Keith

  Raison, Timothy

  Dykes, Hugh

  Kaberry, Sir Donald

  Rathbone, Tim

  Eden, Rt Hon Sir John

  Kellett-Bowman, Mrs Elaine

  Rawlinson, Rt Hon Sir Peter

  Edwards, Nicholas (Pembroke)

  Kershaw, Anthony

  Rees, Peter (Dover & Deal)

  Elliott, Sir William

  Kilfedder, James

  Rees-Davies, W. R.

  Emery, Peter

  Kimball, Marcus

  Reid, George

  Ewing, Mrs Winifred (Moray)

  King, Evelyn (South Dorset)

  Renton, Rt Hn Sir D. (Hunts.)

  Eyre, Reginald

  King, Tom (Bridgwater)

  Renton, Tim (Mid-Sussex)

  Fairbairn, Nicholas

  Kirk, Peter

  Rhys Williams, Sir Brandon

  Fairgrieve, Russell

  Kitson, Sir Timothy

  Ridsdale, Julian

  Farr, John

  Knight, Mrs Jill

  Rifkind, Malcolm

  Fell, Anthony

  Knox, David

  Rippon, Rt Hon Geoffrey

  Finsberg, Geoffrey

  Lamont, Norman

  Roberts, Michael (Cardiff N.W.)

  Fisher, Sir Nigel

  Lane, David

  Roberts, Wyn (Conway)

  Fletcher, Alex (Edinburgh N.)

  Langford-Holt, Sir John

  Ross, Stephen (Isle of Wight)

  Fletcher-Cooke, Charles

  Latham, Michael (Melton)

  Rossi, Hugh (Hornsey)

  Fookes, Miss Janet

  Lawrence, Ivan

  Rost, Peter (SE Derbyshire)

  Fowler, Norman (Sutton C.)

  Lawson, Nigel

  Royle, Sir Anthony

  Fox, Marcus

  Le Marchant, Spencer

  St. John-Stevas, Norman

  Fraser, Rt Hon H. (Stafford & St.)

  Lewis, Kenneth (Rutland)

  Scott, Nicholas

  Fry, Peter

  Lloyd, Ian (Havant)

  Scott-Hopkins, James

  Shaw, Giles (Pudsey)

  Steen, Anthony (Liverpool)

  Wakeham, John

  Shaw, Michael (Scarborough)

  Stewart, Donald (Western Isles)

  Walder, David (Clitheroe)

  Shelton, William (Lambeth St.)

  Stewart, Ian (Hitchin)

  Walker, Rt Hon P. (Worcester)

  Shepherd, Colin

  Stokes, John

  Walker-Smith, Rt Hon Sir Derek

  Shersby, Michael

  Tapsell, Peter

  Wall, Patrick

  Silvester, Fred

  Taylor, R. (Croydon NW)

  Walters, Dennis

  Sims, Roger

  Taylor, Teddy (Glasgow C.)

  Watt, Hamish

  Sinclair, Sir George

  Tebbit, Norman

  Weatherill, Bernard

  Skeet, T. H. H.

  Temple-Morris, P.

  Wells, John

  Smith, Cyril (Rochdale)

  Thatcher, Rt Hon M.

  Welsh, Andrew

  Smith, Dudley (Warwick)

  Thomas, Rt Hon P. (Barnet)

  Whitelaw, Rt Hon William

  Speed, Keith

  Thompson, George

  Wiggln, Jerry (Weston-s-Mare)

  Spence, John

  Thorpe, Rt Hon Jeremy (Devon)

  Winterton, Nicholas

  Spicer, James (W. Dorset)

  Townsend, Cyril D.

  Wood, Rt Hon Richard

  Spicer, Michael (S. Worcester)

  Trotter, Neville

  Young, Sir George (Ealing)

  Sproat, lain

  Tugendhat, Christopher

  Stainton, Keith

  van Straubenzee, W. R.

  TELLERS FOR THE aYES:

  Stanbrook, Ivor

  Vaughan, Dr Gerard

  Mr. Adam Butler and

  Steel, David (Roxburgh)

  Wainwright, Rihart (Coine V)

  Mr. John Stradling Thomas.

  NOES

  Abse, Leo

  Deakins, Eric

  Hoyle, Douglas (Nelson)

  Allaun, Frank

  de Freltas, Rt Hon Sir Geoffrey

  Huckfield, Leslie

  Anderson, Donald

  Delargy, Hugh

  Hughes, Rt Hon C. (Anglesey)

  Archer, Peter

  Dell, Rt Hon Edmund

  Hughes, Mark (Durham)

  Armstrong, Ernest

  Dempsey, James

  Hughes, Robert (Aberdeen N.)

  Ashley, Jack

  Doig, Peter

  Hughes, Roy (Newport)

  Ashton, Joe

  Douglas-Mann, Bruce

  Hunter, Adam

  Atkins, Ronald (Preston N)

  Duffy, A. E. P.

  Irvine, Rt Hon Sir A. (L'pool)

  Atkinson, Norman

  Dunn, James A.

  Irving, Rt Hon S. (Dartford)

  Bagier, Gordon A. T.

  Dunnett, Jack

  Jackson, Colin (Brlghouse)

  Barnett, Guy (Greenwich)

  Dunwoody, Mrs. Gwyneth

  Jackson, Miss Margaret (Lincoln)

  Barnett, Joel (Heywood)

  Eadie, Alex

  Janner, Greville

  Bates, Alf

  Edelman, Maurice

  Jay, Rt Hon Douglas

  Bean, Robert E.

  Edge, Geoffrey

  Jeger, Mrs Lena

  Benn, Rt Hn Anthony Wedgwood

  Edwards, Robert (Wolv. S.E.)

  Jenkins, Hugh (Wandsworth)

  Bennett, Andrew (Stockport N)

  Ellis, John (Brigg & Scun)

  Jenkins, Rt Hon Roy (B'ham, St)

  Bidwell, Sydney

  Ellis, Tom (Wrexham)

  John, Brynmor

  Bishop, Edward

  English, Michael

  Johnson, James (Kingston, W.)

  Blenkinsop, Arthur

  Ennals, David

  Johnson, Walter (Derby S)

  Boardman, H.

  Evans, loan L. (Aberdare)

  Jones, Alec (Rhondda)

  Booth, Albert

  Evans, John (Newton)

  Jones, Barry (East Flint)

  Boothroyd, Miss Betty

  Ewing, Harry (Stirling)

  Jones, Dan (Burnley)

  Bottomley, Rt Hon Arthur

  Faulds, Andrew

  Judd, Frank

  Boyden, James (Bish Auck.)

  Fernyhough, Rt Hon E.

  Kaufman, Gerald

  Bradley, Tom

  Fitch, Alan (Wigan)

  Kerr, Russell

  Bray, Dr Jeremy

  Fitt, Gerard (Belfast)

  Kilroy-Silk, Robert

  Broughton, Sir Alfred

  Flannery, Martin

  Kinnock, Nell

  Brown, Hugh D. (Glasgow Pr.)

  Fletcher, Raymond (Ilkeston)

  Lambie David

  Brown, Robert C. (Newcastle)

  Fletcher, Ted (Darlington)

  Lamborn, Harry

  Buchanan, Richard

  Foot, Rt, Hon Michael

  Lamond, James

  Butler, Mrs Joyce (Haringey)

  Ford, Ben T.

  Latham, Arthur (Paddlngton)

  Callaghan, Rt Hon J. (Cardiff S.)

  Forrester, John

  Leadbitter, Ted

  Callaghan, Jim (Middleton & P.)

  Fowler, Gerald (The Wrekin)

  Lee, John

  Campbell, Ian

  Fraser, John (Lambeth, N)

  Lestor, Miss Joan (Eton & Slough)

  Cant, R. B.

  Freeson, Reginald

  Lever, Rt Hon Harold

  Carmichael, Nell

  Garrett, John (Norwich S.)

  Lewis, Arthur (Newham N.)

  Carter, Ray

  Garrett, W. E. (Wallsend)

  Lewis, Ron (Carlisle)

  Carter-Jones, Lewis

  George, Bruce

  Lipton, Marcus

  Cartwright, John

  Gilbert, Dr John

  Litterick, Tom

  Castle, Rt Hon Barbara

  Ginsburg, David

  Lomas, Kenneth

  Clemitson, I. M.

  Golding, John

  Loyden, Eddie

  Cocks, Michael (Bristol S.)

  Gould, Bryan

  Luard, Evan

  Coleman, Donald

  Gourlay, Harry

  Lyon, Alexander (York)

  Colquhoun, Mrs Maureen

  Graham, Ted

  Lyons, Edward (Bradford W)

  Concannon, J. D.

  Grant, George (Morpeth)

  Mabon, Dr J. Dickson

  Conlan, Bernard

  Grant, John (Islington C.)

  McCartney, Hugh

  Cook, Robin F. (Edin C)

  Grocott, Bruce

  McElhone, Frank

  Corbett, Robin

  Hamilton, James (Bothwell)

  MacFarquhar, R.

  Cox, Thomas (Wands, Toot)

  Hamilton, W. W. (Central Fife)

  McGuire, Michael (Ince)

  Craigen, J. M. (Glasgow M.)

  Hamling, William

  Mackenzie, Gregor

  Crawshaw, Richard

  Hardy, Peter

  Mackintosh, John P.

  Cronin, John

  Harper, Joseph

  Maclennan, Robert

  Crosland, Rt Hon Anthony

  Harrison, Walter (Wakelield)

  McMillan, Tom (Glasgow C.)

  Cryer, Bob

  Hart, Rt Hon Judith

  Madden, Max

  Cunningham, G. (Islington S.)

  Hattersley, Roy

  Magee, Bryan

  Cunningham, Dr J. (Whiteh.)

  Hatton, Frank

  Mahon, Simon

  Dalyell, Tarn

  Hayman, Mrs Helene

  Mallalieu, J. P. W.

  Davidson, Arthur

  Healey, Rt Hon Denis

  Marks, Ken

  Davies, Bryan (Enfield N.)

  Heffer, Eric S.

  Marquand, David

  Davles, Denzll (Llanelli)

  Hooley, Frank

  Marshall, Dr Edmund (Goole)

  Davies, Ifor (Gower)

  Horam, John

  Marshall, Jim (Leicester)

  Davis, S. Clinton (Hackney C.)

  Howell, Denis (B'ham, Sm H)

  Mason, Rt Hon Roy

  1722

  1723

  Meacher, Michael

  Roberts, Gwilym (Cannock)

  Thomas, Ron (Bristol NW)

  Mellish, Rt Hon Robert

  Robertson, John (Paisley)

  Thorne, Stan (Preston)

  Mikardo, Ian

  Roderick, Caerwyn

  Tierney, Sydney

  Millan, Bruce

  Rodgers, George (Chorley)

  Tinn, James

  Miller, Dr M. (E. Kilbride)

  Rodgers, William (Teesside)

  Tomlinson, John

  Miller, Mrs Millie (Redbridge)

  Rooker, J. W.

  Torney, Tom

  Mitchell, R. C. (Soton, Itchen)

  Roper, John

  Tuck, Raphael

  Molloy, William

  Rose, Paul B.

  Urwin, T. W.

  Moonman, Eric

  Ross, Rt Hon W. (Kilm'nock)

  Varley, Rt Hon Eric G.

  Morris, Alfred (Wythenshawe)

  Rowlands, Ted

  Wainwright, Edwin (Dearne V.)

  Morris, Charles R. (Openshaw)

  Ryman, John

  Walden, Brian (B'ham, L'dyw'd)

  Morris, Rt Hon John (Aberavon)

  Sandelson, Neville

  Walker, Harold (Doncaster)

  Mulley, Rt Hon Frederick

  Sedgemore, B.

  Walker, Terry (Kingswood)

  Murray, Ronald King

  Selby, Harry

  Ward, Michael

  Newens, Stanley

  Shaw, Arnold (Redbridge, ilf.)

  Watkins, David

  Noble, Mike

  Sheldon, Robert (Ashton-u-Lyne)

  Watkinson, John

  Oakes, Gordon

  Shore. Rt Hon Peter

  Weetch, Ken

  Ogden, Eric

  Short, Rt Hon Edward (Newcastle C)

  Weitzman, David

  O'Halloran, Michael

  short, Mrs Renée (Wolv NE)

  Wellbeloved, James

  O'Malley, Brian

  Silkin, Rt Hn John (Lewish.)

  White, Frank R. (Bury)

  Orbach, Maurice

  Silkin, Rt Hn S. C. (Southwk.)

  White, James (Glasgow, P)

  Orme, Rt Hon Stanley

  Sillars, James

  Whitehead, Phillip

  Ovenden, John

  Silverman, Julius

  Whitlock, William

  Owen, Dr David

  Skinner, Dennis

  Willey, Rt Hon Frederick

  Padley, Walter

  Smith, John (N. Lanarkshire)

  Williams, Alan (Swansea)

  Palmer, Arthur

  Snape, Peter

  Williams, Alan, Lee (Haver'g)

  Park, George

  Spearing, Nigel

  Williams, Rt Hn Shirley (Hertford)

  Parker, John

  Spriggs, Leslie

  Williams, W. T. (Warrington)

  Parry, Robert

  Stallard, A. W.

  Wilson, Alexander (Hamilton)

  Peart, Rt Hon Fred

  Stewart, Rt Hn Michael (H'smith, F)

  Wilson, Rt Hon H. (Huyton)

  Pendry, Tom

  Stoddart, David

  Wilson, William (Coventry S.E.)

  Perry, Ernest

  Stott, Roger

  Wise, Mrs Audrey

  Phipps, Dr Colin

  Strang, Gavin

  Woodall. Alec

  Prentice, Rt Hon Reg

  Strauss, Rt Hon G. R.

  Woof, Robert

  Price, William (Rugby)

  Summerskill, Hon Dr Shirley

  Wrigglesworth, Ian

  Radice, Giles

  Swain, Thomas

  Young, David (Bolton E.)

  Rees, Rt Hon Merlyn (Leeds S.)

  Taylor, Mrs Ann (Bolton W)

  TELLERS FOR THE NOES:

  Richardson, Miss Jo

  Thomas, Jeffrey (Abertillery)

  Mr. J. D. Dormand and

  Roberts, Albert (Normanton)

  Thomas, Mike (Newcastle)

  Mr. Laurie Pavitt.

  Question accordingly negatived.

  BUSINESS OF THE HOUSE
  Ordered,
  That the Motion relating to Financial Assistance for Industry (British Leyland Motor Corporation Limited) may be proceeded with at this day's Sitting, though opposed, until half-past Twelve o'clock.—[Mr. Walter Johnson.]

  BRITISH LEYLAND MOTOR CORPORATION LIMITED
  10.14 p.m.
  The Secretary of State for Industry (Mr. Anthony Wedgwood Benn): I beg to move,
  That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 in respect of a guarantee or guarantees to be given to the bankers of British Leyland Motor Corporation Limited and any of its subsidiaries covering borrowing facilities made available by the bankers to those companies, insofar as the amount paid or undertaken to be paid under the guarantee or guarantees is in excess of £5 million but does not exceed £50 million.
  If the House will allow me, I was intending, in presenting the motion, to be as brief as possible in conveying the information which the House will need to have and then, if the House is ready to give its assent, to seek to intervene at the end of the debate in order to deal with questions which may be raised by hon. Members.
  In my statement on 6th December I informed the House that discussions had been taking place with British Leyland about its short-term requirements for working capital and its longer-term investment programme. I indicated that the Government would seek the approval of Parliament for a guarantee to British Leyland's bankers for the short-term working capital required over and above existing facilities. The bankers have expressed their willingness to provide these additional facilities, subject to the guarantees. The motion seeks authority for the Government to enter into commitments in this respect.
  The Government wish to provide these guarantees because of the company's position in the economy as a leading exporter and of its importance to employment, both directly and through the
  1726
  many firms which are dependent on it. The arrangements proposed will enable the company's needs to be met without interruption while the Government examine the company's request for longer-term support for its investment programme.
  I am sure that all Members of the House are aware of the difficulties which have beset not only British Leyland but the motor vehicle industry in general since the end of last year. Because of higher fuel costs resulting from the dramatic rise in the price of oil, the increased cost of materials, economic uncertainties and inflation, major motor car markets have declined on an almost unprecedented scale throughout the world. Widespread redundancies, short-time working or lay-offs have been reported by nearly all major motor car manufacturers. Inevitably, sales, revenue and profits have decreased sharply, and the competition in the industry has become increasingly fierce.
  It is against that background that British Leyland approached the Government early in December for support for its longer-term programme. I had exploratory discussions with Lord Stokes and his colleagues on 3rd December. Previously there had been regular discussions over a long period between senior officials of my Department and the company. But, as the Chairman of British Leyland has indicated in his statement today, it was only very recently made evident that the investment programme would have to be cut back to an undesirable extent or money obtained from other than commercial sources.
  The company, in common with the rest of industry, also suffered from the disruptive effects of the three-day working week. British Leyland has also lost many days through industrial disputes. It would be wrong of me to ignore the effects which all these events have had on the company's performance. In spite of declining markets, the products of British Leyland are, however, in demand, and I am sure that all hon. Members will join me when I express the hope that the Government's present initiative will evoke a constructive response from the workers and the management and, indeed, all those who work for this enterprise, and that through good industrial relations

  1727
  the company will be able to realise its full potential in the period ahead.
  The House will wish to know more of the arrangements that have been made to advise the Government on British Leyland's situation and prospects. I have already announced that the high-level team will be led by Sir Don Ryder and I am now able to inform the House of the other members of his team. It includes two members from the Industrial Development Advisory Board, which has statutory responsibilities under the Industry Act 1972. They are Mr. R. A. Clark, who is the Chairman of the IDAB and who will, as Chief Executive and Deputy Chairman of Hill Samuel and Company Limited, bring wide banking experience to the team, and Mr. Harry Urwin, a senior official of the Transport and General Workers' Union, who has a great deal of first-hand knowledge of the industry. Mr. F. S. McWhirter, who is a chartered accountant and a partner in the firm of Peat Marwick Mitchell and Company, has agreed to serve and he will provide expert accountancy advice. Production expertise will be provided by Mr. S. J. Gillen, formerly the Chairman and Chief Executive of Ford of Europe Inc., who completes the team.
  I think that the House will wish me to express its thanks to these gentlemen for their agreement to undertake this very important assignment.
  The team's remit is to conduct, in consultation—I stress that—with the corporation and the trades unions, an overall assessment of BLMC's present situation and future prospects, covering corporate strategy, investment, markets, organisation, employment, productivity, management-labour relations, profitability and finance; and to report to the Government.
  The investigation will be given the highest priority, but it is clearly a substantial task which will take a few months to complete. No specific time scale has been imposed but the report is expected in the spring of 1975. It will not be possible to publish the report because it will obviously contain information of great commercial value to British Leyland's competitors. I shall, however, report to the House on its principal
  1728
  recommendations and their financial implications as soon as I am able to do so.
  It is my intention that the conditions of the guarantee will require that the company shall co-operate fully with the review team, and that during the period of the guarantee while the review is taking place all major decisions proposed by the board will be subject to agreement with the Government. Responsibility for negotiating pay settlements will continue to rest with the board, but the Government will expect the board of British Leyland to reach settlements which are consistent with the financial situation now facing the company, and within the guidelines given to negotiators by the Trades Union Congress, as welcomed by the Government—
  Mr. David Stoddart: Can my right hon. Friend answer a point regarding negotiations? He may know that some delicate negotiations are going on within the industry about pension schemes. Can he tell me whether these negotiations will be affected? Can he give an assurance that these negotiations will be able to proceed without interference?
  Mr. Benn: I am aware of the point my hon. Friend raises, because it has been raised with me by other hon. Members. I thought that it might arise in questions and I would have dealt with it later, but I am happy to deal with it now. I should explain to the House that the present position is that until the House of Commons, in its wisdom, has given its view and its decision on this motion, and until the conditions to which I have just referred—which it is the Government's intention to secure— have been met, my relationship, as the responsible Minister, with the company has no official character. But clearly the negotiations that are in progress would continue to be the responsibility of the company, subject to what I have just said prior to my hon. Friend's intervention. I think that perhaps many questions similar to that posed by my hon. Friend will arise and it might be more helpful if I try to deal with them all together later. I appreciate that many hon. Members are concerned.
  I conclude by saying that British Leyland is a great British company, made up

  1729
  of a highly-skilled work force which has made, and I hope and believe will continue to make, a notable contribution to the British economy. The company needed Government help and I believe it right to have offered the facilities for which I seek the consent of the House.
  But certainly in our approach to the matter—I hope the House will reflect this in the debate—we should not be looking for any scapegoats. Rather we should see this as an opportunity for those who work in British Leyland—I am speaking of the management and the trade unions —who know the firm very well and who have worked with it for a long time, to work out, with their knowledge, their own proposals. I hope that those workers will also feel that the review body which I have announced tonight, in working in consultation with them, will be able to make use of this knowledge to find the right answer to the problems that confront the company. The real assets which we are discussing tonight are the people who work in British Leyland, and I hope that the House approaches the debate in this spirit.
  10.25 p.m.
  Mr. Michael Heseltine: I am sure that the House will feel that the Secretary of State's concentration on the events of the past 12 months does not do justice to the depth of examination into the affairs of British Leyland which one hopes the inquiry will undertake. There are longer-term and more difficult issues to be dealt with rather than the particular difficulties, real though they are, which have beset the entire world motor manufacturing industry over the past 12 months or so.
  The truth is that not all other companies throughout the world have had to go to their Governments. Some have and some have not, but it is important to draw the distinction that there are motor manufacturing companies which have so far been able to react to the circumstances and remain viable. I believe that the inquiry which the right hon. Gentleman has announced will have to probe over a far longer period than the past 12 months and look into matters which were inherent in the whole BLMC structure before it was brought together as a result of the intervention of the IRC in 1968.
  I am sure that the membership of the team which the right hon. Gentleman has
  1730
  announced does justice to the measure of public concern in this matter, but there is a question to be asked about the trade union representative who has been invited to take part. I believe that it is necessary for there to be a trade union representative, but I wonder whether the Secretary of State was wise to choose a member of a union which must have a deep involvement in British Leyland. The Transport and General Workers' Union is a major constituent representative of the work force in BLMC, and I believe that the other unions involved will be concerned when they know that their interests will be considered by a member of a union with which they are in partnership or in rivalry, as the case may be.
  Mr. Benn: Before he continues on that line about Harry Urwin, perhaps the hon. Gentleman will confirm that Mr. Urwin was appointed by his own administration to the IDAB, and, had the Government not thought it right to appoint a special body in this case, the provisions of the Conservative Industry Act would have referred the Leyland case to the IDAB, and Harry Urwin as a member of it would have participated in the inquiry.
  Mr. Heseltine: I am sure that the House will in no way misunderstand the point which I am making. [HON. MEMBERS: "We understand it."] I believe that Mr. Urwin is an extremely valuable member of the Industrial Development Advisory Board under the Industry Act, and I have heard nothing but praise for the contribution which he has made. However, there are deep issues involving the unions in British Leyland, and I just wonder whether it might have been wiser for the Secretary of State in this specific case to appoint a union representative who does not have such a close involvement in one of the 16 unions concerned in that organisation.
  As I have said, the issues here go back much further than the Secretary of State suggested. Specifically, they go back to the moment at which the IRC approached Donald Stokes, then Chairman of Leyland Motors, to suggest that he should become involved in a rationalisation scheme embracing the Austin-Morris operation.
  At that point two significant events took place. First, there developed the widespread belief that the Government

  1731
  had decided to become involved in the motor industry in the form in which it then existed, and that they would stand behind that industry in that form, come hell or high water. The reality is that, having taken that standpoint, we shall never know in this country what alternatives might have emerged for the motor industry and its employees if the rationalisation brought about by the IRC at that time had not taken place.
  For example, we do not know, and we cannot know, whether Britain's motor industry might not have been stronger if, instead of putting together the BLMC package and using, to an extent, the investment resources and profits of the more successful aspects of that package to maintain investment and development in the least successful aspects, we might have achieved more advantage in the national interest by concentrating on developing the successful components of BLMC as it is today, pouring investment into them and concentrating on the success which was evident at that time and which, as the figures show, has been evident consistently since BLMC came into operation.
  The one thing we do know is that in all the main areas in which the company concentrates its activities there would not have been a shortage of earnings for its employees. The reality is that there were throughout this period a large number of vacancies for people with the skills employed by BLMC, and it is therefore in no way realistic to suggest that the choice was to employ these people in BLMC or see them unemployed. It is simply a question of whether they were serving themselves and the nation more effectively within the organisation that the IRC brought into being than they would have done had the IRC not intervened and if there had been a rationalisation of the industry in the normal course of events in 1967–68. The reality is that six years later we cannot know what would have happened; we can only know that there would not have been unemployment in these areas but a redeployment in some uncertain way.
  Given the situation we face tonight there are only two ways in which the present problems of British Leyland can be dealt with. The first is the method of
  1732
  traditional receivership. It is only fair to appreciate that that does not entail liquidation of the company, mass unemployment or anything of that sort. It simply means forcing a number of decisions to be taken now as a result of an examination in the hands of a receiver. It would retain the vast proportion of the company, which is successful, as an operating unit, at the same time seeking solutions to the company's problems.
  The other alternative is the Government's suggestion of a guarantee. I believe that in all the circumstances this is the right solution to take, providing we understand the nature and the limit of the guarantee into which the House is expected to enter. It is very important that implicit in this guarantee is no automatic assumption that the Government are to move in with a substantial commitment of public resources to the company which will maintain its work force at present levels without regard to its record.
  In other words, the Secretary of State is entitled to ask for a period in which the inquiry he has appointed will do its work. That is the limit of the commitment that we enter into tonight. We are not saying, and we are not being asked to say, that we shall commit ourselves to a particular form of Government intervention on a particular scale, until we have seen the report of the inquiry.
  One of the greatest anxieties is that the Government, having once come into the matter, will now underwrite any degree of irresponsibility in the company's employee relationships regardless of the cost to the public purse. This matter has been widely commented upon in the Press and it is one which concerns me, representing, as I do, many of the company's employees. The fear is that this will happen in spite of all the problems which have evolved over the years, and the Secretary of State referred to some of them. These fears cannot be ignored by the House in coming to a conclusion on the report, which it seems we shall be asked to do in the course of next year.
  The real problems of this company will not be solved simply by injecting public money into it. The questions arise over the level of profit, the extent of industrial disputes, the prospects in world markets for the projects on which the company is working and the manufacturing pattern for the motor industry

  1733
  internationally. These questions cannot be separated from the impact of the present management on the particular group.
  Those of us who heard the Secretary of State's statement tonight that the report will not be published were perhaps aware that he had already outlined his own commitment to a degree of public ownership in the structure that emerges from the report. What I do not understand is how the right hon. Gentleman can appoint an independent inquiry to examine the situation in British Leyland and, before it has agreed to serve, can have made a commitment that there will be public ownership, whatever its conclusions.
  It is interesting that the right hon. Gentleman's announcement tonight should have pointed to the statutory responsibility of the advisers under the Industry Act. The reality is that no one more than the Secretary of State has ignored those set up under the Act to advise in circumstances where the Act was called into play. He has a record of Court Line, Harland and Wolff, Meriden, IPD and Scottish Newspapers, in all of which the Government ignored the advice of the industrial advisers.
  The Secretary of State says that he has now set up an inquiry, the report of which will not be published, and upon which he is presumably to reach conclusions which will be presented to the House, without our being able to see the full details of the evidence submitted.
  The Minister of State, Department of Industry (Mr. Eric Heffer): Would the hon. Gentleman have allowed all the workers in the shipbuilding side of Court Line to be put out of work?
  Mr. Heseltine: I would have allowed the private companies which were prepared to acquire those shares to have a chance to do so.
  Mr. Heffer: Answer the question.
  Mr. Heseltine: The hon. Gentleman must understand that the track record of nationalised industries in causing redundancy and laying off people is in no way to be disregarded when we consider these matters. It is the delusion of Labour Members that this country can turn its back on the pressures of economic forces, which will mean that people have to move
  1734
  from job to job, from location to location. We in Britain, now immersed in one of the worst economic crises of our time, cannot go on telling people that there is a way in which the Government can intervene in all circumstances to ensure that change is frustrated.
  Mr. Heffer: Why, then, did not the hon. Gentleman's Government allow Rolls-Royce to collapse, with thousands of workers being put out of work? His Government would not allow that to happen. Nor would ours with Court Line. The hon. Gentleman knows it.
  Mr. Heseltine: Before the take-over of Rolls-Royce 10,000 people were laid off by the private sector management. After the take-over another 10,000 were laid off in the nationalised operation. No one can look back and say that there was a realistic choice. If an industry is overmanned, whether it is in motor manufacturing or aerospace, in the public or private sector, the bankruptcy of the company will result, or the taxpayer will be called upon to bail it out.
  If that is the policy with which the Government will conduct their industrial affairs, no one need look further than the Treasury Bench to understand why company after company is queueing up at Victoria Street for help. There is no ability in industry to finance its own operations within the framework of the Government's policies. That is why next year we shall face levels of unemployment which I shall be interested to hear the hon. Gentleman explain away. I understand that already the alibis are being made. But in the recent election Labour Members were not saying that there would be unemployment as a result of private enterprise—
  Mr. Heffer: The hon. Gentleman should read my election address.
  Mr. Heseltine: I realise that the hon. Gentleman's election address probably did not have much to do with the Labour Party manifesto.
  There will be redundancies within the private sector and the public sector next year, as the pressures of the economic forces which the Government try to pretend do not exist make themselves felt on a larger scale than the hon. Gentleman has seen in this country.

  1735
  The Minister of State is out of touch with what the Government seek from the inquiry. I refer him to what Sir Don Ryder said in the Investors Chronicle only last week, namely, that his aim was to see the National Enterprise Board
  "as a totally commercial animal, not some big Santa Claus".
  The Government have appointed a man who is determined to pursue the very arguments which hon. Members opposite pretend do not exist.
  But what I am concerned about is that the House will not be given the opportunity to see the detail of the report. Therefore, I have one question to ask the Secretary of State: will he achieve the agreement of the inquiring committee to the presentation to the House of the summary of its findings?
  The second area about which I want to say something is the area within which the inquiry must concern itself. First, it is necessary for the inquiry to examine the use of the company's resources since the merged operation came into existence. It is necessary for us to know whether the policy which has had the effect, as the Financial Times article pointed out only a week ago, of using money from the more profitable parts of the organisation to support and encourage investment in the less successful parts was right and should be continued.
  Secondly, I wish to know, and I believe the House will wish to know, what the future industrial relations policy of the company—management and trade unions —will be. Thirdly, we want to know how much money is involved and the purposes for which it will be used. It is impossible to divorce management from all these decisions, and the first purpose of the inquiry must be—and the management could wish it no other way—to examine the role of the management of the company in the past six or seven years in all these three critical areas.
  One of the first questions which must be asked is why British Leyland last year made £1 million less profit than the conglomeration of the component parts made 10 years ago and why in no intervening year were the profits anywhere near as great as they were before the group was put together. Secondly, we need to know what the unions are prepared to say about
  1736
  the rôle of unions and the negotiating procedures in the company. There are 400 bargaining units in British Leyland involving 16 unions. That means that on every working day between one and two new agreements or refinements of agreements must be reached. Does the House seriously believe that we should invest substantial sums of taxpayers' money in a situation of this sort which must make coherent management, no matter what the ownership of the business may be, virtually impossible?
  An important question to be asked by the inquiry is, are the unions—
  Mr. Heffer: The hon. Gentleman is absolutely ignorant about the trade union situation.
  Mr. Heseltine: I have not come here to plead a special case. What I concern myself with is how we shall make British industry as effective as its competitors in the world and how we can survive in the modern world if we do not. We all have an overwhelming responsibility for the use of taxpayers' money. I concern myself with that, and I believe that I have as much right as the hon. Gentleman to express views on these matters.
  If the unions want the company to be successful, they must give assurances, before the commitment of taxpayers' money, that the provisions and procedures of the last seven years will be dramatically changed. The chaotic industrial relations in British Leyland cannot continue.
  Mr. Robert Kilroy-Silk: Bring back the Industrial Relations Act.
  Mr. Heseltine: I am interested to hear the suggestion that that was caused by the Industrial Relations Act. Perhaps I may refer to a debate that took place before the hon. Member for Ormskirk (Mr. Kilroy-Silk) came to the House, when the right hon. Member for Blackburn (Mrs. Castle), referring to British Leyland, said:
  "to say nothing of the motor car workers in the constituency of my hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), one of my Under-Secretaries, who have welcomed the White Paper"—
  the Labour White Paper—
  "as, at last, doing something about the chaotic industrial relations in the motor industry which keep putting them out of work."—[OFFICIAL REPORT, 3rd March 1969; Vol. 779, c. 41.]

  1737
  How any Labour Member, knowing that that was said by a Labour Government spokesman about British Leyland, can try to put up a smokescreen of false laughter when we ventilate these issues on the Floor of the House passes all understanding.
  Mr. Robin Corbett: Does the hon. Gentleman recall that in the opening page of the guide to the Code of Practice under the Industrial Relations Act the statement was made that the responsibility for good industrial relations rested ultimately with the management?
  Mr. Heseltine: If the hon. Gentleman had been listening to my speech he would have realised that I made exactly that point. If the hon. Gentleman cares to read HANSARD in the morning, he will find that that is what I said. It is a disservice to management to pretend that it is removed from this problem. No respectable management would want to be removed from it.
  How can the House remain credible when every mention of unions and management results in a series of catcalls? Unions and management are unified by a common interest in the country's prosperity. It is because Labour Members are consistently determined to divide when there is need to seek unity that we fail to find agreement on so many issues.
  The Financial Times has listed year by year the cost to British Leyland of industrial disputes. It is fascinating to see that the cost was higher in 1969 than it was in 1968 and higher again in 1970. The cost fell in 1971, again in 1972 and again in 1973. In 1973 the cost of disruption through industrial disputes was the lowest since the figures were calculated in 1968. Anyone who says that a Tory Government aggravated industrial relations in British Leyland either must produce figures to refute the Financial Times figures or, better still, ask the inquiry to calculate where the greatest cost falls.
  During the last financial year of British Leyland 20 per cent. of the industrial disputes took place before 1st March and 74 per cent after 1st March. Why? Because a Labour Government was returned, and the feeling spread throughout the motor industry that this was the moment to grab wage increases before
  1738
  we were forced back to a statutory policy. That is why there are now more disputes in the motor industry than there have been for many years.
  Mr. George Rodgers: Would the hon. Gentleman concede that, according to Lord Stokes's statement today, the loss of £16·6 million is attributable to the three-day week, which occurred during the period of the Conservative Government?
  Mr. Heseltine: I have Lord Stokes's statement here. The hon. Gentleman will no doubt have read it carefully. It says that the cost of inflation is £190 million. The hon. Gentleman cannot simply blame the three-day week, when we were confronted by the miners' strike, when the miners were attempting to break a rate of inflation of 7½ per cent. We are talking now about an inflation rate of three times that level. We would have been thought prosperous if we had kept the rate of inflation down to what we had then.
  Mr. John Lee: The hon. Gentleman has spent the best part of 20 minutes by inference, if not directly, attacking the trade unions. Would he come back to the purpose of the debate and say how such remarks, be they true or false, are going to assist the situation which he says he is interested in solving?
  Mr. Heseltine: This is a critically important question. I know, and the House, I believe, knows, that until we get industrial relations right in the company it can never perform as effectively for the country or for its employees as we all want it to. The independent inquiry will have to find out the extent to which the structure and attitudes of the unions are now possibly out of the management's capability. That question must be answered. It cannot be divorced from the figures, which indicate the cost to the nation, but particularly to British Leyland, of that situation.
  The figures show that industrial disputes since the company came into existence have cost about £100 million, every penny of which could have been turned into sales because the demand for its products at the time was such that it could have sold the cars. We cannot consider whether we should give a £50 million guarantee to tide the company over without also considering that, over the last

  1739
  six years, more than £100 million in sales has been lost through industrial disputes. We cannot avoid that issue.
  The question before us is whether we should give the Government the opportunity to allow their independent inquiry to take place, as opposed to allowing a more traumatic situation to overwhelm the company. I believe that we should support the concept of an inquiry. But it is important that, in agreeing, we should see it as a holding operation when we come later to the point at which we reach a decision.
  We shall have to see whether there has been, first, a realistic assessment of what the company can expect to achieve in future; secondly, whether the present management can carry that out; thirdly, whether the unions are prepared on their part to make the sort of commitments that are necessary to bring about the proper operation of the company. It is a holding operation, no more and no less.
  10.54 p.m.
  Mr. Maurice Edelman: I will not follow the hon. Member for Henley (Mr. Heseltine) in the more historically contentious part of this speech. My purpose is to support the motion that some bridging aid should be given to British Leyland.
  British Leyland is a national asset, and what is at stake now is the future of the only wholly-owned British motor company, our biggest single exporter, and the employer of 200,000 workers, which really means that probably more than 500,000 people are directly dependent on the prosperity of the company.
  Only today, the company's cash difficulties were underlined by the unhappy financial report issued by Lord Stokes. What is clear from it is that the bankers have given a vote of no confidence in the present administration of the company in existing circumstances.
  The real question for this House is why we should make a contribution of £50 million worth of preliminary support to the company unless there is some structural change within the company, and some assurances that its future strategy will be in accordance with the country's needs and will be designed to promote the prosperity not only of the workers most
  1740
  intimately concerned but also of the nation as a whole.
  When I say that this is a preliminary contribution, it is clear that the £50 million which the company is immediately asking for is merely to replenish stocks which cannot be replenished at present, first, because the bankers will not give the necessary support and, secondly, because of inflation there is not the cash flow available to provide the stocks required. If we look further ahead, we see that something like a further £350 million of support will be needed to re-equip the company if it is to be able to compete with the giants of the motor industry.
  There is something slightly ominous about this order. It reminds me unhappily of cash handouts in the past which ultimately dribbled away into the quicksands. Some people regard public support as being some sort of bran tub, and it can become a bottomless pit, which the Concorde eventually became, into which public money is poured, without accountability and without public control. When money is asked for in these circumstances, without the guarantees which I have talked about, I regard it as being a great confidence trick played upon the public.
  It is wholly improper to extract money from the taxpayer unless there is a proper organisation capable of supervising the expenditure of the money and accounting for it, so that the Minister can come to the House and say, "The money which you voted to support the company has been paid out not simply as a sort of dole for those who have fallen on hard times, not as a kind of Christmas stocking to be filled by the taxpayer because of the season of the year, but as a constructive contribution to the future of the British motor industry".
  We have to consider some matters of future strategy. We have to consider, for example, how to raise the productivity of the industry which at present is one of the lowest in the Western industrial world. I quote some figures from the Economist. Last year in Britain, the number of cars produced was six per worker. In Europe, it was 12 per worker. In Japan, it was 37 per worker. These are sinister, disturbing figures, wherever the fault may lie. It means that the amount of horsepower and the amount of investment put behind each

  1741
  worker is very much lower here than it is abroad.
  If we are asked to invest money in the motor industry, a second question must be answered. What will labour relations be like in the future? The hon. Member for Henley (Mr. Heseltine) very properly drew attention to the fact that industrial disputes have resulted in a lowering of output, inevitably. But the profounder question concerns the cause of these industrial disputes. It takes two to create a dispute. It is not unilateral Management has a great responsibility in this matter, and I revert to the question whether the management of British Leyland has been or is adequate to deal with this new investment of public money and to produce the results that we all want to see.
  Finally, there is the question of competitiveness of the British motor industry and whether, in the world as it is, we really are in a position to tackle the big three or even the big four of the motor industry.
  Tonight is the moment of truth for the British motor car industry. The oil crisis and the deepening world recession have plunged the industry everywhere into difficulties. A figure worth remembering tonight is that one-third of Detroit's labour force is either laid off or on some form of short time. That has relevance to Coventry, too. It used to be said that if Detroit sneezed, Britain's motor car industry caught pneumonia.
  The symptoms are already there. Chrysler is already laying off men. Five of Chrysler's six American assembly plants have been shut down until after the New Year. There is redundancy and short time in Europe. Governments are intervening desperately to restructure their industries to deal with the already deepening recession. In the last year output has fallen by about 25 per cent. Perhaps the most disturbing figure is that European motor manufacturers now have over 800,000 new cars in stock, which is about half the number of our likely production this year.
  These are symptoms of a very grave situation in our motor industry. This is a moment not for slogans, but for a real examination of the industry's problems.
  I believe firmly in the public ownership of the motor industry, and that belief is reinforced by the fact that we are now
  1742
  being called upon to provide this trailer, so to speak—perhaps my right hon. Friend will confirm it—of £50 million for what ultimately might rise to an investment of about £400 million. If so, this vast expenditure of public money should have an adequate form of public accountability and control, and I believe that public ownership must be the answer.
  Having said that, I should add that, even if British Leyland were nationalised tomorrow, the industry's problems would not be solved by the wave of a wand. Nationalisation will not cure the malaise in the industry. Still less do I believe that my right hon. Friend's proposal—I take issue with him here—of bringing in Sir Don Ryder as the magic man of the industry, complete with his hatchet, will provide the urgent action required for the industry.
  My right hon. Friend has named an eminent panel of investigators who are to inquire into what went wrong at British Leyland, and presumably to make recommendations for the future. I have known Mr. Harry Urwin for a very long time. He is an outstanding trade unionist with remarkable—indeed, unequalled— experience of the motor car industry who will obviously bring great expertise and benefit to the investigating committee. But that is not the point. If Sir Don Ryder is to apply a Beeching-like process of rationalisation to British Leyland —a sprawling, amorphous company which grew haphazardly without any logical and integral relationship between one part and another—if he is to apply that kind of Malthusian process of cutting down, I must warn my right hon. Friend and the House that there will be great resistance by those workers who, in this arbitrary way, are to be done out of their jobs.
  I recall that in Coventry, when automation was first introduced, there was what was called an anti-automation strike. Some people called it the Luddite strike. Whatever it was, it was the immediate response of men, and women too, who felt that their jobs were in danger from new processes being introduced arbitrarily without consultation with them. They felt that they had not been allowed proper consultation, and therefore they objected. If that sort of process were to take place there would not only be anti-redundancy strikes but sit-ins on

  1743
  a massive scale which, by definition, would be profoundly detrimental to the future of the industry.
  I am speaking tonight because I want not only to tell my right hon. Friend about this but to suggest to him a means by which it would be possible so to consult those who are involved in this industry that there would be an assent that would in turn enable British Leyland to be the strong, productive and efficient industry which, with its managerial experience and skilled workers, it has been in the past and can be in the future.
  I have urged my right hon. Friend to call a conference of all the interests involved, and I mean the Government, managers and shop floor workers, because it is not enough to pluck out a few established trade unionists, much as I respect them, and say that they are the people who will make the decisions, they are the people who will decide what will happen to the livelihood of so many men. I do not think that is the way to do it.
  In reply to a Question of mine, my right hon. Friend said that he was already having discussions with the interests concerned. I do not believe that that kind of bilateral discussion is the way to do it. The first thing that is necessary is to have this general national consultation to create the right psychological climate in which people will feel that they are having some part in deciding what their destiny will be. If my right hon. Friend feels that the term "psychological" is too strong, let me tell him that this is the preparation for any pragmatic decisions that will have to be taken.
  The sin of right hon. Gentlemen opposite in their policy of confrontation was that they made a unilateral diktat directed against workers with the Industrial Relations Act which produced the three-day working week and all the unhappiness and the disadvantages which flowed from it.
  Let my right hon. Friend consider this question of a tripartite national conference. Let him not think that just because it involves so many people and there may be so many delegates it may turn into a national jamboree. I know that I can speak for the shop floor workers in Coventry with whom I am in close touch and with whom I have had consultations on this subject. I am certain
  1744
  that they will not be prepared to receive a kind of ukase from outside that will tell them what they have to do, unless they are taken into the confidence of those concerned.
  My right hon. Friend said that he will not publish the report because of conditions of commercial secrecy. It is in saying that that he is showing the weakness of his approach to this matter. If issues are to be shrouded in secrecy, if workers on the shop floor feel that facts are being kept from them, how on earth can my right hon. Friend expect to have their co-operation? How on earth can he expect to have their participation? What is necessary at British Leyland is not only a statement on the general facts, but a clear statement that if there is massive public investment there must be public ownership and accountability. In the interim, there must be a new deal at the top, and not only on the floor.
  I have the greatest respect and admiration for Lord Stokes. I think he is a superb salesmen and I hope that, come what may, his talents will remain at the disposal of the company, but there comes a moment when the failure of a company —and tonight we are engaged in an inquest into the failure to obtain the proper cash flow of the company and the fact that it has run into its present difficulties, which I believe have been produced by top management—must lead one to say that there should be a change at the top. No person is sacrosanct in that respect. No person can be said to hold his position freehold, and that applies not only to politics but to an important national company such as British Leyland. I hope that my right hon. Friend will consider, as a condition of the contribution that we are being asked to make tonight, an urgent inquiry into the top management at British Leyland.
  Some of the workers who live in my constituency have summed up the situation very simply. They have said that there are more sheriffs than cowboys at British Leyland. That is a matter which should be investigated. How has the management been conducted? Is it being conducted properly in a financial sense?
  I ask this specific question of my right hon. Friend. Is it true that if Lord Stokes were to retire he would receive a terminal payment of £400,000? I ask that question because that statement has been made. If there is any truth in it,

  1745
  there is something seriously wrong with the financial organisation of a firm which can vote its top management, however indispensable it may seem, such a fantastic figure. I hope that question will be answered tonight. If hon. Members are being asked to vote £50 million, we ought to know whether almost half a million pounds of that sum may be paid to one manager as a golden handshake.
  In conclusion, may I say that I want to see a new mood of co-operation and purpose both at the top and on the shop floor. The Opposition are fond of talking about co-operation. The workers of British Leyland want nothing more than to have the opportunity of working on, and producing, cars. They want to help exports. They want to participate in a great national effort. Let them make a new start in promoting a state of affairs where strikes will be a thing of the past. That new start can be made only if the workers are brought into consultation and given the chance of participation. I hope and believe that eventually, out of the restructuring of British Leyland, the workers will have a participatory place on the board, and that they will be able to feel integrated into a firm of which they are an essential part. In that way I hope that, with the assent of the 200,000 workers of British Leyland, we can make a new beginning in which this great national firm will be able to work in the interests of the nation as a whole.
  Mr. Speaker: Order. We have only until half-past twelve to complete this debate. I hope we shall have rather shorter speeches.
  11.12 p.m.
  Mr. Hal Miller: Before addressing myself to the motion, I should like to pay a tribute to the management and men of British Leyland who purposely and productively worked to create this great enterprise under the direction of the noble lord, Lord Stokes, and the managing director, Mr. John Barber. I should like to place this great enterprise within the context of the British economy to show that it truly deserves the name British Leyland, particularly in view of the fact that the firm employs about 200,000 people.
  The products of British Leyland account for 4 per cent. of British exports,
  1746
  and represent approximately one-third of the contribution of the entire motor industry. That industry has consistently accounted for about 10 per cent. of capital investment formation in this country, 12·5 per cent. of exports and approximately 15 per cent. of employment in the engineering industry. It is right that we should bear those figures in mind when we consider this motion.
  I hope that the Minister, when he replies to the debate, will take the opportunity to correct the impression made by the hon. Member for Coventry, North-West (Mr. Edelman). The motion will enable a back-up to be provided to allow the commercial banks to lend to this company an additional amount of money over the current borrowing limits. I stress that this company is fully satisfied that it is capable of servicing those loans, so there is no question of this money disappearing down some bottomless pit. I hope that the right hon. Gentleman will underwrite those remarks.
  I turn next to the question why British Leyland has got itself into the position, not of failing, as some hon. Members have said, but of bumping up against its borrowing limits because of the erosion of its borrowing base, partly because of the fall in its share value. The company could be purchased on the stock market today for £39 million.
  Mrs. Audrey Wise: Would the hon. Gentleman agree that it would not be a bad use of public money to do just that, and have complete public accountability?
  Mr. Miller: I see no case for the public purchase of British Leyland.
  The company's borrowing base has been eroded and it has had to use a great deal more working capital—£190 million —because of inflation, the increased cost of inventory, higher interest charges and the higher wages paid. There is also another £80 million in pensions, national insurance contributions, increased costs of steel and other overheads. That is why the company has been brought up against its borrowing limit. There is no question of its having failed.
  The motion guarantees borowing for a temporary period while the inquiry takes place. I support it, but I should like

  1747
  the Secretary of State to direct the attention of the inquiry not only to the circumstances of the company but to the outside circumstances which have brought it into this position, particularly acts of the Government.
  We were told that one of the objects of the inquiry would be the company's markets. It is important to realise that the management has taken a strong decision to concentrate its marketing effort on Europe, because its share of the European market has been very low and that market, despite the current troubles, has grown much faster than our own market over the past ten years. The uncertainty created in the company by the Government's failure to resolve their position on Europe is damaging the marketing strategy and management morale. Some clear statement of the Government's position would therefore be of great help.
  The whole motor industry lost 465,000 cars as a result of strikes in 1973, and this year it has already lost 500,000, which, at a unit price of, say, £1,000 is a large sum—and these are all profitable cars, above the break-even point. One consequence of a heavy capital investment is a much higher break-even point. There is, therefore, a serious need to ensure that that capacity is fully utilised. But the whole situation in the British industry is such that the utilisation of capacity has been dropping over the past five years. I hope that the inquiry will direct its attention to this matter.
  However, this loss of cars through industrial disputes must be faced. I am not one of those who take an anti-union attitude. I have had valuable consultations with union officers on this subject. But the sad truth of the matter is that the union officers, as well as the management, have lost control of the situation. It is the direct shop-floor power—so much beloved by the right hon. Gentleman— which has brought about this situation.
  Mr. Leslie Huckfield: Absolute nonsense.
  Mr. Miller: If the hon. Gentleman had the number of constituents who work at Longbridge that I have, he would know something about this matter. Many people in those factories wish to work for 52 weeks of the year, and not for the 36
  1748
  weeks which mindless people have inflicted upon them. They want to earn their wages for a full year, as do most people in this country. This disruption must be faced, and the Government have a responsibility to come clean on the subject.
  The third matter for which the Government have very direct responsibility is the use that they have made of the motor industry as an economic regulator, which has led to very severe fluctuations in demand in this country with consequential effects on employment and earnings. The work force has at some times been compelled to work long periods of overtime and at other times has been on short earnings. Until there is more consistency and continuity in Government policy, there will always be these difficulties, which are so easy to seize on as an excuse for industrial action.
  From what I have said, I hope that the House will accept that this great company is not going under at present and that it is in a position to continue without Government assistance by reducing its activities. It is only because it is thought to be in the national interest that the volume of exports to which I have referred and some of the employment should be maintained that there is a ground for bringing forward Government assistance now. But that assistance need not necessarily include a direct Government investment. As has been pointed out by my hon. Friend the Member for Henley (Mr. Heseltine), the immediate transfer of shares of itself will achieve nothing.
  What is needed is a firm statement and a commitment from the Government on the points I have mentioned—namely, the EEC, militant activity against the best interests of the trade unions, continuity and consistency of Government economic policy, and a determined attack on interest rates and inflation in general. I hope that the right hon. Gentleman will give us an outline of the Government's thinking on these matters.
  11.24 p.m.
  Mr. Ray Carter: I shall be as brief as possible as I am aware that other hon. Members wish to speak in the debate. However, as 25,000 out of the 200,000 workers involved live in my constituency, not only did I want to take some part in

  1749
  the debate but I think that it would have been expected of me.
  There will be no surprise at the present troubles of British Leyland. If there is any surprise, it is that they took so long to come about. I say that because over the past few years, particularly the past year, British Leyland has battled against some enormous problems. It has had in addition the structural problems to which the hon. Member for Henley (Mr. Heseltine) referred. But in the past 12 months it has had the three-day working week, the oil crisis, falling demand, and foreign competition, which in recent months has reached enormous proportions.
  In my opinion, however, all those circumstances amount to the straw which broke the camel's back, and the real problem which British Leyland has faced over the past decade rather than two or three years has been the problem of investment. This has been referred to time and again by Lord Stokes and other members of the board of the company. That is the root cause of the trouble, and it has to be tackled.
  The problems facing the company in that respect are now revealed by the fact that every car it makes it can sell, and there is not one in stock. If productivity had been higher, if production had been higher, the company, with all its difficulties, would probably not have been in the position it is in now.
  In my view, whatever be the solution arrived at now, we must ensure that the crisis within the company is solved and, one hopes, solved for good. The car is with us to stay. What is more, it is our biggest export earner, and the industry is one of the country's major employers. In the West Midlands, one in four of all industrial workers works either in the car industry or in an industry associated with it. So it is no laughing matter for us in the West Midlands. Whatever happens as a result of the crisis and of the inquiry, we must find some long-term solution. Failure now could lead ultimately, I believe, to disaster.
  What should the Government do? I echo what was said by my hon. Friend the Member for Coventry, North-West (Mr. Edelman) and by others of my hon. Friends who intervened at various points in the debate. Complete public ownership, it seems to me, is the only way out. I
  1750
  say that because the industry appears to have been rejected by the private sector. If support from the private sector were still there, British Leyland would not have had to come to the Government.
  Mr. Reginald Eyre: May I refer the hon. Gentleman to the company's report for the year ending September 1974:
  "All industrial companies in the United Kingdom are affected by inflation, but British Leyland is particularly vulnerable because production loss over the years due to strikes has prevented the building up of reserves for difficult times".
  Will the hon. Gentleman pay due regard to that?
  Mr. Carter: I know that the hon. Gentleman takes a great interest in the car industry, as any West Midlands Member does, and he is a Birmingham Member. But what he should bear in mind—I feel that we should not make flippant points, and I am not suggesting that that was—is that every car industry in the world has this problem. It does not apply only to British Leyland. True, British Leyland has more of a problem in this area than other companies have in other countries, but one cannot reliably compare one company with another or one country with another. Indeed, if we did we could come up with some quite alarming facts and figures.
  If there is one thing I have learned in five years of association with my constituency, with British Leyland and with the 25,000 people who work in the industry, it is that there are no simple solutions. Public ownership has been referred to. I know, and my shop stewards in the car factories know, that even if we took this industry into public ownership tomorrow, we should still have the job of producing motor cars, and nobody really likes doing it.
  I believe that a large part of the difficulty which we experience in industrial relations in the car industry is bound up with the difficult nature of the job of actually making cars. I take the point that no strikes are acceptable, and certainly one loses production, but it is not a pleasant job. I am afraid that we have to live with a certain degree of disruption in the industry.
  I said that public ownership was the only way. Perhaps some other solution will be arrived at, but we must insist,

  1751
  from the Government side, that any money invested by the Government in British Leyland is taken as a public stake in that industry. I am afraid that the measures adopted in the past, by the IRC and other bodies, for investing public money have not given the degree of public accountability that the taxpayer and we, as a Parliament, should expect. That is the first political requirement that we can make of any public investment.
  This may be the last chance for British Leyland—the last sector of the wholly British-owned part of the car industry. The workers in British Leyland at Long-bridge feel that. That is why a delegation came to the House yesterday, consisting of the whole of the works committee, accompanied by some people from Coventry, and made plain their fears.
  For the information of hon. Members on the Opposition benches, these are not wild men; they are people with a long experience in the industry. The convener of the works committee—Dick Etheridge —has held his post in that factory for over 30 years, and others have been shop stewards or trade union officials in other capacities for more than 20 years. They realise that the company is in trouble and they want to do something to help it. That is why they came here yesterday —not thinking just of their jobs but of the future of their industry—the industry of which they are a part and of which they are proud to be a part. These people must be listened to. They have a point of view and they have a part to play in any restructuring of the company that may be decided upon.
  We must remember that the days of imposed decisions are going. No more can Governments or companies say to workers, "This is how we think you should order your industrial life". Nowadays workpeople expect something better. We, as a Government and an institution here in Parliament, should capitalise on that and try to involve people as much as we can, particularly in times of crisis.
  The works committee had a number of demands to make, some of which have been answered by the Secretary of State tonight. The first one was that Sir Don Ryder must involve the workpeople—by whom I mean the trade union—in any decisions made about the future of the
  1752
  company; about the question of public ownership or about a BP-type solution. All these factors must be taken into account and be put fairly and squarely to the trade unionists involved, so that they can put their point of view.
  The second point is that they are extremely worried about the suggestion by John Barber that there are certain loss-makers within the British Leyland empire. Mr. Barber referred in the Sunday Times a fortnight ago to the Cowley plant, and Longbridge. For the benefit of hon. Members, I should explain that these are the two plants that are in the volume car production area. Anybody who is making volume cars today is in a loss-making area. It is true that these two plants have not been making profits for a long time, but if we wish to maintain a presence in this field, Longbridge and Cowley must be kept in production. The earliest opportunity should be taken by the Government or by Sir Don Ryder to reassure the people at Longbridge and Cowley—I know that the Opposition Front Bench spokesman has many people in his constituency who work at Cowley and who would want to be assured on this point—that their jobs are secure.
  Mr. J. W. Rooker: To reinforce my hon. Friend's point—these two plants make the most economically-running motor car that British Leyland produce. The man who buys a Jaguar does not give two hoots about the price of petrol, but to the man who buys a Marina or an Allegro it is a vital factor, and it is important that consideration should be given to that fact.
  Mr. Carter: My hon. Friend is right. The finest range of quality cars at Long-bridge and Cowley are highly suited to the age in which we live, with petrol costing almost £1 a gallon.
  The third point that the shop stewards raised with me and other hon. Members yesterday was the fact that no one had yet had put to him precisely what the state of British Leyland was. Tonight we are discussing £50 million to support the company, and yet no one knows precisely what the internal position of the company is, although we have had a statement about its financial position.
  The fourth point is overseas investment. It is felt by many people that the export

  1753
  of capital has jeopardised the employment prospects and possibly the standard and status of the company in Britain.
  The fifth point concerns the import of Japanese cars. Last year we imported just under 90,000 Japanese cars while the total of British cars exported to Japan was only 1,200. We are not asking for a total ban on car trading with Japan, but we are asking for fair terms of trade.
  Above all, and this is the sixth and final point—[HON. MEMBERS: "Hear, hear."]—I have tried to be as brief as possible.
  Mr. Tom King: Is the hon. Gentleman aware that if the Government had had their way, the debate would have lasted only an hour and a half and that it is only because of the Opposition's strong representations that it is to last two and a half hours, and that he and his hon. Friend the Member for Coventry, North-West (Mr. Edelman) have already taken half an hour?
  Mr. Carter: I must congratulate the Opposition on that. They have done a fine thing and rendered a great service to British Leyland and its employees. I should have been very disturbed if the debate had lasted only one and a half hours. However, the hon. Member has succeeded in lengthening my speech by two minutes, and I am not sure that everyone will be happy about that.
  My sixth point reinforces what I said earlier about consultation with working people, and by that I mean people on the shop floor, the staff and the management. They want to become involved in the future of the company. They feel that they have a positive part to play in the future structure and future organisation of the company.
  If that is done, there is a golden opportunity, even though this is a crisis situation for British Leyland, to ensure that the future of the company is secure.
  11.38 p.m.
  Mr. Nick Budgen: I find myself in the embarrassing position of agreeing with many of the sentiments that have come from the Government side of the House and not agreeing with my hon. Friend for Henley (Mr. Heseltine) that this is a holding operation. He believes that he can agree with the concept of an inquiry.
  1754
  The debate will be seen throughout the West Midlands and the whole of the rest of the country as a preliminary to a major public stake in British Leyland. It will be seen as leading to public control of the whole company. It is wrong to pretend that this is just a mere holding operation.
  If it were a mere holding operation, it would be grossly wrong to spend £50 million. One would expect one of the banks to be prepared to put up the money for a holding operation for an otherwise solvent company. I believe it to be a preliminary to massive Government expenditure and nationalisation which are wholly wrong in the circumstances in which the debate takes place.
  The debate takes place at the end of two days of debate on the economy during which one subject on which there has been widespread agreement is the danger of the Government's vast borrowing requirement. Time and again hon. Members have mentioned the £6·3 billion requirement and its effect on already rising interest rates. One after another hon. Members have warned that we are perilously dependent on foreign borrowing. We are warned that if the Arabs do not continue to lend to us we must resort to the printing presses. We know from the rates revolt that there is no real chance of a major increase in taxation being forced upon the people. Yet tonight this measure is described as a mere holding operation when we know that it is the preliminary to a massive increase in Government spending.
  The proposals are wrong in every way. I am against nationalisation not simply because I believe it to be inefficient. The case against nationalisation is not based upon efficiency or growth. It is based upon freedom. It is the case against the concentration of power into the hands of the State, and it is most of all the case against those who would wish to see all power of decision in the hands of politicians.
  If there is this increased nationalisation there will be a repetition of the situation which occurs in the case of the British Steel Corporation. Plants are kept open because they are in marginal constituencies. Decisions are taken on that criteria and not according to the profit record of the plant in question. The

  1755
  politician and not the business community holds sway.
  I am opposed to this measure most of all because it is a preliminary to public expenditure of the order of £500 million, which is the figure Mr. Barber was referring to recently.
  Mr. Leslie Huckfield: It will be at least that.
  Mr. Budgen: It may be more, probably much more, and for the following reason. Unhappily British Leyland has had very bad labour relations. One of the main arguments of the company has been that it could not pay excessive rises because it would mean that the company would go bust. This did not happen between 1971 and 1974 because wage payments could be met out of easily obtained credit. Now the employees will be able to tell the management to get the money from the Government. I agree with the hon. Member for Nuneaton (Mr. Huckfield) that the figure may well exceed £500 million. It may be that the unions will go on demanding more and more and that they will get it, because this is no preliminary holding operation, it is the beginning of a massive handout.
  The situation is even worse than that. It sets an appallingly dangerous precedent. It is grossly unfair that British Leyland will be bailed out because it is big.
  Mr. Greville Janner: Is the hon. Member aware that if British Leyland is not helped thousands of small concerns all over the country, including my constituency, will go to the wall and their employees will be out of work? That is what this debate is all about.
  Mr. Budgen: If the Government print more and more money there will be more and more inflation and we will simply delay the crunch for perhaps three or six months. But the crunch will come and the more its coming is delayed the worse it will be when it gets here.
  The horrifying danger of this is that the little man will realise that, because he cannot influence the outcome of a particular election, because he does not command power in the places where the politicians make their decisions, he will not be bailed out in the way that the big companies are bailed out. Little men will
  1756
  seethe with indignation in a year's time when they see how hardly treated they are compared with the big companies, and particularly when they realise how they are hit by inflation, increased rates and taxes, and the increased national insurance contributions of self-employed people.
  This premilinary act of bailing out will divide the nation more than almost anything else. The Secretary of State sees himself as the great company doctor, but he is no more than a quack. He does not appreciate that British industry is an organic whole. Parts die and parts are born. Before a new part can be born an old part has to die. It is a horrible and inescapable fact of the market economy which the right hon. Gentleman so hates. If he sets himself up as a quack doctor and tries to tell all his patients that he has the secret of eternal life, when the relatives finally find that he is wrong the cynicism and disillusionment will be even greater than it would have been if he had told them the truth at the beginning.
  11.47 p.m.
  Mr. Evan Luard: I speak for the great majority of my constituents who work in the motor industry when I say that I warmly welcome the reiteration of support for British Leyland involved in the statement of my right hon. Friend the Secretary of State tonight. They will welcome it not merely as an expression of confidence in British Leyland and the British motor industry but as an expression of the Government's determination not to allow the genuinely British motor industry to collapse or fall out of British control.
  The hon. Member for Wolverhampton, South-West (Mr. Budgen) has repeated things said widely in the House and in the Press. He has spoken of the operation as if it were the bailing out of a totally unsuccessful firm or industry. I contest that view. British Leyland has not had a totally unsuccessful record over the past year. It is true that in the first half it was not so successful, but the figures published today show that in the past six months its trading record has been much better. In its domestic operations alone it has had a substantial operating profit.
  It is still less true of the British motor industry as a whole that it has recently

  1757
  been operating at a loss or unsuccessfully. Compared with most of the other motor industries of the world, it has a remarkably successful record, given the present state of the market. In October the industry's exports were 36 per cent. higher than they were a year earlier, whilst imports were only 5 per cent. higher. Exports in the first 10 months of the year were 17 per cent. up, whilst our imports were only 10 per cent. up. That should be remembered by those who believe that our domestic market has been taken over by foreign manufacturers. The balance of trade for the whole of this year is likely to show a surplus of exports over imports for the industry of £1,000 million. That surplus is 32 per cent. higher than last year. In October alone it was 70 per cent. higher than last year. Those are remarkable figures, figures of an industry not doing at all badly.
  It is true that the industry has suffered over the past year from two factors which every motor industry in the world has to contend with. One is the tremendous increase in the price of oil and of petrol which has inevitably caused a decline in the demand for motor cars. The second is the general recession in industry, not only in this country, but in other parts of the world. Taken together, those are severe handicaps for any motor industry or motor firm to contend with.
  It is remarkable that the British motor industry has, on the whole, been affected by these problems much less than comparable industries in other countries. We have been reading in the past few months of the large numbers of men who have been put out of work or on short time or laid off temporarily by the major motor firms in most of the major industrial countries. The British industry has come off remarkably lightly compared with those countries. We have had a certain amount of natural wastage and a number of people have been temporarily laid off, but, on the whole, we have avoided making permanently redundant large numbers of people, as has happened in many other countries' motor industries. This is a good reason for us to have confidence in the future of the British motor industry and, therefore, a good reason to justify the measures announced by my right hon. Friend and his promise of further assistance in the investment programme of British Leyland.
  1758
  Another charge often made against the British motor industry, and particularly against British Leyland, is that it has a particularly poor industrial relations record. The responsibility for this no doubt lies in many quarters, but management must take a large part of the responsibility. In my constituency there has not been one major industrial dispute in British Leyland in the past eight months.
  Mr. Douglas Hurd (Mid-Oxon): Does the hon. Gentleman agree that at the Cowley plant, of which he and I have knowledge, the improvement to which he refers was the result of a remarkable revolution in the summer by which the troublemakers were turned out by the men because they believed that the trouble-making might drive the firm to bankruptcy? Does not he see a danger that the troublemakers at Cowley will be able to say, "We need not bother about that argument any more because the Secretary of State is at hand with his cheque book"?
  Mr. Luard: There are many reasons for the great improvement in industrial relations at Cowley in the past eight or nine months. One of them may well be, as the hon. Gentleman says, that there has been a change in the leadership among the shop stewards. I do not know whether that is the main reason. There are many people working in British Leyland—and this applies all over the country—who are conscious of the serious situation of the company. It is a remarkable tribute to them that they have responded in this way and have determined to ensure the future prosperity of the company and of the motor industry generally.
  There is not the slightest likelihood that, because the Government are offering the firm money, the great improvement in industrial relations will suddenly change and the men will turn out the existing highly respected leadership in the union and among the shop stewards, since many of the workers have noted the improvement and have welcomed what has happened. They have much more continuous work than before. Industrial relations in Oxford are extremely good, and it is a wild generalisation to say that there are bad industrial relations in the motor industry generally. The good industrial relations in Oxford are largely

  1759
  due to a good union movement and a sensible relationship, but that could be achieved in other parts of the country.
  I hope that the inquiry will note and remark upon the good situation in Oxford. When, for example, decisions are made about the distribution of investment, I hope that the sole consideration will not be whether a factory is making highly profitable models—which are often the most expensive models—but that consideration will be given to factories which have a good record and make cheaper models which are more economical in the use of petrol and will have a good future on the British motor market in years to come.
  I hope that the inquiry will also note that the situation in Oxford is in some ways different from that in other parts of the country. I hope that there will be no major redundancies in the industry as a result either of the problems of the industry or of the inquiry, particularly in Oxford, because there is no other major manufacturing industry in Oxford to which displaced workers will be able to turn. That is not necessarily true in other parts of the country. In Oxford the motor industry is the only major manufacturing industry.
  Mrs. Wise: Does my hon. Friend agree that it would be dangerous either to play off or allow to be played off one worker against another in various towns? Is it not the future of the car industry as a whole that is important?
  Mr. Luard: I prefaced my remarks by saying that I hoped that as a result of the offer of Government support and of the inquiry there would be no redundancies in any part of the country. The points I have made are not irrelevant to the inquiry and will have the effect of ensuring stability of employment in Oxford.
  There are two matters about which workers in British Leyland in my constituency and in the British motor industry as a whole will want to know. If the Government are to give a considerable volume of investment to British Leyland, the workers will expect the Government in return to acquire a share of the ownership of the company. In association with the share of ownership, the workers will expect a considerable measure of partici-
  1760
  pation in the major decisions that are reached which affect their future. I hope that my right hon. Friend when he considers the report which Sir Don Ryder makes will bear that in mind.
  Secondly, I hope that my right hon. Friend wil regard it as a major concern to maintain stability of employment within the industry as a whole. In certain cases there may need to be a continuation of the natural wastage which has been taking place over the last year or so. There are many people who have devoted their lives to the industry. They have worked within it for 20 or 30 years and will have difficulty in finding work elsewhere. One major result of Government assistance for the firm will be that many people in Oxford and elsewhere will have less fear for their future.
  If those two conditions are met, my constituents and many others who work in the industry will warmly welcome the offer of Government support that has been made.
  12 midnight.
  Mr. Tom King: I want genuinely to speak briefly. It is a great pity, when so many hon. Members wish to speak, and the time for the debate has been extended, that so few on either side have been able to take part, with the result that the Secretary of State is to answer relatively few questions on an extremely important topic. I support the motion, but not with any pleasure. I am sure that none of us is pleased to see a great company of this country in such a condition. The motion is necessary. I endorse what my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller.) re-emphasised—that this is not money to British Leyland but a guarantee of money from the clearing banks, at normal commercial rates of interest, which, if the guarantee is not called in, will cost the Government nothing. It gives a holding period while the review is undertaken.
  I fully support what my hon. Friend the Member for Henley (Mr. Heseltine) said about the needs which the review should meet. It is not going to be a pleasant review, as we all know. There is no secret magic formula which will protect the British motor industry from the problems facing the car industries of the world.

  1761
  The only formula which has protected British Leyland so far has been the number of strikes and the fact that it is so far behind production that it has not faced so immediately the cuts in demand now taking place in the world. There is still some demand for its cars.
  Any hon. Member trying to buy a British Leyland car over the last month or so will have experienced, as I have done, the greatest difficulty. I was promised a four-month delivery date. The hon. Member for Birmingham, Northfield (Mr. Carter) talked about how British Leyland should face foreign competition. We know that the keenest edge of foreign competition in the last two years has been in delivery, the fact that foreign competition has been able to deliver a car where the British industry has not been able to.
  This motion has come before the real impact of the crisis has hit our industry. The extent of the worldwide crisis has not yet hit British Leyland. Its problems are domestic—domestic in the financial state of the country, inflation, and the domestic circumstances of the company itself. It has yet to feel the real impact of the cutback in world demand for cars.
  The fact that we are in this situation now should bring home to all hon. Members that this is going to be an acutely difficult inquiry. My feeling is that every week it goes on it will be presented with figures for a lower and lower potential demand for cars from British Leyland.
  Today, the Chancellor of the Exchequer admitted that the recession is now deeper than he forecast three months ago and that his expectation for world trade is now lower than it was three months ago. The inquiry will find that the prospects for British Leyland will be substantially lower this year than last, and that the forecasts will be chipped down again and again. Every time the Secretary of State asks the inquiry, "How are you getting on?" he will be told, "We are revising the forecast of demand for next year." The impact on employment is obviously very serious.
  Mr. Peter Hordern: Whatever the report may conclude, it is essential that its conclusions be published, otherwise there can be no public accountability in the real meaning of the word.
  Mr. King: I perhaps do not go wholly with my hon. Friend on that point. I accept that publication of a summary of the essential outlines is sensible, but I understand the problem about handing over in a public report certain facts to the company's competitors.
  My concern is that the investigation and study may produce beyond peradventure the fact that British Leyland is really an unmanageable organisation. I do not so much criticise the management or the union leadership. I think that a lot of very good people find themselves in an impossible situation, one which needs examination to see whether it should be tackled. Companies of this size set up in this way will be seen as the dinosaurs of the 1970s. People will realise increasingly that real human industrial relations in the context of 1980 are not possible in the size of organisation represented here.
  Finally, I ask one specific question. There are two members of the IDAB on the study group. Did the IDAB support this measure? The Secretary of State is taking it under Section 8, and Section 8 requires the Secretary of State to consult the IDAB. Did the IDAB support him?
  12.5 a.m.
  Mr. Leslie Huckfield: Without casting reflection on you, Mr. Deputy Speaker, I find it incredible that we should debate a company which employs 200,000—and I have 20,000 constituents involved in one way or another in Coventry and in British Leyland—and that less than half of the two and a half hours allotted to the debate should be given to speeches from the back benches. I am asked to compress my remarks into three minutes—
  Mr. Janner: My hon. Friend is lucky.
  Mr. Leslie Huckfield: That may be because of my 20,000 constituents.
  Listening to the hon. Member for Henley (Mr. Heseltine), anyone would think it was unique that we should be trying to help save British Leyland. We have to realise that one of the most successful motor manufacturing companies in the world, Volkswagen, has been publicly-owned. We have to take note of the fact that one of the most successful motor manufacturing companies in Europe, Renault, is still publicly-owned. We have to remember

  1763
  that another of the most successful in Europe, FIAT, still has a sizeable public chunk. We are doing nothing unusual. We are simply following the example of what is happening throughout Europe—
  Mr. Heseltine rose—
  Mr. Huckfield: I shall not give way to the hon. Gentleman. I prefer to make my own speech.
  Mr. Heseltine: On a point of order, Mr. Deputy Speaker. The House is listening to the hon. Member for Nuneaton (Mr. Huckfield) realising that he is curtailing his remarks in a way which he does not wish to do and which we do not wish to make him do. Many hon. Members on both sides of the House have not had a chance to contribute to the debate. Is it in order for me to propose that this debate should continue after the time allotted to it? Would such a motion be acceptable to you?
  Mr. Deputy Speaker (Mr. Oscar Murton): I cannot at this stage make a decision on the matter.
  Mr. Huckfield: I can only take note of the generous interruption of the hon. Member for Henley. I am sorry that I mistook his intention in rising just now.
  Mr. Heseltine: Further to that point of order, Mr. Deputy Speaker. When you say that you cannot take a decision, is there any reason why I should not put such a motion so that this House might have an opportunity to consider the matter at greater length?
  Mr. Deputy Speaker: It is for the Chair to accept or reject a motion. But I am not prepared to make a decision at this moment.
  Mr. Huckfield: That leaves me about 30 seconds.
  The alternatives facing the company are that we can either inject a substantial sum of public money and, I hope, take over the company completely, or we can let the company fall into American hands and go, ultimately, exactly the same way—
  Mr. Janner: Or the Arabs.
  Mr. Huckfield: As my hon. and learned Friend says, or the Arabs—as General Motors, Ford and Chrysler, with investment decisions, men's jobs and even where men stand on the production line put completely in the hands of Detroit or Dearborn. If we start on that road, we end up with American multi-national corporations manufacturing cars not in Britain but in Spain or South-East Asia.
  Sir Don Ryder's inquiry team has to decide the kind of car industry that we are to have. Will it be a car industry which will compete only with BMW, Volvo, Mercedes-Benz and that type of car, or will it continue in the Austin-Morris range? These are the kind of concerns into which my right hon. Friend's inquiry will have to look.
  I hope that, whatever comes out of the inquiry, British Leyland will be a publicly-owned company with the Government and workers at last having a say in its affairs, because, on behalf of my constituents, I want the British car industry preserved.
  12.10 a.m.
  Mr. Christopher Tugendhat: This short debate is a fitting epitaph to the day that we have spent debating the economy, because a constant theme through that debate has been that the country has not yet fully recognised the depth of the crisis in which it finds itself.
  During the week when this great company, British Leyland, went to seek Government assistance, there were 11,000 men idle—not all on strike, but idle as the result of a strike—and pressure from the Cowley works for a £16 a week increase which would bring the main production rate up to £67·20.
  The danger that we see in Government assistance to British Leyland is that everyone in the company—management as much as men—will feel that they can sit back and relax, that everything will be safe, that jobs will be safe, that pay increases will be guaranteed, and that the expansion programme will go ahead without difficulty.
  I agree with the hon. Member for Coventry, North-West (Mr. Edelman) who, in a most interesting contribution, said that there is a danger, whenever there is Government intervention on this scale in a company of this kind, that it becomes

  1765
  a kind of Christmas stocking. We shall want to hear from the Secretary of State how he proposes to ensure that it is not a Christmas stocking, or, to take another of the analogies suggested by the hon. Member for Coventry, North West, a bottomless pit. Those who work for British Leyland, at whatever level, must realise that Government assistance on this scale is not a soft option. and that all the difficult problems and decisions that faced the company before it went to the Secretary of State remain now just as they did then.
  I particularly stress the importance of labour relations. The labour relations and industrial disputes record of British-Leyland has been very bad. One point not mentioned in the debate is that one achievement of the company in industrial relations has been the virtual elimination of piece-work and its replacement by a more logical system of payment. I think that we all recognise that the negotiations leading to that change were in themselves very difficult and complex and provoked —perhaps "precipitated" is a better word —a number of disputes. Now that the change has largely been carried through, it is to be hoped that industrial relations within the company will improve.
  It is fair to point out that, though there have been difficulties on the union side, the management has not sufficiently recognised the importance of industrial relations. This was demonstrated by the fact that Mr. Pat Lowry was invited on to the main board only in 1972. A man with his job ought to have been on the main board much earlier.
  The facts speak for themselves. There has been a loss of £92 million as a result of industrial disputes in the company's first six years and productivity, as the hon. Member for Coventry, North-West said, is among the lowest in the Western world.
  There is no doubt that the Government will become increasingly involved in the affairs of British Leyland. Therefore, it is essential that the inquiry should pay particular attention to industrial relations. If, as the Secretary of State suggested, the workers are to play a more prominent rôle in the management of the company, we must look for improvement in that direction.
  1766
  We must also look for improvement, given that the company is deeply in debt and living off the taxpayer, as it will be, for a degree of wage restraint which would not perhaps be necessary in a company which was not living off the taxpayer and was earning good profits.
  Experience in the past of companies which have gone to Governments of both parties—Rolls-Royce comes to mind immediately—shows that the willingness of trade unions to restrain wage demands, when a company is living off the taxpayer, has so far been unhappy.
  I hope that when the inquiry takes place and the Secretary of State becomes involved he will make certain that all sections of the company are consulted— middle management and upper management, quite as much as the trade unions —and that he will give sufficient weight to the opinions and ideas of the retail side of the motor trade. The retail side has a vast amount of capital tied up in the success or failure of the company and its opinions deserve to be taken into account.
  I draw the attention of the Secretary of State to the interesting point made by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) who is extremely knowledgeable about the motor industry. He mentioned the difficulty that has faced British Leyland in planning its investment in Europe while the uncertainty about this country's future in Europe remains.
  I hope, too, that the right hon. Gentleman will reconsider what he said about the publication of the report. We realise that some aspects of the company's affairs will have to remain secret. We realise that commercial information is at stake, but as much information as possible should be made available to this House, to the country and to the people who work in British Leyland if we are to form a reasonable judgment of the kind of decisions that the right hon. Gentleman takes.
  If the country is paying for British Leyland, and if the people working there are dependent upon it, this House, the country and the workers have a right to as much of that report as can conceivably be published.
  12.16 a.m.
  Mr. Benn: I hope that I may have the leave of the House to reply to the points that have been made.
  May I, in response to the argument that we should defer the matter because the debate has not been long enough, remind the House that we are debating and deciding something very real, namely, the issuing of guarantees with the authority of Parliament, and consequences would flow from not being able to do that. I hope the House will accept that we must reach a decision tonight.
  I have noted most carefully all the points that have been made, and I know that other hon. Members who would have liked to do so have not been able to contribute to the debate.
  It is not possible, and it would not be sensible to seek to anticipate the out come of the deliberations of the review team and of the unions, shop floor workers and management in British Leyland who, in my opinion, will be making a significant contribution to the study of the deep-seated problems of the firm. I do not see this is as an external study done in isolation subsequently to be imposed on the company by the agency of Government action.
  Mr. Rodgers: Would it be possible to convey that to the individual plants? There is great appreciation of the Government's action, but will there be discussions at local level in which the workers will be involved?
  Mr. Bean: It is the intention and desire of the Government that those who work in the plants, including those with shop floor responsibility and full-time trade union officials who represent the members, should not only have an opportunity, but should have an obligation, with their knowledge of the firm and their experience in it, to contribute constructively to a solution which the review team will have to find. There is no intention that this should be a secret, separate external examination with the results disclosed later to workers who would have had no part in making the recommendations.
  Mr. Janner: Will my right hon Friend bear in mind that many hon. Members who are waiting to speak on this subject are considerably worried because in our
  1768
  constituencies we have, for example, light engineering and other industries which depend on companies such as British Leyland for the livelihood and employment of their men? Will he take them into account in the inquiry and consult them and their workers in so far as that is possible so as to take their views into account when deciding what steps are to be taken?
  Mr. Benn: I appreciate the concern of my hon. Friend who represents workers in component and other factories in Leicester. I should be misleading the House and confusing the exercise if I were to suggest that Sir Don Ryder and his team would be undertaking a study of all aspects of the British motor industry, including its compenents firms.
  However, one of the factors we had in mind in making this proposal for a guarantee—as distinct from a receivership, which was canvassed and hinted at, though in fairness to the hon. Member for Henley it was not his view—was the disastrous effect that the company's failure would have upon supplies of components. I am very glad to have this opportunity to say that.
  It follows from what I have said that, although we are bound to have regard to proper commercial confidentiality in not publishing to the world every detail of the British Leyland company—which is the only large British-owned motor company, whose commercial security we are bound to protect—the maximum degree of disclosure now by the management to the workers, as well as to the team, would be highly beneficial. One of the greatest problems of industrial relations is that workers, because they are usually not given the facts relating to the company in which they work, are limited by the ignorance imposed upon them to confine themselves simply to wage bargaining because they are not able to participate in discussions about investment, export markets, and about the general strategy of the company.
  Although this is not the occasion on which to make the point, I see in this review an embryonic planning agreement developing in which workers, who have much to offer and who in my judgment have been attacked most unfairly in some of the speeches made this evening, might

  1769
  perhaps begin to be able to contribute towards the solution of those problems.
  Mr. Heseltine: So that the House is not limited by ignorance, will the Minister ensure that the summary published for this House to consider has the agreement of Sir Don Ryder?
  Mr. Benn: I have undertaken in my opening statement to publish a summary of the recommendations. If the hon. Gentleman is not satisfied with my answer, I can say that the reservation I made relates to disclosure of commercial matters and not to any desire on my part to withhold recommendations which might not find favour in the mind of the Government. I was referring solely to the need to preserve a degree of confidentiality. That will be understood, bearing in mind the quality of the men who have agreed to serve on the review body.
  Reference has been made to public ownership. If public money is to go into British Leyland there must and will be participation and accountability going with it. There is no question that that is right. That is the attitude we adopt.
  Listening to the debate, I wondered whether those hon. Gentlemen who made points concerning the attitude of workers in industry fully took on board the consequences of what they were saying. Many hon. Members spoke as if, somehow, the mystical experience of redundancy was an essential ingredient of redeployment and national recovery. One hon. Member spoke in medical terms of the need for death and rebirth. I utterly reject the idea that it is the duty of the House, or indeed of any industrial policy, to seek to bring about redundancy to obtain the necessary redeployment.
  Eight million people in Britain change their jobs every year. Even in 1971, which was a peak year for redundancies, there were only 370,000 redundancies. The idea is widely put abroad in the Press and elsewhere that somehow, unless evidence can be produced to show that blood has been shed in redundancy situations the nation is not applying its resources properly. That is a wholly Victorian notion which is entirely unacceptable to me and to the trade union movement. When men become redundant needlessly, as has happened, this is a major factor in creating restrictive practices throughout
  1770
  industry, for workers feel that they are treated solely as factors of production and will necessarily devote much of their time to defending their jobs. Since this point was made, let me say that plainly.
  Let me say something else about the references in the speeches of hon. Members opposite to motor car workers or the trade unions or trouble makers or shop stewards or whatever term they use in their arguments. Can any hon. Member recall any Press support ever being given to those involved in any dispute in the motor industry? Hon. Members who have visited the factories, as I have, and seen the track and the conditions under which motor cars are made know that, at its worst, this is the most boring and tedious work. Yet I cannot recall the grievances of motor car workers ever being described fairly in the popular Press. There is comment only when matters come to dispute. This applies equally to the unfair criticism of management, who have a formidable task in trying to get good production out of these conditions.
  If no one in the party opposite or in the popular Press is prepared to turn his mind to the real problems of motor car production and what it does to men's lives, then it is no surprise that some of the disputes should be the means by which these matters are brought to the attention of the community. I say this with deep feeling because I believe that much of what is wrong with Britain lies in the sort of debate we have had tonight, in speeches about industry which are not coming from people with industrial experience—who are ready to attack— [HON. MEMBERS: "So are you."] I am not attacking. I have not attacked the management tonight. I said at the beginning that I did not believe that the heroes and villians approach to the problems of Leyland and British industry is the right approach.
  Those who work in the industry, whether industrial workers or shop stewards or full-time officials or technical people or salaried management, right up to board level in British Leyland, would not think very highly of a debate which sought to make this problem the occasion for searching for scapegoats— [Interruption.] This was a great element in the debate, in which the hon. Members did not participate in any way.

  1771
  Many of my hon. Friends have brought to my attention the anxieties which have been brought to their attention by the representatives of the workers who come to the House. It is manifestly true, first, that productivity has been low in the British motor industry and British Leyland because of a lack of investment in the past; second, that productivity can and must be increased; third, that the key to the economy of the West Midlands lies in and around the motor industry; fourth, that public ownership is the right way of dealing with public participation,
  Question accordingly agreed to.
  where it is required; fifth, that there must not be an attempt to handle this problem externally, without involving those who work in the industry, so that their skill can be brought into play—
  Mr. Tom King: What about the IDAB?
  Mr. Benn: I am grateful to the hon. Member. The IDAB had this matter reported to it.
  Question put:—
  The House divided: Ayes 149, Noes 13.

  Division No. 41.]

  AYES

  [12.30 a.m

  Allaun, Frank

  Fernyhough, Rt Hon E.

  Morris, Alfred (Wythenshawe)

  Archer, Peter

  Fitt, Gerard (Belfast)

  Murray, Ronald King

  Armstrong, Ernest

  Flannery, Martin

  Newens, Stanley

  Ashton, Joe

  Fletcher, Raymond (Ilkeston)

  Noble, Mike

  Atkinson, Norman

  Ford, Ben T.

  Oakes, Gordon

  Bagier, Gordon A. T.

  Fowler, Gerald (The Wrekin)

  O'Malley, Brian

  Bates, Alf

  Garrett, John (Norwich S)

  Ovenden, John

  Bean, Robert E.

  George, Bruce

  Paisley, Rev Ian

  Benn, Rt Hon Anthony Wedgwood

  Gilbert, Dr John

  Palmer, Arthur

  Bennett, Andrew (Stockport N)

  Golding, John

  Parry, Robert

  Bishop, Edward

  Gould, Bryan

  Pendry, Tom

  Blenkinsop, Arthur

  Graham, Ted

  Richardson, Miss Jo

  Brown, Hugh D. (Glasgow, Pr)

  Grant, George (Morpeth)

  Rodgers, George (Chorley)

  Buchanan, Richard

  Grant, John (Islington C)

  Rooker, J. W.

  Callaghan, Jim (Middleton & P)

  Hamilton, James (Bothwell)

  Roper, John

  Campbell, Ian

  Hardy, Peter

  Ryman, John

  Carmichael, Neil

  Harper, Joseph

  Sandelson, Neville

  Carson, John

  Harrison, Walter (Wakefield)

  Shaw, Arnold (Redbridge, Ilf)

  Carter, Ray

  Heffer, Eric S.

  Silkin,Rt Hon John (Lewish)

  Carter-Jones, Lewis

  Horam, John

  Smith, John (N Lanarkshire)

  Cartwright, John

  Hoyle, Douglas (Nelson)

  Spearing, Nigel

  Clemitson, I. M.

  Hughes, Rt Hon C. (Anglesey)

  Stallard, A W.

  Cocks, Michael (Bristol S)

  Hughes, Mark (Durham)

  Stewart, Rt Hon Michael (H'smith F)

  Colquhoun, Mrs Maureen

  Hughes, Robert (Aberdeen N)

  Stoddart, David

  Concannon, J. D.

  Irving, Rt Hon S. (Dartford)

  Stott, Roger

  Conlan, Bernard

  Jackson, Miss Margaret (Lincoln)

  strang, Gavin

  Cook, Robin F. (Edin C)

  Janner, Greville

  Taylor, Mrs Ann (Bolton W)

  Corbett, Robin

  Judd, Frank

  Thomas, Ron (Bristol NW)

  Craigen, J. M. (Glasgow, M)

  Kinnock, Neil

  Tierney, Sydney

  Crawshaw, Richard

  Lamborn, Harry

  Tinn, James

  Cryer, Bob

  Lamond, James

  Tomlinson, John

  Cunningham, Dr. J. (Whiteh)

  Latham, Arthur (Paddington)

  Urwin, T. W.

  Dalyell, Tam

  Leadbitter, Ted

  Wainwright, Edwin (Dearne V)

  Davidson, Arthur

  Loyden, Eddie

  Walker, Terry, (Kingswood)

  Davies, Bryan (Enfield N)

  Luard, Evan

  Ward, Michael

  Davies, Denzil (Llanelli)

  Lyons, Edward (Bradford W)

  Watkinson, John

  Dormand, Jack

  McCartney, Hugh

  Watt, Hamish

  Douglas-Mann, Bruce

  McElhone, Frank

  Wellbeloved, James

  Duffy, A. E. P.

  MacFarquhar, R.

  Welsh, Andrew

  Dunlop, J.

  Mackenzie, Gregor

  White, Frank R. (Bury)

  Dunwoody, Mrs Gwyneth

  Maclennan, Robert

  White, James (Glasgow, P)

  Edelman, Maurice

  McMillan, Tom (Glasgow C)

  Williams, Rt Hon Shirley (Hertford)

  Edge, Geoffrey

  Madden. Max

  Wilson, William (Coventry SE)

  Ellis, John (Brigg & Scun)

  Marks, Ken

  Ellis, Tom (Wrexham)

  Marquand, David

  Wise, Mrs. Audrey

  English, Michael

  Marshall, Dr Edmund (Goole)

  Woodall, Alec

  Ennals, David

  Mellish, Rt Hon Robert

  Woof, Robert

  Evans, John (Newton)

  Miller, Hal (Bromsgrove)

  Young, David (Bolton E)

  Ewing, Harry (Stirling)

  Miller, Dr M. (E. Kilbride)

  TELLERS FOR THE AYES

  Eyre, Reginald

  Mitchell, R. C. (Soton, Itchen)

  Mr. Laurie Pavitt and

  Faulds, Andrew

  Molloy, William

  Mr. Donald Coleman.

  NOES

  Brotherton, Michael

  Morgan-Giles, Rear-Admiral

  Winterton, Nicholas

  Budgen, Nick

  Nelson, Anthony

  Hooson, Emlyn

  Penhaligon, David

  TELLERS FOR THE NOES

  Howell, Ralph (North Norfolk)

  Powell, Rt Hon J. Enoch

  Mr. John Biffen and

  Howells, Geraint (Cardigan)

  Smith, Cyril (Rochdale)

  Mr. Ian Gow.

  Lawrence, Ivan

  Tebbit, Norman

  Resolved,
  That this House authorises the Secretary of State to pay or undertake to pay by way of financial assistance under section 8 of the Industry Act 1972 in respect of a guarantee or guarantees to be given to the bankers of British Leyland Motor Corporation Limited and any of its subsidiaries covering borrowing facilities made available by the bankers to those companies, insofar as the amount paid or undertaken to be paid under the guarantee or guarantees is in excess of £5 million but does not exceed £50 million.

  WEALTH TAX
  Ordered,
  That Sir John Hall be discharged from the Select Committee on Wealth Tax and that Mr. Peter Rees be added to the Committee.— [Mr. Walter Harrison.]

  STANDING COMMITTEE ON STATUTORY INSTRUMENTS
  Motion made,
  That Standing Order No. 73A (Standing Committee on Statutory Instruments) be amended as follows:—
  Line 41, after the word 'hours' insert the words '(or, in the case of an instrument or draft instrument relating exclusively to Northern Ireland, two and a half hours)'.—Mr. Walter Harrison.]
  Rev. Ian Paisley: On a point of order, Mr. Deputy Speaker. Is it in order for us to discuss this motion?
  Mr. Deputy Speaker (Mr. Oscar Murton): No, it is not exempted business. It will not be in order to debate it.
  Mr. J. Enoch Powell: Further to that point of order, Mr. Deputy Speaker. As it was difficult to hear what you said, I wonder whether you would tell the House whether we are on the motion dealing with Statutory Instruments or the motion dealing with Public Accounts.
  Mr. Deputy Speaker: We are now on the motion dealing with Statutory Instruments. The question has not yet been proposed. Does the right hon. Gentleman wish to speak?
  Mr. Powell: I await your proposing the motion in order to speak to it.
  Mr. Deputy Speaker: Is the right hon. Gentleman desiring to object to the order?
  1774
  If he is. the question cannot be debated now.
  Mr. Powell: Object.

  PUBLIC ACCOUNTS
  Ordered,
  That Mr. Guy Barnett, Mr. Richard Buchanan, Mr. Edward du Cann, Mr. Cant, Mr. A. P. Costain, Mr. David Crouch, Mr. Denzil Davies, Dr. John Gilbert, Mr. Peter Hordern, Mr. James Lamond, Mr. John Mac-Gregor, Mr. John Moore, Mr. Maurice Orbach and Mr. David Price be members of the Committee of Public Accounts.
  Ordered,
  That the members of the Committee of Public Accounts nominated this day shall continue to be members of the Committee for the remainder of this Parliament.
  Ordered,
  That this be a Standing Order of the House. —[Mr. Walter Harrison.]
  ADJOURNMENT
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dormand.]

  HONG KONG
  12.41 a.m.
  Sir Paul Bryan: I shall be visiting Hong Kong in January. I am particularly glad to have this opportunity to hear the right hon. Gentleman's views on various topical subjects before I go. As the right hon. Gentleman's noble Friend, the Under-Secretary of State, is also due to visit the colony shortly, this debate may also provide an opportunity for his colleague in this House to express the Government's attitude to Hong Kong's problems in advance of his arrival.
  From time to time Hong Kong comes under a wave of criticism. Such criticism is almost always based on failure to recognise that all economic thinking there is related to one basic reality—its dependence on foreign trade.
  Hong Kong is almost wholly dependent on imported food, it produces no industrial raw materials, and its domestic market is not big enough to absorb more than a small proportion of its industrial production. Food is imported from

  1775
  China, raw materials—textile fibres and plastics—largely from Japan. Hong Kong's processing industries use machinery imported from all over the world, and 80 per cent. of their finished products—predominantly textiles and clothing, electrical goods and plastic products—are exported mainly to the United States and the EEC.
  This dependence on foreign trade leads inevitably to certain clear-cut economic policies. Due also to its origin as a trade entrepôt for China, Hong Kong believes in the virtues of free enterprise and free trade: low import duties, low taxation, unrestricted capital movements and equal treatment of locally based and foreign operations.
  Firm and constant adherence to these policies has led to one of the most remarkable phenomena in history—the sevenfold growth in 25 years, on a tiny, inhospitable patch of this world, of a community from 600,000 to 4·2 million people. Let me emphasise, too, that the bulk of these 4 million people came to Hong Kong, often in the face of great hardship, of their own free will, and they remain there of their own free will.
  Critics may say that these policies of low taxation and free enterprise have made the rich too rich. What they certainly have done is to attract investment from all over the world, resulting in highly efficient industry which alone can give good employment and a good living to this growing population. So these policies are the very reason for the existence of Hong Kong and its community. The prosperity that they have brought has been the main cause of the growth of the community.
  This mushroom growth has in turn been the cause of huge social problems and it is to these that I should like to address my speech tonight.
  I quote the Governor's speech to the Legislative Council on 16th October this year:
  "In the last quarter century, life in Hong Kong has been dominated by the way in which the growth in population outstripped the capacity of any government to provide for residents and immigrants alike some of the basic infrastructure of life. But the problem was faced and very great progress was made. So much so that two years ago your Government concluded that the time
  1776
  had come when it would draw up programmes to make an end to these deficiencies forced on Hong Kong in the past and to do so within a measurable period. As a rough guide we set ourselves the time-span of a decade."
  I pay particular tribute to the approach of Sir Murray Maclehose, the governor, and his team to these social problems. Anyone who thinks of Hong Kong as a purely materialistic, get-rich society and nothing else should read the governor's mammoth "State of the Nation" speech. Three-quarters of this speech is devoted to the plans for the social betterment of those who live their lives in the colony.
  By now these long-term plans for housing, social welfare, education, medical and health services, are well under way. I shall be specially interested to see something of them during my visit.
  Housing has been one of the biggest problems and biggest achievements in Hong Kong. What has been done is unique in the Far East, but the problems remain formidable. The plans of the new housing authority look like transforming the situation within the next 10 years. I should like to know from the Minister whether these plans are affected by the current downturn in trade, which Hong Kong shares with the rest of the world.
  The education services have not been able to keep up with the needs of the rocketing population. The new White Paper gives real hope that this will be remedied. I find the plans for technical education and polytechnic and industrial training particularly encouraging and necessary, especially in a society that can prosper only by consistently maintaining a technical lead in industry.
  To the outsider, one of the less creditable sides of the Hong Kong scene would seem to be its crime and corruption record. This problem is being tackled with a will. There has been a real breakthrough in recruitment for the police. Police techniques and training have been improved. The idea of mobilising people in neighbourhoods to help each other and the police to deter crime seems full of promise and, if successful, might well be copied in other countries.
  Crime figures nevertheless are still rising. I must warn the Minister of State that when his colleague visits Hong Kong he will meet a very strong pressure to

  1777
  reactivate the death penalty. One cannot generalise about the deterrent effects of capital punishment. It differs in varying societies. The people of Hong Kong seem almost unanimous in their belief that it would have a deterrent effect there.
  Will the Minister say a word about the mass transit railway? This has every prospect of being one of the most remarkable engineering feats in the world. It was, therefore, naturally a disappointment when the contract was not won by the British consortium. The main reason for the success of the Japanese tender was the absence of an escalation clause. This seemed remarkable at the time but quite incredible now in the face of current Japanese inflation. Do the Japanese still maintain their original tender? If so, Hong Kong has certainly got a bargain.
  The Minister will find a considerable sense of grievance among textile manufacturers regarding the EEC generalised scheme of preferences. A situation in which preferences in the British economy are given to Hong Kong's competitors but not to Hong Kong is quite impossible to explain or to justify. The exclusion of footwear has recently been removed but this is of small importance. I hope that the Government are making a supreme effort to negotiate the inclusion of textiles.
  I appreciate that the Minister of State will not be able to deal with all my questions in 10 minutes tonight, but I should be grateful if those he is unable to answer orally could be answered by letter before I go to Hong Kong next month. There will be concern at the prospect of paying a higher share of defence costs, as foreshadowed in the latest defence review. The general assumption that this is a highly prosperous community well able to pay out more is not valid in today's conditions. The economy is sound. Indeed, we in this country could take some lessons in how Hong Kong has kept its economy sound in the face of worldwide inflation, shortage of material and depressed export markets. These economic difficulties coincide with quite exceptional capital expenditure necessary to carry out the social programmes I have mentioned. For these much additional finance by foreign loans and other means will have to be found. Now, therefore, would be a par-
  1778
  ticularly unfortunate time to be saddled with a greatly increased defence bill.
  I hope that the Minister of State will enjoy his first visit to Hong Kong. I believe that what will impress him most are the people. These people, with their ability, their ingenuity, realism and persistence, are the principal asset of Hong Kong. They are the explanation for its success and its hope for the future.
  12.53 a.m.
  Mr. Philip Goodhart: I am grateful to my hon. Friend the Member for Howden (Sir P. Bryan) and to the Minister of State for allowing me to intervene in the debate.
  I wish to raise the question of the fate of refugees from China in Hong Kong. There have been reports in the Press of an agreement with the Peking Government that newly-arriving refugees from China who are apprehended by the Hong Kong police are handed back straight away to the Chinese Communist authorities. I know that the flow of refugees causes grave problems for the Hong Kong administration, but as my hon. Friend rightly reminded us, modern Hong Kong was built by refugees.
  I hope that the Minister of State will confirm that we have not agreed automatically to hand refugees back for punishment at the hands of the Communist authorities from whom they have tried to escape, because such a course is inhuman and contrary to human rights.
  12.54 a.m.
  Mr. Hal Miller: As one who has spent half of the last quarter century in the service of the Hong Kong Government, may I urge the Minister to explain to my hon. Friend the Member for Beckenham (Mr. Good-hart) that it was always the practice during that period to return illegal entrants whence they came? There has always been a quota for the entry of those of Cantonese origin into Hong Kong as part of the original agreement dating back to the cession of the territory and the lease of it. Will the Minister of State confirm that the community of Hong Kong is in no shape to sustain an uncontrolled volume of immigration because of the great social problems to which my hon. Friend for Howden (Sir P. Bryan) referred?
  12.55 a.m.
  The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): I am grateful to the hon. Member for Howden (Sir P. Bryan) for raising the question of the United Kingdom's largest remaining dependency. I was glad to hear that he will be visiting Hong Kong. I am sure that as chairman of the Anglo-Hong Kong Parliamentary Group he will have a warm welcome. We look forward to hearing his impressions when he returns. It will be interesting for him to compare views with those of my noble Friend Lord Goronwy-Roberts, who is visiting Hong Kong shortly before he goes.
  Hong Kong's population has grown from 600,000 in 1945 to 4¼ million today. The overwhelmingly Chinese population have chosen to live in Hong Kong of their own free will. This has been to the benefit of all. Up to this year real wages have increased by about 5 per cent. a year over the last 10 years and are now the highest in the region outside Japan.
  The hon. Gentleman painted a glowing picture of the situation in Hong Kong, but it would be unwise to underestimate some of the serious problems. I am certain that he will become aware of them on his visit next month. Rapid expansion has brought congestion and grave social problems. In parts of Kowloon the population is over 400,000 to the square mile, 10 times the rate in Tokyo. There has been a grave shortage of housing. In the early 1960s there was an overwhelming squatter problem, which has even now not been completely resolved. Education and health services have had to be continuously expanded to meet the demand.
  The Hong Kong Government's social programme, which started in 1972, is a 10-year programme to provide satisfactory living standards for all. It is an ambitious programme designed to meet urgent human needs.
  As with so many other countries, world economic problems in the past year have posed great difficulties for Hong Kong, which is totally dependent on trade Exports are down this year compared with last year. The Government are faced with a need to raise new revenue, perhaps with new taxation, to keep the social programme going. Real wages have declined by about 12 per cent. this year, and future prospects are still doubtful. In this situation there may have to be
  1780
  some review and rephasing of the social programme, but the Governor, who is now on a visit to London, has confirmed that the social programme will go forward.
  The hon. Gentleman asked about the housing programme. The Hong Kong Government already house 1·56 million people, which is 38 per cent. of the total population. The 10-year housing plan aims to provide housing for an additional 1·8 million. The broad objective is to provide by 1984 acceptable self-contained accommodation for every family in Hong Kong. It is a massive programme by any standard. We all hope that it will continue.
  As for the health and medical programme, the main proposal in the 1974 White Paper is a target of 5·5 hospital beds per thousand population by 1983. At present there are 4·1 per thousand. This compares with about nine per thousand in the United Kingdom.
  Expenditure on social welfare should increase by about 80 per cent. between 1974 and 1978. This will be through a continued and expanded public assistance scheme, disability and infirmity allowances, and emergency relief.
  The hon. Gentleman referred to the new 10-year education programme announced in October 1974. The main objective is to provide by 1979 nine years' subsidised education for every child up to the age of 14. In the senior secondary classes the aim is to provide places for 40 per cent. of the 15–16 year age group by 1979. This programme will remove one of the main criticisms of the educational system in Hong Kong, that children who have completed their primary schooling at the age of 12 have been left in limbo because there were no secondary school places for them and because they could not legally start work in industrial undertakings until the age of 14.
  Recently there has been interest on both sides of the House in labour conditions. Determined efforts have been and are now being made to raise general labour standards by improvements in workmen's compensation, factory safety, paid holidays, severance pay and reduced hours of work. The legislation is backed up by a much strengthened inspectorate. Much remains to be done, but much has been achieved.

  1781
  The employment of children under 14 in industry has long been a problem and last November a large-scale programme began to provide every child under 14 with an identity card complete with photograph. When that is complete, I hope we shall be able to say that that is one social problem of Hong Kong that has been solved.
  Two key pieces of legislation have been enacted this year: first protection of workers against acts of anti-union discrimination; secondly, severance pay for workers who become redundant or are discharged through no fault of their own. The average industrial daily wage of about £2 a day in Hong Kong compares, for example, with 200 million people in India with a monthly wage of less than £2. But Hong Kong has also had its inflationary problems. The retail price index increased by 15 per cent. in the year ending June 1974, and with wages relatively static there has been a decline in real wages. Employment, however, has continued at a high level, although there has been some decline in employment over the past 12 months—a reduction of about 28,600 jobs in industry.
  There has also been interest in Hong Kong's adherence to ILO Conventions. As at 1st June 1974, 20 conventions had been declared fully applied to Hong Kong and 10 had been declared applied with some modification. For purposes of comparison with ILO Member States in the area, 31 conventions had been ratified by Japan, 18 by the Philippines, eight by Malaysia, eight by Indonesia, and 21 by Singapore.
  As has been said, crime is a major factor in Hong Kong.
  Mr. James Lamond: My right hon. Friend has given an impressive recital of achievements in Hong Kong, many of which I saw when I visited the area last summer. I join hon. Members opposite in their admiration of what has been achieved. What worries me is the narrowly-drawn membership of the Legislative Council. Will my right hon. Friend try to find time in his reply to say something about any ideas he has to encourage broadening the membership of the Legislative Council to include, perhaps, some people from the lower levels of working life in Hong Kong?
  Mr. Ennals: That matter is under consideration. There is no doubt that it would be of advantage to Hong Kong if it had a Legislative Council which was more representative of various social groupings in the colony, though there are considerable difficulties about constitutional changes for reasons which I think my hon. Friend, as well as hon. Members opposite, will recognise.
  When my hon. Friend intervened I was about to say a few words about the crime problem. The 1,500 mutual aid committees set up by the Hong Kong Government are an important element in fighting the wave of violent crime but they are not a substitute for an effective police force. Progress has also been made in the reorganisation of the police force. I am glad that the hon. Member for How-den referred to that.
  Although the death penalty still exists under Hong Kong law, no sentence of death has been carried out since 1966. There is no doubt that public opinion in Hong Kong still strongly favours the implementation of the death penalty in extreme cases. This is a difficult problem which we are examining with the Governor. The Member for Bromsgrove and Redditch (Mr. Miller), in an intervention, mentioned that immigration from China into Hong Kong has increased considerably in recent years. Estimated figures for both legal and illegal immigration were 74,000 in 1973, compared with 37,000 in 1972 and less than 13,500 in 1971. The Chinese Government have since taken some steps to reduce the number of legal immigrants entering Hong Kong, but the overall figures are still a matter for concern.
  The arrangements for the return of illegal immigrants to China are generally a revival of procedures which fell into abeyance in 1967. The absence of their application has in recent years led to substantial increases in illegal entry. Estimates are 10,500 in 1971, 17,000 in 1972 and 18,000 in 1973. These numbers greatly added to the Hong Kong Government's task of improving social conditions in the Colony. I can assure the hon. Gentleman that all cases are considered on an individual basis before any action to return is taken. Full account is taken of any special circumstances or cases of genuine hardship.

  1783
  We are committed to seeking substantial improvements for Hong Kong in the enlarged EEC. Hong Kong already benefits under most of the Community's Generalised Scheme of Preferences. In terms of total duty remitted, only Yugoslavia receives greater benefit than Hong Kong. The scheme will be extended in 1975 to cover some Hong Kong footwear, and we intend to press for the extension of the scheme to Hong Kong's textiles in 1976.
  Hong Kong will also be negotiating with the Community for the conclusion of a bilateral agreement for the regulation of Hong Kong's textile exports under the GATT Multi-Fibre Textile Arrangement. We intend to use our influence as far as possible towards the achievement of
  1784
  greater liberalisation for Hong Kong's textile exports in keeping with the spirit of the Multi-Fibre Arrangement.
  In the short time available I have sought to answer most of the questions. I shall look carefully at HANSARD to see whether there are any questions that I have not covered. I feel that the visit of my noble Friend the Under-Secretary of State and that of the hon. Gentleman will be much appreciated in Hong Kong, and I am sure the House will be interested in such reflections as the hon. Gentleman has when he returns from the colony.
  Question put and agreed to.
  Adjourned accordingly at eight minutes past One o'clock.

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  Diesel Engines
  Diesel Engines
  British Steel Corporation
  British Steel Corporation
  Saudi Arabia
  Saudi Arabia
  Aerospace Exports
  Aerospace Exports
  Printing
  Printing
AGRICULTURE, FISHERIES AND FOOD
  Lamb and Mutton
  Lamb and Mutton
  Veterinary Service
  Veterinary Service
  Game Exports
  Game Exports
  FAMILY COURTS
  FAMILY COURTS
  FINER REPORT
  FINER REPORT
  DEFENDANTS (CONDITIONAL DEPORTATION)
  DEFENDANTS (CONDITIONAL DEPORTATION)
DEFENCE
  Training (Craftsmen)
  Training (Craftsmen)
  Army
  Army
EDUCATION AND SCIENCE
  Immigrant Children
  Immigrant Children
  Expenditure
  Expenditure
  Truancy
  Truancy
  Research Grants (Scottish Universities)
  Research Grants (Scottish Universities)
  School Leaving Age
  School Leaving Age
  Further Education
  Further Education
  Schools (Governors and Management)
  Schools (Governors and Management)
  School Buildings (Safety)
  School Buildings (Safety)
  Schoolchildren (Bus Fares)
  Schoolchildren (Bus Fares)
  Nursing Assistants
  Nursing Assistants
  Finer Report
  Finer Report
  Teachers' Pay
  Teachers' Pay
  Royal Holloway College
  Royal Holloway College
EMPLOYMENT
  Building Industry (Cornwall)
  Building Industry (Cornwall)
  Industrial Accidents
  Industrial Accidents
  Redundancies
  Redundancies
  Finer Report
  Finer Report
  Local Authorities (Cornwall)
  Local Authorities (Cornwall)
  Ceredigion
  Ceredigion
  Collective Dismissals
  Collective Dismissals
  Training (Craftsmen)
  Training (Craftsmen)
  Tourism
  Tourism
ENERGY
  Gas and Electricity
  Gas and Electricity
  Prices
  Prices
  Energy Saving Investment
  Energy Saving Investment
  Prices (EEC Countries)
  Prices (EEC Countries)
  Consultants
  Consultants
  Power Stations (Waste Heat)
  Power Stations (Waste Heat)
  Coalfields (Scotland)
  Coalfields (Scotland)
  Conservation
  Conservation
HOME DEPARTMENT
  Bennion v. Hain (Private Prosecution)
  Bennion v. Hain (Private Prosecution)
  Chileans
  Chileans
  Deported Persons (Costs)
  Deported Persons (Costs)
  Legal Aid (Foreigners)
  Legal Aid (Foreigners)
  Television (UHF Coverage)
  Television (UHF Coverage)
  Illegal Immigration
  Illegal Immigration
  Charities (Exemption from Registration)
  Charities (Exemption from Registration)
  Finer Report
  Finer Report
HOUSE OF COMMONS
  Stationery
  Stationery
  Parliamentary Questions
  Parliamentary Questions
NORTHERN IRELAND
  Republic of Ireland Citizens (Voting Rights)
  Republic of Ireland Citizens (Voting Rights)
  Teachers' Pay
  Teachers' Pay
  OVERSEAS DEVELOPMENT UNESCO
  OVERSEAS DEVELOPMENT UNESCO
TRADE
  European Patents Office
  European Patents Office
  Airline Users' Committee
  Airline Users' Committee
  Shipbuilding (Lump Labour)
  Shipbuilding (Lump Labour)
  Civil Aviation Authority Employees
  Civil Aviation Authority Employees
WALES
  Day Centres
  Day Centres
  Lands
  Lands
  Council House Sales
  Council House Sales
  Speech Therapy
  Speech Therapy
  Royal Welsh Agricultural Society
  Royal Welsh Agricultural Society
  Fishing Industry
  Fishing Industry

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

EEC: ALTERNATIVES TO MEMBERSHIP
Lord O'HAGAN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will publish a White Paper describing the alternatives to membership of the EEC.
The PARLIAMENTARY UNDERSECRETARY of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord GORONWY-ROBERTS): My Lords, my right honourable friend the Foreign and Commonwealth Secretary has said that a decision on the conduct of the referendum is likely to be taken in January. I should not like to anticipate anything which may then be announced. But the point made by the noble Lord will of course be fully borne in mind.
Lord O'HAGAN: My Lords, does the noble Lord remember what he said in this House on Monday, which was that the position must be put fully before the people? If Her Majesty's Government are thinking about the implications of withdrawal from the EEC, as I understand they are, will he give an undertaking that the thoughts on the implications of withdrawal from the EEC will be shared with the British people before they decide on this question through the ballot box?
Lord GORONWY-ROBERTS: My Lords, I not only recall what I said on Monday, which is a reasonably recent date to recall, but reaffirm it; and I also give the assurance that this Government, especially, will share their thoughts in all
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particulars with the people when the appropriate time comes.
Baroness TWEEDSMUIR of BELHELVIE: My Lords, does the Minister recall that in his speech on Monday he said that it was not necessary to lay out the alternatives to membership of the European Community, because the Government hoped to recommend that Britain should remain a member?
Lord GORONWY-ROBERTS: My Lords, with respect, I wonder whether I said quite that. But I take the point of the noble Baroness, which is that we are renegotiating with a genuine and firm intention to find reasons to stay in. Naturally, in the process of the study and promotion of renegotiation, all possible aspects of the matter are also being studied, including alternatives.
LORD HALE: My Lords, among the possibilities would the noble Lord also consider whether a financial union with Jersey, Guernsey, the Isle of Man and the Cayman Islands might provide very sub-stantial financial support for the pound, either within or without the Common Market?
Lord GORONWY-ROBERTS: My Lords, my noble friend certainly has a point; but he might expand that already large list.

POST OFFICE: BIRMINGHAM SERVICE
2.40 p.m.
Lord INGLEWOOD: 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 on what date the automatic parcel letter tray and packet handling system installed for the Birmingham post office was completed and ready for use; when it was brought into full operation; and what is the estimated annual saving expressed both in terms of cash and in manpower.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (LORD BESWICK): My Lords, these are operational matters for which the Post Office

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is responsible. I am therefore asking its Chairman to write to the noble Lord.
Lord INGLEWOOD: My Lords, is the noble Lord aware that that is rather a weak Answer? Could he not give some indication that the Post Office is at least not hostile to innovation in the way that is widely believed as a result of their handling—and some of their men's handling—of this important piece of new equipment?
Lord BESWICK: My Lords, I am sorry that the noble Lord thinks that I gave a weak Answer. It happens to be a truthful one. I do not accept the deduction he draws that, because a letter tray in Birmingham post office is not working, the Post Office is hostile to modern equipment.

STATUS OF ANGUILLA
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 whether they have now reviewed the status of Anguilla in fulfilment of the promise given in 1971 to do so within three years.
Lord GORONWY-ROBERTS: My Lords, this review is in hand, following a visit in September by my honourable friend the Parliamentary Under-Secretary to St. Kitts and Anguilla where she had discussions with the Premier, the Leader of the Anguilla Council and other leading citizens.
Lord BROCKWAY: My Lords, I should like to thank the Minister. Is not this matter now rather urgent in view of the attitude of Mr. Webster and the elected Council in Anguilla? Would Her Majesty's Government consider bringing together a much broader representation of Caribbean countries, so that they can exert their pressure for a solution to this problem and, indeed, to the problem of other islands?
Lord GORONWY-ROBERTS: My Lords, we do not doubt the urgency. We think, however, it is more important that
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a general consensus as between these islands should be achieved before we finally move to a solution. As to the suggestion made by my noble friend about a broader representation in a possible meeting or conference, I am sure my right honourable friend will bear that fully in mind.
Lord SLATER: My Lords, would my noble friend agree that adopting the approach suggested by my noble friend in his supplementary question, which is to bring pressure, may not have the anticipated effect? Would it not be better to resist such pressure until these people have had more time to give consideration to what is involved?
Lord GORONWY-ROBERTS: My Lords, if I may say so, those are very wise words indeed. We are endeavouring to achieve a consensus which will lead to a solution that is durable. It would almost be possible to impose a solution, and then be saddled with continuing difficulty and very dangerous situations in the future. On this question a little more time is well spent.
Earl COWLEY: My Lords, does the noble Lord accept the commitment made by my right honourable friend on 16th July 1971 in another place, that the views and wishes of the Anguillans will be paramount?
Lord GORONWY-ROBERTS: Yes, my Lords, entirely.
Lord HALE: My Lords, would the noble Lord bear in mind that, without the aid of computers and modern communications, the Founding Fathers laid the foundations of the United States in rather less time than has been taken to consider the future of Anguilla, and that it has proved a fairly durable institution?
Lord GORONWY-ROBERTS: No doubt, my Lords—but they did not have to contend with computers.

ROME CONFERENCE
2.44 p.m.
The Lord Bishop of COVENTRY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are proposing to take on the findings of the recently held Rome Conference.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, Her Majesty's Government are examining the detailed recommendations of the Conference with a view to organising a maximum British response. We hope to be represented on the new World Food Council and the Committees on Food Security, Aid Policies and Programmes when they are established. We also intend to participate fully in the UN Secretary General's proposed meeting about the International Fund for Agricultural Development.
The Lord Bishop of COVENTRY: My Lords, while being grateful for the courteous reply of the noble Baroness, in view of the gravity of the situation and the fact that world famine in the Third World may hit us within the next four or five months I doubt whether that Answer is really satisfying. I should like to ask one supplementary question which is in two parts. First, what steps are Her Majesty's Government taking to make the people of this country more aware of the need to grow more food in this country, thereby saving the need to import foodstuffs required for countries of the Third World; and secondly, what steps are Her Majesty's Government taking to publicise the necessity to prevent wastage of food in this country?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, while entirely sharing the right reverend Prelate's concern about the desperate situation concerning the world food shortage, I think both his questions run rather wide of his original question. Her Majesty's Government are doing everything they can to help production of food in this country. I am glad to say that, while we are doing that, and while we import so much of our own food, we are giving £18 million through our EEC contribution to world food aid and £1·8 million in direct contribution to the World Food Programme.
Lord BROCKWAY: My Lords, while welcoming the Minister's reply and Her Majesty's Government's participation in
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this series of conferences, may I ask whether the issue of famine in the world now is so urgent that there is a danger that a long row of conferences may delay a solution or a contribution and may come before the point of the immediate urgency?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I have some sympathy with the views of my noble friend. Nevertheless, this Conference was largely asked for by the developing countries. We felt it right to take part. Her Majesty's Government made a significant contribution to the Conference, particularly in calling a special Commonwealth Conference of Ministers responsible for development, and also in making specific recommendations to the working of the Conference itself.
Lord HAILSHAM of SAINT MARYLEBONE: My Lords, while noting the statement of the noble Baroness that the Government are encouraging to the best possible advantage the production of food in this country, may I ask whether the Government realise that the farmers of this country require even more encouragement?
Baroness LLEWELYN-DAVIES of HASTOE: Yes, my Lords.
Earl COWLEY: My Lords, could the noble Baroness say what will be the size of this country's contribution to the Agricultural Development Fund, and what other countries do they know of, other than Iran, who are actually making any contribution to this Fund?
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, as the noble Earl will know, there were a number of resolutions put at the Conference, and until the whole matter has been generally confirmed we cannot come to a firm conclusion about our own contribution; and I do not think the noble Earl would expect it. He referred to Iran. We very much welcomed the encouraging speeches by the oil-producing countries, and we await with some anxiety positive action on their part towards this world problem.
Lord HAILSHAM of SAINT MARYLEBONE: Hear, hear! Shake down the sheikhs!
Lord PARGITER: My Lords, would

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not the noble Baroness agree that there is considerable difficulty and alarm among some of the countries who are willing to contribute about the falling down in the arrangements for distribution? Could this aspect be looked at at the same time as the goods are supplied?
Baroness LLEWELYN-DAVIES of HASTOE: Yes, my Lords. This is what the Committee on Food Security is particularly concerned with, not only stockpiling but actual distribution.

EEC COUNCIL OF MINISTERS: BUSINESS
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, a Statement is being made in the other place today about business to be taken in the EEC Council of Ministers during January. With the leave of the House, I will arrange for this Statement to be made available in the OFFICIAL REPORT, as has been the practice in recent months.
Following is the Statement referred to:
"I will, with your permission, Mr. Speaker, and that of the House, make a Statement about business to be taken in the Council of Ministers of the European Community during January. The monthly forecast for January was deposited yesterday. The House will understand that because of the Recess my Statement has had to be made earlier than usual in the month.
"At present five meetings of the Council of Ministers are proposed for January. Agriculture Ministers will meet on the 13th-14th and 20th-22nd; Foreign Ministers on the 20th-2Ist; Finance Ministers on the 27th and Development Ministers on dates yet to be set. It may also be necessary for Ministers to discuss the latest position in the negotiations with the developing sugar producing countries.
"Agriculture Ministers will resume their discussion of Community Farm Prices for 1975–76 and of proposals for the beef régime.
"The Foreign Affairs Council will be the first since the recent Heads of Government meeting in Paris about which my right honourable friend the Prime Minister made a Statement last Monday, 16th December. It is likely that the Foreign Ministers will wish to review the outcome of that meeting, although the full agenda for the Council is not yet available.
"The agenda for Finance Ministers is also not known although they are likely to have their usual monthly discussions on the economic situation in the Community.
"Development Ministers will consider the release of a further Community contribution to the UN Emergency measures; a Commis-
1166
sion proposal on guidelines for a new Aid Framework for the Community; and Food Aid Policy.
"There is also likely to be a ministerial meeting between the EEC and the African, Caribbean and Pacific countries to conclude the negotiations for a new Convention of Association."

SUPPLY POWERS BILL [H.L.]
2.49 p.m.
The LORD CHANCELLOR (Lord ELWYN-JONES): My Lords, I beg to introduce a Bill to consolidate the outstanding provisions of the Ministry of Supply Act 1939 and enactments and instruments amending those provisions, with amendments to give effect to recommendations of the Law Commission and the Scottish Law Commission. My Lords, I beg to move that this Bill be now read a first time.
Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

PROCEDURE OF THE HOUSE
The CHAIRMAN of COMMITTEES (THE EARL OF LISTOWEL): My Lords, I beg to move that this Report be now agreed to.
Moved, That the First Report from the Select Committee be agreed to.—(The Earl of Listowel.)
The Committee's Report was as follows:
1. ROTATION RULE
The Committee have considered the working of the rules for the retirement by rotation of members of Select Committees (set out in the First Report from the Procedure Committee, Session 1971/2). They recommend:—

(a)That a Lord who has been a member of a Committee for more than three years due to his holding one of the posts exempted from the rotation rule, and then resigns that post, should be subject to the retirement rule.

(b)That the Lord Great Chamberlain should be an ex officio member of the Offices Committee.

(c) That the rotation rule should apply to the members of the Standing Orders (Private Bills) Committee.

(d) That the post of Deputy Chairman of Committees should be added to the posts exempted from the rotation rule.

2. LORDS' EXPENSES
The Committee recommend that, in future, the arrangements for the reimbursement of Lords' expenses should be supervised by a Select Committee of the House rather than by the Committee of the Whips, a body which derives no authority from the House itself. They recommend that the Leave of Absence Committee should have its terms of reference extended, to enable them to undertake this supervision as follows: "That a Select Committee be appointed for the general supervision, of arrangements relating to Leave of Absence and the reimbursement of Lords' expenses."
3. AMENDMENTS TO PUBLIC BILLS
The Committee have considered the practice of the House whereby the number of names of Lords printed in support of an amendment is limited to four. On occasion the sponsor of a Bill, whether a Minister or a private member, finds that an amendment which he would like to support appears in the names of four other Lords. In such a case, there is no way in which the sponsor of the Bill can show on the Marshalled List that he supports the amendment. The Committee recommended that the practice should be changed so that the Lord in charge of a Bill should always be able to add his name to an amendment and that the Companion should be amended to this effect.
4. APPELLATIONS: FORMER ARCHBISHOPS OR BISHOPS
The Committee recommended that former Archbishops or Bishops who are created Lords should be referred to in debate as "The Noble and Right Reverend Lord".
On Question, Motion agreed to.

SCOTLAND: DEVOLUTION OF GOVERNMENT
2.50 p.m.
The EARL of CROMARTIE The EARL of CROMARTIE rose to call attention to the necessity for some form of devolution of Government for Scotland; and to move for Papers. The noble Earl said: My Lords, I believe that there are many Scottish Peers on both sides of your Lordships' House who, like myself, think that this debate is long overdue, since it is of the greatest importance to Scotland. At this time of considerable difficulty for Scotland as well as for England and Wales, it would be quite wrong to mention that emotive word "separatism". May I stress that this debate is intended to be about devolution? However, it must be real devolution and not some ineffective sop—possibly attached to the new local government set-up.
Here may I appeal again to the Government to postpone the implementation of, at any rate, the new regional councils? If that is not done, the additional cost to taxpayers and ratepayers will escalate—as, indeed, it has done already in certain regions, one honourable exception being the Highland Region. There is bound to be a considerable overlap of the powers of an elected assembly and of a regional authority which will eventually lead to waste of time and money. A reasonable delay could also give the much-desired opportunity of re-examining the monstrous Strathclyde Region. Those of us who for many years had the honour of working with a local authority know how necessary is this re-assessment. Indeed, after reading many letters in the Scotsman and other papers on this subject, I can remember only two which insisted that the process should continue. One was from a man who appeared to be financially interested; the other was from an "ivory-tower" academic who, I imagine, had no practical knowledge of the subject.
My Lords, we all know that both major Parties have swept the devolution problem under the carpet for too long and have hoped that it will lie still—it has not, nor will it. During this period of pretending that the problem did not exist one read, and some heard at Election time, more nonsense propagated than on any other subject—passports, the eviction of English people working in Scotland, and heaven knows what else. May I remind your Lordships that in 1905 the Kingdom of Norway was formed, having amicably parted from the sovereignty of Sweden. No passports are required when the Scandinavian people travel between Norway, Sweden and Denmark. The only "scare line" which I did not see was the suggestion that Hadrian's Wall should be reconstructed—of course facing South !
Another point put forward to make the flesh creep was that of the domination of the Scots by the South-West Central Belt, led by hordes of Communists. My Lords, there are Communists here, as elsewhere in Britain, and since they are dedicated to destruction and disruption the great majority of our people would be delighted if they emigrated to Russia, where it is improbable that they would be able to lead the cushioned life that

1169
they lead in Britain. Although the West of Scotland is different in many ways from either the Highlands or the Eastern parts of the Kingdom of Scotland, they are still good Scots, and it is even possible that their very real difficulties might be better understood by other Scots situated in Scotland; because, however conscientious Scottish Members of Parliament may be—and, indeed, are—they can sometimes bring with them an aura of Whitehall and Party dogma which does not help to solve all problems.
My Lords, we have seen of late disastrous strikes, appalling mishandling of the teacher problem and, last, but not least, the desperate plight of the Scottish farmers who were encouraged to go into beef by the Government of the day. All these matters can be better handled on the spot by an elected Government which might even have a Minister of Agriculture who really knew something about Scottish farming problems. I admit that we are still faced with the position of a concentrated numerical majority being able to swamp the rest of Scotland, but why should we not have some form of proportional representation? This might even be suitable for England where, under what is basically a two-Party system, so many people are virtually being disenfranchised.
As is the case with every other political debate, that on devolution gets confused by the misuse of words and false assumptions. Some people want devolution to go no further than that proposed in the Kilbrandon Report; others would prefer devolution to go further. And one of the great fallacies postulated by many politicians has been the supposition that all those who voted Conservative or Labour were voting against devolution. My Lords, nothing could be further from the truth.
Finally, my Lords, may I deal with the touchy question of the allocation of the hoped-for profits from the oilfields which lie off the Scottish coasts? Of course, these profits will depend upon two factors. The first is that the Chancellor of the Exchequer and the Treasury do not mortgage future oil profits for immediate loan aid from abroad. Secondly, the huge capital investment which is needed to extract oil from the depths of the sea means a high price for the end product, and it is not impossible that the Middle
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East oil-producing countries may consider lowering their prices at a very awkward moment. It is to be hoped that an elected body in Scotland would have a considerable say in the allocation of these profits. There is some—and, I think, justified—suspicion that the greater part would be siphoned off South for the financing of such projects as the Channel Tunnel, the Third London Airport and the like.
Many of your Lordships know how desperately behind we are with decent housing for our people. The planner's nightmare of the high-rise fiats did, indeed, replace certain slum areas in such great cities as Glasgow, and this has added in no small measure to the plague of juvenile delinquency and crime. When money becomes available much greater sums should be allocated to create decent dwellings which encourage a community spirit and enable mothers to control their children.
Another sphere where possible oil revenues could help is in creating proper and economic communications between the mainland and the Western Isles. As I have said before, these communications should be considered as a continuation of the existing road and rail systems of the mainland. British Rail could be helped in many ways to take the burden off the overloaded roads. They might also be able to provide on the long route from Euston to London, on those great stretches of the permanent way where electrification is a long way off, diesel engines which do not catch fire and break down with depressing frequency.
My Lords, devolution is coming, despite a certain number of voluble opponents. Let us try to make it work. The vast majority of us who live in Scotland wish to remain united under the Crown; and may I remind your Lordships that Her Majesty the Queen is also Queen of the Scots. However, we should also be free to run our own show in amiable accord and co-operation with our English cousins who should help and not hinder us. I do not have to remind noble Lords of the sacrifices which were made by the men and women of Scotland during two World Wars—not only the sacrifice of those who filled the ranks of our splendid Scottish Regiments as well as those who served in the Royal Navy, the Royal Air Force

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and the Mercantile Marine, but also the fact that the number of those who died was tragically great for a country with a population of only 5½ million. In conclusion, may I say that we have much in common with the English but that the Scots, a very old nation, have a right to the management of their own destiny. My Lords, I beg to move for Papers.
3.0 p.m.
The MINISTER of STATE, DEPARTMENT of EDUCATION and SCIENCE (Lord CROWTHER-HUNT): My Lords, let me say right away how much the Government welcome the Motion moved with such perception by the noble Earl, Lord Cromartie. I personally am delighted because I so much enjoy any opportunity I can get to talk about devolution. This Motion comes just at the right time. The Government are now pressing on with all the detailed work needed to implement the proposals in the White Paper on Devolution published in September, and it is important that in doing so the Government should know, and be influenced by, the views of your Lordships on a matter of such fundamental constitutional importance.
It is the White Paper which seems to me to be very much the starting point for today's debate. The proposals it makes are far-reaching indeed, and in fact they amount to a more radical constitutional change in the relationships between Scotland and the rest of the United Kingdom than anything we have known since 1707. The White Paper was based of course on a detailed study of the recommendations of the Commission on the Constitution which was set up by the Labour Government in 1969 because we recognised then, as my right honourable friend the Prime Minister put it in another place at that time, the
"strong feeling, not only in Scotland or Wales, but in many parts of England, of a greater desire for participation in the process of decision-making moving it nearer, wherever this is possible—to the places where people live."
So the constitutional Commission was set up. First it was under the brilliant and inspiring chairmanship of the late Lord Crowther and then, on his untimely death, under the equally distinguished chairmanship of the noble and learned Lord, Lord Kilbrandon. I should like again to say what a privilege it was to
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serve on this Commission under their leadership and alongside my noble friend Lord Houghton of Sowerby, and also the noble Lord, Lord Foot, both of whom I found to be great allies in the work in which we were engaged.
As noble Lords will recall, we all worked so hard that we produced a multitude of different recommendations which were often conflicting. So not only was there a Majority and a Minority Report, but even within the majority there were significant minority views on various major questions. It was partly because of this that when this Government came into Office last February they decided that there must be the widest possible consultations on the various proposals put forward in both the Majority and the Minority Reports. So we published a discussion document last June, summarising the the seven main schemes of devolution put forward in the Majority Report and the Memorandum of Dissent. Four of those different schemes were concerned with Scotland, and it was on the basis of these and the various questions which the Government raised about them that the Secretary of State for Scotland had widespread and detailed discussions in Scotland with a wide-ranging group of organisations, including the Scottish Trades Union Congress, the Scottish Council of the Confederation of British Industry, the Church of Scotland, the representatives of local authorities in Scotand and also with representatives of some of the political Parties. On the basis of those discussions the Government produced their radical constitution proposals for Scotland (and of course for Wales as well, because parallel actions were taken in Wales) in the White Paper last September.
As that White Paper made clear, the Government proposed that there should be a directly elected assembly in Scotland. It proposed, too, that that assembly should have legislative powers and that it should also assume many of the executive functions of the Scottish Office and of the nominated authorities now operating within Scotland. At the same time the Government made it clear that they agreed wholeheartedly with one of the few unanimous recommendations of the Constitutional Commission; namely, the recommendation that they rejected

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separatism and federalism. The Government naturally agreed with that unanimous recommendation. Like the Royal Commission, we regard it as a vital and fundamental principle to maintain the political and economic unity of the United Kingdom. It was within that essential framework that the Government put forward their proposals in the White Paper, which also made it clear that there will be no reduction in the number of Scottish Members of Parliament at Westminster and that the Secretary of State for Scotland will continue to act as a full member of the United Kingdom Government in the formation of United Kingdom policies.
The Government are moving as quickly as possible to implement these decisions to set up a directly elected assembly in Scotland, and of course also in Wales. It it because the Government attach so much importance and urgency to this question that two months ago they strengthened their ministerial team on devolution and set up an entirely new Constitution Unit in the Cabinet Office. The unit is under my right honourable friend the Lord President of the Council. It has its own Permanent Secretary, senior administrators and lawyers, together with the necessary supporting staff. In directing the work of this unit, the Lord President is assisted by my honourable friend in another place, the Minister of State for the Privy Council Office. In addition, Mr. Harry Ewing has been appointed as an additional Parliamentary Under-Secretary of State at the Scottish Office, and with supporting officials there he is working closely with the Lord President and the Minister of State on the Scottish aspects of devolution. And of course all the relevant Government Departments are closely involved in the massive amount of work which is now going on.
But, my Lords, there are some formidable problems to be solved before it is possible to proceed to legislation. So let me just indicate, as briefly as possible, some of these major problems so that this House can express its considered views on them. First, there is the question of the range of the legislative powers to be devolved to the Scottish Assembly. The White Paper said that the Scottish Assembly will have legislative powers within those fields in which separate legis-
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lation already exists so far as Scotland is concerned—that is, such fields as housing, health and education. These areas were quoted in the White Paper as an example of the sort of fields in which legislative power would be devolved, and other areas are, of course, under consideration. So clearly there is much complicated and difficult work to be done here.
Secondly, there are enormously difficult and complex problems to be solved in the area of finance and economic management. As we said in the White Paper,
"in any scheme of devolution the financial arrangements will clearly be of fundamental importance".
We went on to say that,
"any major change in the present broad arrangement has got to be reconciled with the maintenance of a general uniformity of approach in the United Kingdom as a whole to the allocation of resources, to taxation arrangements and to the overall management of the economy".
This is why the White Paper proposed that,
"the financial allocation for functions over which the assemblies will have responsibility will be in the form of a block grant voted by the United Kingdom Parliament under arrangements which will take account both of local needs and the desirability of some uniformity of standards of service and of contributions in all parts of the United Kingdom".
Clearly, as noble Lords will appreciate, an enormous amount of work has to be done in this area before detailed measures and proposals can be worked out, and whatever eventual solutions are produced here our objective on the expenditure side is that the Scottish assembly should be able
"to judge among competing priorities within Scotland … in the light of their own assessment of the community's needs; as between, for example, hospitals and roads or schools and houses",
and so on.
Another major area of problems is the possible trade and industry functions which it might be possible to devolve to the Scottish assembly. As my honourable friend the Minister of State in the Privy Council Office said in another place earlier this month:
"The possibility of devolving trade and industry powers is being actively considered".
As my honourable friend the Parliamentary Under-Secretary at the Scottish Office

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also said in another place earlier this month:
"Relations between the nationalised industries and the Scottish Assembly is one of the issues currently being examined in the context of the devolution proposals".
So, my Lords, there are enormous complexities and difficulties in this area as well, and the Government are proceeding as quickly as they can.
Lord ROBBINS: May I ask the noble Lord whether he could elucidate one major point in this connection? Does the devolution of trade—I use his words—involve devolution of the functions of Customs and Excise?
Lord CROWTHER-HUNT: My Lords, the noble Lord will probably appreciate that the functions of Customs and Excise would almost certainly be reserved to the United Kingdom Government. It is not the intention of this Government to produce a barrier at the Scottish Border which would either lead to smuggling or would be a barrier to trade. That seems to be consistent with the maintenance of the economic unity of the United Kingdom. Another major area of problems which the Government obviously have under consideration is clearly indicated in the White Paper in which we said that the assemblies
"will assume some of the executive functions of the Scottish and Welsh Offices and of the nominated authorities now operating within their boundaries".
Clearly, therefore, we are carrying out important detailed studies to decide precisely which of these executive functions and which of these ad hoc nominated authorities would go in this direction. Then, of course, there is the question of what form of Executive will be associated with the Scottish assembly. Should it follow the ministerial executive system, which we all know so well here at Westminster, or should it provide for a form of power-sharing perhaps along the lines of a local authority committee system? There are arguments pro and con each of these types of solution, and I shall be most interested to hear your Lordships' views on this difficult but very important problem.
Then there is the whole question of the relationship between the Scottish assembly and this Parliament. We have
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emphasised in this context—and it cannot be over-emphasised—that we are determined to maintain the political and economic unity of the United Kingdom, so we have to be sure that we can achieve the right relationship here between the Scottish assembly and this Parliament and Government. Of course, my Lords, there are a whole series of other problems, too, that have to be resolved, but I have now indicated, perhaps, some of the most important ones. We are confident that all these problems which I have mentioned, difficult though they are, can be solved. However, we want to be sure that we arrive at the right solutions, so we have to move both with speed and with caution, with speed because we recognise the urgent need to bring forward our detailed proposals as soon as possible, with caution because we want to be sure that we resolve these problems in a way which will produce a stable and lasting solution and which will also bring great benefits not only to the people of Scotland and Wales but to the people of all parts of the United Kingdom. So, my Lords, we look forward to hearing the views of this House and are most grateful to the noble Earl for the views he has expressed and for creating the opportunity for this very timely debate.
3.15 p.m.
Viscount THURSO: My Lords, the question of Scottish devolution has been both frequently debated and often referred to in your Lordships' House in recent years. So much so that your Lordships might well be forgiven for thinking that not only has the subject been exhaustively discussed but that it has been exhausted. This is not so. I am therefore very grateful to my noble kinsman Lord Cromartie for bringing up this subject at this most opportune moment and I am very delighted, as I mentioned earlier, to see the noble Lord, Lord Crowther-Hunt, leading the debate on this subject from the Government Benches.
My Lords, this afternoon we are examining the subject of Scottish Home Rule from a totally new and most exciting viewpoint. Our deliberations, too, will be affected by some entirely new parameters—which have been referred to by the noble Earl, Lord Cromartie, but not, I think, by the noble Lord, Lord Crowther-Hunt, unless I missed it—arising from the extent of progress towards

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local government reorganisation. The new viewpoint is, of course, that of knowing that Scottish Home Rule will happen. We are therefore not discussing whether Scottish devolution is a good thing or a desirable thing; we are discussing how best to shape the Home Rule which we are about to give to Scotland and how best to shape the administration of Scottish affairs within Scotland when the country has a legislative assembly of her own.
I hope that, as so often happens in your Lordships' House when we debate Scottish affairs, we shall each be able to keep our minds unhindered and un-blinkered by partisan preconceptions. I hope that we shall be sensitive to thought and to emotion in Scotland. I hope that we shall be honest enough to recognise sound constructive thought even in the views of those to whose ideologies we may be opposed. I would say that Scotland deserves nothing less of us today than our total and constructive honesty. The assembly which we are about to set up must be clearly seen by Scotsmen to be capable of shaping, directing and controlling Scotland's destiny. It must be clearly seen to be in the hands of Scotsmen and not to be subject to overriding pressures from Westminster. Where it joins in with the rest of the United Kingdom it must be seen to do so voluntarily and after due consideration, and not merely conforming for conformity's sake.
If a king divides his kingdom among his sons, it is not a gift if he does not divide his sovereignty. If a businessman gives shares in his business to his sons, it is no gift if he does not give voting shares. If a father shares out his goods and chattels among his children, it is no gift if he then insists that they remain in his (the father's) house. So if we really mean to give Scotsmen control over even some facets of Scotland's political affairs we have to hand the strings by which we control these affairs over the border and drop them there.
Scotland's assembly must be capable of shaping Scotland's way of life. This requires that the powers of the assembly must extend over a broad legislative field. In that connection, I am glad to hear that trade and industry is now included among the list of matters which will possibly be coming under the aegis of the Scottish assembly. This will mean not only the
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perpetuation of existing differences from England in religion, law and education but it will possibly mean the creation of new differences in law and life style between Scotland and the rest of the United Kingdom. We must be prepared for this, because this is the whole nub and essence of what we are doing. The point of an assembly is to give to Scots the power of self-expression. It is by this means that we shall liberate the pent-up forces of creativity among Scotsmen and the latent power of political yearning within the Scottish nation.
If an assembly is to be capable of doing these things and of doing them effectively it will have to have some power over money; it will need power both over how money is raised and how money is spent within the country. The colonists of the New World first put this axiom into a catch phrase when they shouted, "No taxation without representation". There is the other side of the coin, which is equally true. No assembly can claim to represent a country in which it does not raise and spend the tax revenue.
My Lords, I offer this thought to the House, and especially to the noble Lord, Lord Crowther-Hunt, because I genuinely believe one cannot give effective power to an assembly unless one gives it the power to raise and spend money. It was really the raising and spending of rates that gave, and still gives, verisimilitude to the deliberations of local authorities. It is the increasing proportion of Exchequer-raised and Exchequer-directed money which is being passed through local authorities' hands which has removed from their actions the appearance of reality, and has increasingly estranged local authorities from their own electorate. If you want a Scottish assembly to look real, it must tax people and spend the taxes.
Another prerequisite for a convincing assembly—and I was particularly glad to hear this referred to by my noble kinsman—is the need for the electors to be able to get the sort of people they want into that Assembly and, having got them there, to feel confident that those representatives will remain answerable to them, the electors. It is this feeling of confidence that the members of the Kilbrandon Committee sought to inspire

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when they unanimously recommended proportional representation as a means of electing a Scottish assembly. It immediately undermines our confidence in the honest intentions of the Government that they do not appear to concur.
Why not agree to proportional representation? There are no ancient traditions or customs that would be violated by its use; for this is a totally new assembly. It will be vitally important that the voice of minorities should be heard in the early and formative years of the Scottish assembly. This can be best ensured by proportional representation. Proportional representation was thought essential in strife-torn Northern Ireland in order to ensure this very thing—this essential and desirable thing—the just and proportionate representation of minority opinion in the affairs of State. So why has proportional representation been dropped from the suggestions in the White Paper? Can it be, although I hesitate to suggest the possibility, that the Government might be seeking some Party advantage by leaving out the Kil-brandon recommendation of proportional representation from their suggested arrangements for a Scottish assembly? I beg of them not only to deny such a libellous slur, but to prove that the libel is baseless by restoring proportional representation as the election procedure of the assembly.
Even among those who have been always in favour of Scottish self-government, and who have been most vociferous in demanding it, there is unease that it should be coming on the heels of a sweeping reorganisation of local government. Among people of all Parties, especially among those already working in the sphere of local government, one hears the worried murmur, "We are going to be terribly overgoverned". Of course, this is true. It is true, because the present shape of local government in Scotland was principally devised as a means of trumping the Home Rule ace. Certainly, it was shaped to try to achieve some of the objectives of devolution. I have always thought it was a mistake. We on these Benches supported the noble Lord, Lord Hughes, in an Amendment designed to modify some of its worse aspects.
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More and more people are now beginning to see it as a major disaster. They are squealing, just as the Gadarene swine must have squealed as they thundered towards the cliff, "It is too late to stop now. It is too late". It is not too late. It is never too late to do the right thing. I recognise there is now a huge vested interest involved. All the newly appointed holders of all the newly created offices at newly inflated salaries would be horrified if we cried "Stop", yet it is our real duty so to do.
However, there is a way to amend local government reform with the minimum of disturbance, and it is beautifully simple. One merely phases out the regions as one phases in the assembly. This means, of course, that the regional administrators then provide and, indeed, become the new assembly's civil servants—and such persons will be needed—while the regions themselves disappear, having served their use as a transitional arrangement. The district councils would then receive back most of the local government functions which they are now giving up to their respective regions. Possibly at that stage they would begin to take back some of the redundant officials and staff from the regions.
My Lords, there is very great concern among people of all Parties, and also among those of no Party affiliation, about this whole matter. This concern is most keenly felt by those actually engaged in local government. Unless Her Majesty's Government can demonstrate clearly that this concern is unfounded, or say now that a restructuring of local government will go hand in hand with the setting up of a Scottish assembly, great harm may be done. I beg noble Lords opposite, please do not be obdurate; please assure us that you will listen to the mounting groundswell of opinion against regionalisation with an open mind.
Finally, my Lords, in talking of a Scottish assembly we must remember that Wales is also at this time to be granted Home Rule. Therefore, we cannot think of the shape and power of the Scottish assembly without considering Wales also, and, indeed, the relationship between Ireland, Scotland and Wales within the framework of the United Kingdom. Clearly, if we are talking of devolution

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as a means of bringing a more meaningful democracy into our political life, and not merely as a way of pacifying the wild and woolly tribes on the Celtic fringe——
Lord DAVIES of LEEK: Does the noble Viscount mean us?
Viscount THURSO: Yes, my Lords, the noble Lord and me!—then, in honesty, we must admit that we are eventually moving towards a federal grouping of the nations which in combination become the United Kingdom. England, too, will have to think about self-government, and we in Westminster will have to ponder our own role also. Therefore, I say only this. Though the debate about the linking of our various British nations into a federal system will have to wait a while, yet that debate will most certainly take place. The writing is on the wall. Meanwhile, it behoves us to get the Scottish and Welsh assemblies off to a good and meaningful start, so that they will be valuable and maturing institutions when the time comes to link them federally. The task today is to call for real work, real responsibility and real power in the Scottish assembly.
3.29 p.m.
Lord GLENKINGLAS: My Lords, like other noble Lords who have spoken, I am very grateful to the noble Earl, Lord Cromartie, for introducing this subject at this moment. I should like to start my speech by referring to my own perhaps not very distinguished part, but we spoke of the desire of all Parties to sweep this problem under the carpet. In this regard at least I have not been one of the sweepers, because it was, I think, in 1963, when I was Chairman of the Party in Scotland, that I set up the first of our committees to look at this problem, having already set up the first movement to reorganise local government. I then followed it, as a member of the Shadow Cabinet in 1968, when we set up the most distinguished committee that perhaps has ever sat in Scotland, under Sir Alec Douglas-Home, and that was a year before the Labour Party had even begun to think of the problem. So at least I was not responsible for trying to sweep anything under the carpet.
I was also amused by the remark of the noble Viscount, Lord Thurso, that this was not a partisan subject. Certainly
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it is not, but it is none the less fascinating for that, because if you take the Liberal Party, I think we must give them credit for being perhaps the first in the field consistently to advocate some policy of devolution. I am sure for no Party political purposes whatever. If you look at my own Party, it was interesting that throughout the years of which I am talking, the leadership of the Party was nearly always almost solidly in favour of some form of devolution, but it was the Back Benches who were very much more doubtful, putting it no more strongly than that. Of course, we all had our cynics in our Parties in England; some were passionately keen for total devolution in Scotland and Wales, which they felt would ensure a Conservative Government in England for the rest of time. They were, of course, equally matched by the leaders of the Socialist Party, who were not at all keen on devolution in those days, perhaps for the same reason.
Lord HAILSHAM of SAINT MARYLEBONE: The opposite reason.
Lord GLENKINGLAS: Or the opposite reason, as my noble and learned friend says. A number of my friends on the Back Benches in the Socialist Party were very keen indeed that something should happen, so I agree with the noble Viscount that this is not a partisan matter in that sense.
But the problem, as your Lordships know, has been a very important one for Scotland for some time. Everybody knows about the Scottish engineers in every ship sailing round the world, but not enough people realise that we in Scotland have not only our own law but our own Church, our own educational system, our own language—and I do not just mean the Gaelic; we have a number of things which other parts of the country do not have. We have the Scottish Office, which in my experience is an extremely competent and effective office. It has its warts like all other Government Departments, but it has developed, over nearly one hundred years of steadily increasing devolution of power, a skill and energy in Government which is perhaps unique in Europe in its way, and this is a great advantage that we have. We have our own national drink, if I dare mention it, not unimportant in its way, too.

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But one of the real facts—and I am sure your Lordships who have travelled extensively round the world will share my view on this—is that wherever you go, quite irrespective of rank or Party or colour or religion, you have a nationalism among the Scots which is quite different and distinct in its way, however long they have been away from the country. It is not just a purely Scottish feeling; it is a real national feeling among the Scots.
It is also absolutely clear, whatever arguments can be made for or against devolution—and I hope that we are now coming to the end of arguing that this must not be done—there is a widely held belief throughout the length and breadth of Scotland that our interests are not properly looked after at Westminster. One can argue that this view is wrong; one can argue that they are misinformed, but the fact of the matter is that this they firmly believe. The second point is perhaps a little more difficult to express, but certainly one that I feel very strongly, having had a great deal of experience both as a Scottish Minister and a Scottish Whip. There is no single part of the House of Commons which is more wearisome, more boring or more ineffective, than the Scottish Grand and the Scottish Standing Committees. I am certain that a number of your Lordships who have had that experience will not totally disagree. They spend longer achieving less than any other Committee in the House; so much so that even the Scottish journalists have practically given up going because they cannot stand it any longer. This is inevitably reflected to some extent in the views that people in Scotland have about how we handle their affairs at Westminster, and the sooner we can delegate some of that legislation to an assembly in Scotland, I think the better it will be for all of us.
The third of these points—and I think the Government must think about this one quite carefully when they are making up their plans as to how devolution is to I be effected—is that it is becoming increasingly difficult to get the right standard of ability among young Scotsmen to come into the House of Commons and play; their full part in that. The reasons are partly economic, partly the unsocial hours, partly the very long journeys that are necessary between Scotland and Lon-
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don, and then often very long journeys round constituencies as well. But whatever the reason for it, it is, I am afraid, the fact that it is getting harder and harder to find young men of ability to come and lake their share of the work done in London.
It is probably a shared view, by myself and perhaps the Government and many others in your Lordships' House, that in some way this new assembly must be able to act through its Secretary of State and in conjunction with Parliament. The noble Lord, Lord Crowther-Hunt. explained that this was one of the problems. I wish he had been able to tell us a little more about how his mind is working, because it is in fact a very difficult combination, if one is to have an assembly with full powers in Edinburgh, to link that through the Secretary of State who is spending his time in the Cabinet in London. The mere distance is problem enough, and having been in that position, I know how much one is tied to London; therefore, one could not take a very active part in an assembly sitting at the same time in Scotland. The criteria that I think are important are these. We have to give this assembly, as noble Lords have already said, enough power to make it an effective House and make it feel that it is really achieving what Scots people want.
It is not simply a matter of finance, though this is important. Again the noble Lord, Lord Crowther-Hunt, spoke about the difficulties of finance. There are considerable problems. Personally, I am not as certain as the noble Viscount, Lord I Thurso, appeared to be that all the taxation must be raised in Scotland. I should like to think rather carefully about that one before I handed that power over, with ' or without proportional representation. These are problems that have to be carefully thought out, and I was hoping that we would get a little more guidance from the Government at the beginning of this debate than we have had. If this assembly does not have considerable power over the spending of money, then it will certainly fail because nobody will believe that it is useful, and, what will be far worse, nobody of any merit or ability will join an assembly where that sort of power is not available.
The noble Lord, Lord Crowther-Hunt, talked about the type of power that might

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be delegated to the assembly, and, if I remember rightly, he referred to housing, education and health. I hope very much that on the Home Office type of legislation on the permissive society, about which there are widely differing views held in Scotland from those in England, Scotland may also be allowed to legislate in its own way. Further, I see no reason why, for instance, agriculture should not be different, as our conditions are rather different in Scotland—even wetter this year! These are some of a large number of items which this assembly will be able I competently to decide, and their inclusion will have a considerable effect on the sort of reception it will get from the Scottish people when the final draft of the Bill, or whatever it is to be, comes out.
Lord DAVIES of LEEK: My Lords, would the noble Lord give way for one moment for quite a serious point about finance? The great universities of Scotland are recognised world-wide, and surely, Scotland itself would not be able to maintain them out of its own revenues?
Lord GLENKINGLAS: My Lords, I do not think that I should pursue the noble Lord down that particular alleyway, because we do not really know how much revenue will be available. There have been very distinguished universities in Scotland for as long as in England. They have been run very successfully in the past, and I have no doubt that they will be in the future.
May I leave that point and say a word or two on my thoughts about the question of devolution? I should be very happy to see a lot of the regional responsibili-ties of the DTI—to use the old term—devolved to Scotland, and I think Scotland could handle them very well. I should be sorry if we tried to take over the overseas trade side of the DTI, because it would be enormously costly to have separate Scottish trade offices all over the world at the same time as English, Welsh, Irish and Yorkshire offices, and wherever else the devolutionists want to proceed.
Certainly, this is a difficult and dangerous path that we have started upon. I know the political difficulties, but my own belief is that it would have been far better if the Government had decided to take their first steps in Scotland alone. This is not because I want in any way to down
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Wales, but Wales is not in the same state of national development, in its widest sense, as we are in Scotland. It would have been wiser to have a separate arrangement for Scotland, to see how it worked for four or five years and then to take the second step, rather than try to do both together. My strong feeling is that whatever is done for Scotland—whether or not it is right for Wales—the Welsh will immediately want and we shall probably get into a muddle.
There are many people who fear that if we take any step down this slippery slope we will end automatically in separation. My fear is exactly the opposite. I passionately believe that unless we take some firm steps and go far enough down this slippery road to make sense and to be effective, we are likely to have a great deal of trouble in the next decade or so. From the period of 1870 to 1920 in Ireland, the absolute refusal of the British Government to move an inch or two in favour of Home Rule for Ireland in some shape or form, the resistance—step by step and inch by inch—drove all the moderates in that country inevitably into the arms of one extreme camp or the other. I believe that to some extent, we are seeing the same process, in different circumstances, in Northern Ireland today.
Very few Scotsmen indeed want complete separation; a very high percentage want effective devolution. I hope that with the benefits which your Lordships' debate can give to the Government, and with perhaps a little more information from the noble Lord, Lord Hughes, about the way they are thinking, we may arrive at a solution of which in a number of years we shall all be thoroughly proud.
3.46 p.m.
Lord BELHAVEN and STENTON: My Lords, we have listened this afternoon to a number of powerful speeches. Listening to the noble Lords who have spoken from all sides of the House, I asked myself for a minute whether there was any reason for me to change my political allegiance recently and join the Scottish National Party, because it seemed to me that the pass had already been won. Of course, though I do not propose this afternoon to be any more controversial than I have to be in the matter of these proposals, there will be complexity and controversy in the future. The noble Lord,

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Lord Crowther-Hunt, emphasised the complexity of the proposals which the Government are to bring forward in order, so far as I can see, to ensure that Scotland shall have a Parliament, but that it must be allowed only to pass the right Acts.
I personally think that it will be an almost impossible task to give Scotland a Parliament, and also—if I may express myself in this way—to keep the Scottish Parliament under enough control so that the Union is preserved. If we could have a federal solution of the British problem this would be all right, but what one must accept is that if we did that we should have to divide England into five states, and English people do not want that. Therefore, what we are proposing is a quasi-federal solution, where Scotland and Wales have Parliaments but the Scots and the Welsh are still represented here, as are the English. Where else the English could go, I do not know.
But I must stress that, although I cannot but agree with the speeches that have gone before, what is being attempted will be so difficult that I do not know whether it can be achieved. Of course that is speaking before I know what the proposals are, which of course is not very satisfactory. However, we are grateful to the noble Earl, Lord Cromartie, for giving us this chance at least to debate this vast subject. I presume we are going to speak on it a great deal in the future as these proposals come forward, so perhaps all of us speaking today ought to speak rather briefly; otherwise, we shall have said everything that can be said. We are going to wait for the proposals that the Government intend to bring forward. We believe that they are bringing them forward in good faith, and we shall not prejudge them.
I should like to say a few words about the Strathclyde Region, and the regionalisation of Scotland. Other noble Lords have spoken about this, but I think that what most of us feel must be underlined. A year ago in this House the noble Lord, Lord Hughes, put forward an excellent Amendment which we passed back to the other place and which it negatived. Had the noble Lord's Amendment been accepted we would not be in this position. Perhaps I may give a local illustration of the island on which I live at
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present, the island of Islay, which is going into Strathclyde Region where Glasgow is the regional centre of government. It has struck me that you might as well put the Isle of Wight under the Greater London Council; in fact, it would make more sense, because the communications between the Isle of Wight and the mainland are good. There is probably one boat every hour and I have been there in a hydrofoil which takes only 20 minutes. But communications between Islay and the mainland mean that one has to take a plane—if British Airways feel like it—or a boat, which takes 2 hours 20 minutes to arrive at West Loch Tarbert, which is 100 miles of rather difficult road from Glasgow. The island of Islay is further from Glasgow than is the Isle of Wight from London, yet Glasgow is our centre of regional government.
I hope that even at this late stage the Government may have a change of heart. It is reasonable that people in the outlying areas of Scotland—particularly those in the outlying areas of the Strathclyde Region—should feel that their local government have been nearly taken away from them and has quite ceased to be local. To pursue the absurdity to the extreme, one might say, living in the Strathclyde Region with over half the population already, why not scrap the the whole thing and make the whole of Scotland one region centred on Edinburgh? It would make little difference to us whether the centre of local government was in Edinburgh or Glasgow, because it is not local anyway.
I should like to say one word about the assembly. I have seen it suggested—and it is being suggested in certain quarters and, of course, in another place where they have more of a "knockabout" than we have—that the Scottish National Party intends to obstruct the working of the Scottish assembly. I do not know where this idea emerged from, but I do know that that is not so. We think that for an orderly transfer of power from Westminster to Edinburgh it is essential that the assembly, in whatever form it is brought forward, should at least work. Of course, we will have our differences and we will be pushing for more self-determination for the assembly. That is what we are there for. We hope that we shall have a majority in the assembly,

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and we shall emphatically not be working to obstruct the assembly but rather to make it work as the first step towards full self-determination, which is how we see it.
I will not go into the matter of oil today, because we have a Bill coming from another place which exhaustively deals with oil and, anyway, I do not know much about oil. I think that those Scots, including myself, who feel that Scotland should have control over her own part of the North Sea oil are not being entirely unreasonable. We have seen various products in Scotland producing vast revenues for the Exchequer, and we have often seen that that does not benefit us very much. I am thinking again on the local level and am referring to the island of Islay where I live, which produces some of the most famous malt whiskies in the world. Every bottle of blended Scotch whisky has to have Islay whisky in it. This is a fact. Yet nobody knows—perhaps the noble Lord, Lord Hughes, will tell me—what revenue the Exchequer or the Excise gets from the whisky produced in the Islay distilleries. I think the locals say it is anything between £50 million and £100 million.
I have heard every sort of figure quoted, but it has always been rather vague. We feel that even if 10 per cent. of that revenue was spent on improving the conditions of the people who live in the islands, and on the communications, which badly need to be improved, as well as on improving the roads which are so bad that one might say they were practically non-existent, some of that revenue might go back to the island which produces this very sought-after drink. That really concludes what I want to say today. In conclusion, I would say that this assembly can mark the beginning of a new era for Scotland. If we can work together and try to make the assembly work, we can produce a new Scotland which has hope in the future.
3.56 p.m.
The Earl of PERTH: My Lords, I want to thank the noble Earl, Lord Cromartie, for having introduced this subject and for his cogent comments on it. I think that it is appropriate for me to congratulate the noble Lord, Lord Belhaven and Stenton, for addressing us today in his capacity as member of the
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Scottish Nationalist Party. I think that this is the first time that such an event has happened in this House.
Lord BELHAVEN and STENTON: The second time, my Lords.
The Earl of PERTH: My Lords, let us hope then that there will soon be a third time! The noble Lord, Lord Crowther-Hunt, said that he welcomed this debate as a very timely one. I am glad of that. However, it was not quite as easy as that. I was charged by the Scottish Peers Association as early as July to try to get a debate on this subject. I have been struggling very hard ever since and only now have we got the debate, and that (if I may put it this way) is thanks, perhaps, to the Oposition rather than the Government providing a day. I mention this point because I regret that I find—despite certain words which the noble Lord, Lord Crowther-Hunt, used—that it is indicative of the way in which the Government think about this subject. I believe they have their priorities wrong. In my view there is no subject so important as that of Scottish devolution. In a way, I am sorry that we have not managed a two-day debate. There are not any English Peers taking part in this debate; there is one from Wales and two from Northern Ireland. It ought to be considered a much important subject in which all of the United Kingdom joins.
Earlier in the year, in a speech on the Queen's Address, the Duke of Devonshire said that he was haunted by the fear—if the noble Lord, Lord Pannell, wishes to talk I should be very grateful if he will do so outside the Chamber, as I find his remarks very distracting.
Lord PANNELL: Will the noble Lord give way? I was merely taking up the point that he made. He thought that English Peers should intervene in the debate. Judging from 25 years in the other place, that is the last thing that Scottish Members ever wanted us to do!
The Earl of PERTH: I am very glad that the noble Lord now says that standing up, because I had heard these murmurs and could not make out what he was saying and I found it very distracting. Returning to the subject, I said how the Duke of Devonshire had said in a speech

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that he was haunted by the fear that the problem of Home Rule for Scotland and Wales would be the bugbear of the United Kingdom in the coming years, just as the Irish question was in the last 70 years. I agree with this: this is the thing we have to worry about. I feel that some progress has been made; the very fact that we are debating this subject today shows that. Of course, it is in the main thanks to the Scottish Nationalist Party and to the discovery of oil that people are taking it seriously.
I am still not sure that the Government are really genuine in what they say. I know that the noble Lord, Lord Crowther-Hunt, used the words "very far-reaching reforms", "radical", and "urgent", but I get the feeling from reading the document that what we are being offered is a certain lip service and the throwing out of the few odd crumbs of self-government to keep us quiet. Your Lordships may ask: what do we want? I think I go along with the noble Viscount, Lord Thurso: we want to run our own show within the United Kingdom. We do not want to be dependent on London's benevolence for our daily work and for our daily jobs. This, my Lords, is to me the yardstick by which we should judge the Government's White Paper decisions on devolution and by which we should judge the worth of the assembly.
I shall touch on three points this afternoon: one is the composition of the assembly, the other is its powers, and the third is the question of the Regions. On the composition, the Government in their White Paper say in paragraph 31(a):
"Membership will be on the same system as membership of the United Kingdom Parliament …"
I am not clear what that means, and I think it would be very valuable if we could be told. Does it mean that when there is a General Election there will be two candidates in each constituency, one standing for the English Parliament, if I may put it that way, and the other for the assembly in Scotland, with one the mirror of the other?
Whatever the outcome, the probability is that you would find, roughly speaking, the same people returned, the same Party in both cases. Which would be the more
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important, London or Edinburgh? I do not think we want something like that, my Lords; I think we want something different. In the White Paper, Appendix A., paragraph 6 on page 13 gives us something which I think is better. It suggests that there should be 100 members, that they should be chosen for a four-year period and that there should be some form of proportional representation. I think that is right: we do not want just a copy of what happens in Whitehall. It may be that we should have the same constituencies electing our members. But if we are to have 100 as opposed to 70, then there will be 30 over, and I suggest that those 30 over should be chosen quite differently. I suggest they should be chosen, for example, from the Churches, from the unions, from the employers, perhaps from the universities or even the local authorities. One-third would be a sort of "Cross-Bench group", and I think your Lordships know that that system works rather well.
So much for the composition of the assembly: now let us turn to its powers. The White Paper produces a long list of responsibilities which this new assembly would have, but if you read them very carefully, and particularly if you read subsequent paragraphs, I think you will find that one vital thing is missing from all that is proposed, and that is the power of the purse. I think that issue has been dodged and fudged. It is perfectly true that there is talk about a block grant, but that is not what we are talking about. From reading the White Paper, I think there is only one ray of hope on the point I am trying to make and that is the Scottish Development Agency which I gather—and anyhow the Conservatives have advocated this—will get money from oil resources; and I very much hope that we can have confirmation that this is what the Government intend as well.
What I want to know is whether the Scottish Development Agency will have its own funds for job creation and restructuring the Scottish economy against the time when the oil runs out. My Lords, it is going to run out, and if at that time we have not had an opportunity to restructure our economy, then it will be a tragedy, to put it in no other words. I do not know whether many of your Lordships have read a very remarkable document, produced by the Scottish

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Council (Development Industry) entitled Industrial Devolution, of June 28. If not, I commend it to one and all of your Lordships. It points out how, over these last years, we have been, to use their words, a branch-plant economy, with no industrial decision-making powers; a country of camp-followers, and not the home of industrial pioneers. That is what we used to be, but that has not been so over the last fifty years. I could quote much more about it, but I leave it to your Lordships to read.
I think that what the Scottish Council is saying here is the guts of the whole matter. Can the assembly restructure with its own funds? I am going to ask the Government to try to help us, by taking two concrete examples. The noble Lord, Lord Hughes, knows that I warned him that I would take these two examples. The first one is in relation to steel. I think most of us agree that what we want is to have a steel complex taking advantage of the deep waters of the Clyde, somewhere in the Hunterston region. The British Steel Corporation has talked about it—and they have talked and talked. What I want to know is whether, if the assembly so decided, we could go ahead on our own and use the funds from the Scottish Development Agency for setting up a Scottish steel corporation. That is the first question.
My second question concerns forestry. Your Lordships will know that recently the Finance Bill suggested changes in the taxation system for forestry which will kill—and I use the word "kill" advisedly—any private individual who wants to continue in forestry, with new planting and the like. That may not matter very much to England; it is not of vital importance to them. But if you take the Scottish rural economy, I believe that 1 out of every 20 is employed on forestry, so if this change goes through it will be very serious.
My next question is therefore this. Under these conditions, would it be open to the Scottish assembly to decide that they were going to give a special subsidy to the forestry industry in Scotland, to enable them to go on constructively, for the benefit not only of Scotland but of the whole United Kingdom? I very much hope that we can get definite answers to these questions, because this
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will enable us to judge the sort of powers that we will have, or not have.
The last of the three points brings me to the assembly versus the regions, if I may put it in that way. Many other noble Lords have spoken on this subject and I must confess that I am encouraged and surprised by the unanimity. In paragraph 16 of the Government's White Paper there is a statement of the position of the Strathclyde Authority. They are giving evidence to the Government and The White Paper says:
"Strathclyde Regional Authority ߪ urged the Government to ' ensure that the new authorities are given sufficient time and independent power to establish and develop themselves and that in the meantime the discussions should continue '."
I do not know to express my surprise at that, except that it is certainly a case of the tail wagging the dog. I think that for the Strathclyde Authority to look upon themselves as more important than the assembly is cheek. I find it very worrying. But that is in the White Paper and I think that to a degree it is being followed in Government policy.
My Lords, which is the more important? Many of us have agreed that Strathclyde. as it has been set up, is a monster. The noble Lord, Lord Hughes, tried his best to kill that monster, but it is now much more difficult. I know it is more difficult. There is the human argument, the fact that people have been elected, chosen, have moved their homes and all the rest; or there is the argument that the Regions are concerned only with administrative questions and not with the legislative ones; so one should not worry too much. Is this really right? If in England there was a line drawn from the Wash to Bristol and North of that the whole of the Region was one—all of it. with all the industrial power and all the people that are there—and they, as it were, took on Parliament, would Parliament stand for it? I think it is wrong that this should be allowed and I very much hope that the Government will consider the practical suggestions made—I think by the noble Viscount, Lord Thurso—on how to stop this happening, in relation to all the Regions, but particularly in relation to Strathclyde which is the one which must cause us grave concern.

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One almost has—and, again, I think, the noble Viscount, Lord Thurso, voiced this—the suspicion that the Government would not mind if there was strife between the one and the other, if there was a recipe for trouble in which fishing in troubled waters and confusion might not be a bad thing. Despite the difficulties which I know arise from the human point of view in changing course please let us do it. Again, and I am coming to an end, the Scottish Council Paper uses these words in saying that if the assembly is not given real powers, the sort that I have been talking about,
"… the necessary momentum of events may lead to a radical change of another kind in another framework."
I should like to put that—and I think I am interpreting it rightly—in starker terms. I would translate as follows: If we do not get what we are asking for, there will be an ever-rising tide of nationalism and the Scots will take things into their hands, ready even to fight to gain their independence. That, I am sure, is what is meant by the rather more careful words used by the Scottish Council—and they are very responsible and are not an alarmist body, so I think that we must take their words seriously.
My Lords, I do not want things to reach this pass. I was very much encouraged by the noble Lord, Lord Glenkinglas, when he said that you must go far at the start and not step by step; and then if we go far things may be better. We must have the right to control our daily lives. If we do not get this, then it will come about in a different way and in the coming there will be much sadness.
4.15 p.m.
The Earl of DUNDEE: My Lords I think that there are two good reasons, which have been growing more obvious and more cogent all through this century, why we should seek to have a new Scottish Parliament of some kind. One reason is the vast extension both in numbers and in executive powers of the Civil Service. I think that our Civil Service has very high standards indeed of devotion to duty, and with very few exceptions it has equally high standards of honesty. But any bureaucracy needs to be watched with constant vigilance by
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by the Legislature, and I think that this is becoming almost impossible for 70 Scottish MPs who now have to spend a very great deal of their time at Westminster, far more than they had to spend 70 years ago or even 30 years ago. It is almost impossible for them to make sure that the executive power of the bureaucracy is kept under proper control by the elected representatives of the people.
The other reason is this. I think that Scottish Members—certainly in another place, and perhaps also to a much lesser extent in your Lordships' House—are overburdened with legislation. They have too much legislation to perform in a reasonable time with reasonable efficiency, and it would enormously help Parliamentary government as a whole if we had a Parliament in Scotland. I do not say at the moment whether it should be a subordinate Parliament or an auxiliary Parliament, because I think that what we should all do at the moment is to try to find out what proposals will meet with the widest measure of agreement. All Parties have been thinking about this for many years. We all remember the active steps that my noble friend Lord Glenkinglas took about it ten years ago, and also the Labour Party, although the Scottish Labour Party was completely against devolution until right in the middle of the last General Election when they turned a sudden somersault, I think with the most wonderful acrobatic agility. But, before they went out of office, it was a Labour Government which appointed the Kilbrandon Committee, which reported on the matter more than a year ago. I think that our main purpose should still be to try to find out how much agreement we can achieve.
There is one point (and it is the only point on which I want to say a few more definite words) on which I am afraid I cannot be so amenable or accommodating. It has already been raised, I am glad to say, by the noble Viscount, Lord Thurso. It is the question of proportional representation. Until the White Paper was published I think that we all assumed that any scheme which provided for an elected assembly or Parliament in Scotland would provide for proportional representation, because of all the recommendations in all the Reports, and not only the Majority Report, but also the Note of Dissent by the noble Lord, and

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Sir Alan Peacock. The Government very fairly set them out and quote them in the White Paper. The main Report recommends:
"Each assembly should consist of about 100 members elected by the single transferable vote system of proportional representation for a fixed term of four years."
I like even more the way it was put by the noble Lord, Lord Crowther-Hunt, in his Note of Dissent, which I have already quoted to your Lordships in another context in the last Parliament. He says on page 101:
"There will be a single chamber assembly of about 100 Members. They will be elected on the single transferable vote system of proportional representation. This is so we can be sure that minorities will be fully represented—which is particularly important in those areas where recent voting patterns suggest one Party could be in a ' perpetual ' majority."
I think that contains more wisdom in a few short sentences than any other assessment of the subject which I have read. The Government White Paper again reproduces what they call "Scheme C", which is a variation of recommendations by, I believe, the noble Lord, Lord Foot, and Sir James Steel, whom the Government quote as saying:
"Scotland, Wales and the eight English regions would each have an assembly of about 100 members directly elected by the single transferable vote system of proportional representation for a fixed term of four years."
I was therefore very disappointed to find that the Government, in paragraph 31 on page 9 in what they call "provisional proposals"—and I hope that "provisional" means that they have not yet irrevocably made up their minds about this because I believe it to be of paramount importance—say:
"Membership will be on the same system as membership of the United Kingdom Parliament, ie. a single member elected for a geographical area. This is simple to operate, easily understood by the public and provides for the clear and direct accountability of the elected representative to his constituents."
I would be quite willing to endorse that last sentence. It is simple to operate, easily understood by the public and also provides for direct accountability of the Member to his constituents. However, if I had written this White Paper I should have added: "It is also completely out of date and entirely unfair, if there are more than two Parties contesting, and it is the most effective and
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ingenious method that could be devised for ensuring that the Labour Party may frequently obtain a considerable majority of seats with a minority of votes"—which indeed has happened in the Imperial Parliament five times in the last 29 years. This is a matter on which we ought to take a firm attitude. When we are starting a new Parliamentary system, there is surely no case for saddling the people with this out-of-date and discredited system of representation.
There are many reasons why this system is disadvantageous. For one thing, if there are more than two Parties—which I think would almost certainly be the case in Scotland, perhaps there would even be five or six Parties, I do not know—and two of them are predominant then those two predominant Parties would spend their whole time, under our present method of election, trying to get 2 per cent. or 3 per cent. of the vote swing which can convert quite a substantial minority into a good working majority. If both of these predominant Parties were spending their whole time during the lifetime of a Parliament trying to discredit each other so as to get 2 per cent. or 3 per cent. more of the votes next time, they could not be paying enough attention to the good of the country. I believe that is one reason why our economy in Britain has lagged so far behind the economies of other free democracies in Western Europe which have not retained out-of-date electoral systems such as the system we still have in Great Britain. Of course, 2 per cent. or 3 per cent. of the electorate may be the most intelligent or thoughtful percentage, but they may be the most thoughtless and unintelligent percentage. One cannot tell; however, they are certainly a very small percentage, and it is certainly more conducive to Parties cooperating in the national interest and refraining from excessive Party controversy that we should have a more up-to-date and scientific method of election.
I do not wish to pursue the matter at this moment, but I think it right to tell your Lordships that I believe this to be a matter of the first importance. I personally could not support any measure for devolution in Scotland which meant introducing into Scotland this out-of-date and unfair method of election, as is proposed in the White Paper.
4.28 p.m.
Lord RAGLAN: My Lords, the noble Earl, Lord Perth, indicated me as coming from Wales. I do not come from Wales, but I represent the Kingdom of Gwent, which is an ancient entity, older than Wales. There is a great deal of independent feeling in Gwent, but for the moment we are content to remain within the Union. I shall strike a dissenting note from what has gone before in this debate, because I do not think the Government's proposals are nearly so innocuous as noble Lords may have led us to believe this afternoon; nor do I believe that they will have the effect that is hoped for. I do not feel, with respect, that they have yet grasped the root of the problem in Scotland, and, indeed, in Wales.
My mother was Scotch, or Scottish as it is now termed. As a small boy I sometimes wore a kilt of Hamilton tartan, and I well remember the regret with which I saw it pass to my younger brother. I have the happiest memories of long holidays in Lanarkshire and Aberdeenshire, and I have a longer familiarity with parts of Scotland than with anywhere else except my own region of South-East Wales and the West Midlands. But my mother thought that there was something unusual about Scottish people—though I must say I never noticed it; and my increased knowledge of people in other parts of the United Kingdom has confirmed that there is nothing about Scottish people which would not in normal circumstances be ascribed to ordinary regional or sub-regional variation. The study of origins and settlement patterns in Scotland of course supports this view.
Yet romantic tradition—and it is a recent tradition hardly earlier than Victorian times—demands that we should think otherwise. In 1885 the Scots had become deemed to be so different that a Scotch Secretary (that is what he was called) was appointed; and the next year the Scottish Home Rule Association was founded. In 1926 he was promoted to Secretary of State for Scotland and thereafter several Home Rule Bills were presented during the 'twenties. In 1939 the Scottish Office in its present form was created and as a result the first Scottish Nationalist MP was elected in 1945. Yet today, after all these special institutions have been created for Scotland, when Bills
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pertaining only to Scotland come regularly through the House, when there are frequent debates on Scottish matters spoken to mainly by Scottish Members, the Motion on the Order Paper today calls for "some form of devolution" being necessary. It seems to me that the meaning of the word "devolution" has been stolen by a kilted hob-goblin, and we all ought to have a really good look at what the matter may be.
We would be deceiving ourselves completely if we were to pretend that the demand for a separate Parliamentary assembly for Scotland, such as it has transpired that the noble Earl has been asking for today, is anything other than a nationalistic demand. The appointment of Secretary of State and the formation of the Scottish Office, and so on, can all be and are frequently rationalised as having been done for practical purposes; but the reality is that they were done for Scottish national prestige. People know this, or if they do not know it they feel it. Instead of these measures taking the heat out of the situation, as each time it was imagined they would, every measure directed at separate treatment has generated the demand for more. For a hundred years now, Parliament has increasingly endorsed and encouraged the notion of Scottish separation. It is interesting to note that in 1711 Daniel Defoe criticised the post of Secretary of State which was later abolished. He said it would prevent the union from becoming a reality by preserving the separateness of Scotland. The Scottish Secretary is in a hopeless position in opposing the Scottish Nationalists, because by virtue of his post he is quite a long way along their road already. So we should not be surprised that there is a Scottish National Party.
Furthermore, it is not perversity but logic that the Party in Scotland which is most attracted to the idea of a Scottish Parliament—the Conservatives—should have lost most heavily to the Nationalists; just as I correctly forecast that the Labour Party's devolutionary plans for Wales, which were aimed at retaining Carmarthen against the Nationalists would have the effect of getting the Nationalist elected; and, indeed, I see him below the Bar at present. The reason is that the more you embrace Nationalist beliefs the more credible the

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Nationalists become. Very little attention has been given to the question of whether the amount of devolution already acquired for Scotland has really done good for the Scots themselves. Even with all the independence of action vested in the Secretary of State and with an over-representation of MPs in comparison with people in England, the Scottish economy is always in the news for being particularly impoverished. That greater devolution would improve this situation is a claim made without any evidence at all. What has been happening is of course that with Scottish affairs being left more and more only to Scottish Members, the rest of Westminster has increasingly lost interest. That answers the point made by the noble Lord, Lord Glenkinglas, as to why Scotland does not get the attention that it should.
Lord GLENKINGLAS: My Lords, may I say that the point the noble Lord made regarding my remarks was incorrect. I did not say that the Scots were neglected: I said that people in Scotland felt they were neglected, which is a different point.
Lord RAGLAN: I accept the noble Lord's intervention. My Lords, the practical effect of creating a Scottish Parliament would be to increase that lack of concern and the will for concerted cooperative action which matters a great deal especially in a country as small as this; and the men of vision who created the Union had it very much in mind. They must be turning in their graves.
I know that I am not the only member of the Labour Party to grieve deeply that an influential section of the Party has been so diverted, if only momentarily, by the apparent liberalism which they see in nationalist slogans such as "setting free" and "self-government" and other typical emotive phrases. They have been so taken with this that they have not seen the illiberalism inherent in the doctrine or even in their own plans for devolution. Surely if devolution of Parliamentary power is good for one part of the United Kingdom, it is good for all parts.
I have heard that there are plans for Scotland to have a Parliament with power to raise and spend its own taxes, but to send no fewer MPs to Westminster. So English MPs are to have even less say
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in what is done in Scotland, but Scottish MPs are to have power without accountability in England. It would be a means of maintaining a number of Labour MPs at Westminster. But it is an illustration of how trying to cope with the Nationalist cuckoo can drive normally democratically minded people to do what they would never contemplate in normal circumstances—I almost said "in real life". It will drive them into more and stranger corners unless, as I respectfully urge your Lordships, we try to understand this type of nationalism, its origins and its sentiments. Otherwise we shall not realise why the Nationalists cannot be out-bid, outflanked, or otherwise out-done by meeting their demands. They can only be out-argued, and I think it is far the most desirable course for everyone in the country that they should be out-argued, and, indeed, that Scotland should join the Union in full instead of, as now, being part in and part out and going further away than that the Nationalists should have their way and Scotland becomes independent.
I know that the Government promised certain things at the Election, and that they are examining certain ways in which a Scottish Parliament might be set up. But it is not too late to warn them that if they go ahead they will increase the Nationalist sentiment. That may be what they, or some of them, wish to do, and they think that in some way they are being liberal and generous. I am sure they have good intentions; but in fact they would be encouraging a creed which is more hostile and destructive than perhaps they know, because it is founded on a truly mystic attachment to historical enmities and nineteenth century theories of race which have been totally disproved.
In due course your Lordships may have the opportunity of debating a Motion I have down on the Order Paper on the phenomenon of Welsh and Scottish nationalism. It is a subject which deserves to be studied in depth and is of the greatest relevance to this debate. For instance, the reason for the difference in political complexion between the Welsh and Scottish Nationalist Parties becomes clear when seen in the context of feudal military history and nothing more recent than that. But I will content myself now (and I hope your Lordships) by saying that nationalism is not nearly as old an

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idea as most people seem to think, largely nineteenth century. It is a terrifyingly powerful creed—as powerful as a religion and more militant. Some Liberal ideas are embodied in it, and on the other side of the coin it has shown itself to be the most potent force for racial hatred, xenophobia and war that the world has known. The Common Market has really been forced upon Europe to stop us, who invented nationalism, from tearing ourselves to pieces with it. Economic union will ensure this, provided of course that we are each not too nationalistic in our demands over sharing the cake.
The Scottish Nationalists talk of economics, especially since the discovery of oil in the North Sea. They recite talcs of woe, all being the fault of the English—the noble Earl appeared to do this this afternoon. They also talk about the complexities of modern government and all those things on which my noble friend Lord Crowther-Hunt is such an expert. But it should be understood that their beliefs were never originally formed with the real idea of helping people in Scotland or the Scottish economy. What matters first to a Scottish Nationalist is that Scotland and England historically were separate territories, frequently at war. From that, rationalisations follow with theories of differences in race, national character and the rest, which arc said to be so marked that we can barely get on together. After that comes the talk of self-government, which is seen as a matter of national status, and then come economics. Violence of a militaristic kind lurks in the background—it has been referred to already by the noble Earl, Lord Perth. A Scottish Nationalist recently wrote me a letter, much of which I agreed with, though not on his salient points. But as I was reading it and thinking what to reply, I came across the phrase:
"and if we do not get our independence, you will realise that Scotland's cities are very suitable for guerrilla warfare".'
I wrote back and told him he was immoral, but I do not know whether he realises it.
I do not think there is a more ridiculous creed than historico-romantic nationalism, nor hardly a more unpleasant one. The curious thing is that if the alleged differences that Nationalists are always quoting were real and occurred in any other
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part of the world we should all be condemning them and doing our best to mitigate the resulting friction. But thousands of people subscribe to such false beliefs, and even encourage them, because they have been brought up to them as convention and have never questioned them. Thus, the Kilbrandon Report on its first page refers to the Scots as a "race", after which there is scarcely need to read further. Here we are in this tiny island, all mixed up like currants in a pudding and a Royal Commission actually endorses the notion that because a line was drawn here or there in the aftermath of some mediæval fracas the people on either side of it are of different races and therefore should be governed differently. My Lords, this is bad advice, given for a bad reason. If the Government want to take it, perhaps it is because what they are going for, stage by stage, is an independent Scotland. That would be the line of least resistance, in spite of the close cultural ties between England and Scotland, because romantic nationalism is more powerful than cultural ties and is more in fashion as an outwardly liberal cause.
I must say that there is something very engaging if not very dignified, in the picture of Robert Bruce, William Wallace and Bonnie Prince Charlie, all dressed by George IV's tailor, towing a separated Scotland out into the North Sea behind an oil drum. And I would wish the separatists luck because, although I detest their phoney cult, I admit their logic, which is that if one believes that Scotland is a nation, then a real self-governing territory it should be, instead of its inhabitants being governed by the present departmental hotch-potch—I beg the pardon of the Scottish Office—by which I suspect that the Scots get the worst of both worlds, or by a contrived prestige Parliament which would not last long before the next upheaval.
My Lords, separation would be a tragedy because a political union is always stronger and gives more opportunities than its several parts; and the Union with Scotland, as with the inclusion of Wales earlier, has been the most humanly rewarding and materially enriching association for everyone in these islands. I care about it. It matters to everyone. It is coming to the time when people in Scotland will have to choose which way they go, for nationalistic measures,

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although they may be dressed up and presented as regional ones, only exacerbate the situation. There will soon be no room for quasi-Nationalists or for sentimental semi-separatists, and I would go out and explain that to people in full, and why, and give them time to think about it and then see what they say. I have a great faith—I hope not too great—in reason triumphing eventually over subjective prejudice, and I trust that my speaking in this debate will contribute to that; and with the noble Viscount, Lord Thurso, who said it just now in a different context, I would say it is never too late to do the right thing.
4.46 p.m.
Baroness ELLIOT of HARWOOD: My Lords, I followed with great interest the speech of the noble Lord, Lord Raglan, who is associated with Wales, and I agree with the noble Earl, Lord Perth, in that I wish that in this debate we had more of your Lordships speaking who are not intimately associated with Scotland, as I and many others are. This is not a narrow subject to be confined only to those people who live and work, as I have done for 30 or 40 years, in Scotland. It is a matter which concerns the whole of the United Kingdom and I should have welcomed very much indeed speeches from any other Members of your Lordships' House who do not necessarily have interests and work in either Scotland or Wales. However, we have had extremely interesting speeches and I have been enormously encouraged by the noble Lord, Lord Crowther-Hunt, whose theme throughout his speech was that he wishes, and the Government wish, to maintain unity.
My Lords, I wish to maintain unity. What the noble Lord, Lord Raglan, has said about the dangers of narrow nationalism is something which we in our lifetime have seen developing in so many parts of the world with such disastrous results. It will be absolutely tragic if we suddenly find this situation arising here. The noble Lord has rightly said—and I do not want to prolong the debate by going back into the past—that, after all, we had 300 years of war between England and Scotland. In your Lordships' Library is a copy of the Treaty of Union. It would be tragic if in 1976 or 1977, or whatever the date might be, we had to break that Treaty of
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Union simply because of administration or, in many cases, because of a wrong view of what we in Scotland are really wanting, which we would be able to get by far simpler methods.
We have had very interesting speeches from the noble Lord, Lord Crowther-Hunt, the noble Viscount, Lord Thurso, and the noble Earl, Lord Perth, and I shall not speak for very long. But I want to ask one or two questions and make one or two comments which I hope may be helpful to the Government. There is, as Lord Crowther-Hunt said, this great problem of finance. I make no suggestion about how the assembly in Scotland shall be financed, but it is certain that 5½ million people will not be able to finance what we hope will be all the great developments in Scotland, and we must have and, so far as I am concerned, will welcome, close co-operation with the United Kingdom on finance. Equally, in trade and industry it would be most unfortunate if a narrow form of national development were to replace the big developments which are going on in Scotland today and which involve the United Kingdom and those further afield.
Any artificial nationalistic restrictions on trade or industry, or developments of any kind, would be greatly to the disadvantage of Scotland. Not only would they be to the disadvantage of Scotland, but they would also be to the disadvantage of the whole of the United Kingdom. I am most anxious that we should develop all of our industries, whether they are new industries in the electronics field, or in oil, or wherever, on the basis that this will be to the benefit of the whole of the United Kingdom, and possibly to the benefit of other parts of the world as well. From the point of view of management, whether these industries are based in England or in Scotland matters, in my opinion, very little indeed. What matters is that they should be well managed, that they should develop and that they should make a great contribution to the general economy of the country which, as we all know, is in a very parlous state at present.
If I may turn to the question of local government, it is very unfortunate that the timing of the Kilbrandon Report and the timing of our plans for an assembly should have been reversed. Speaking

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as somebody who is involved in local government but who by May of next year will no longer be involved, what I mean is that we are passing over all our responsibilities in I hope as good a manner as we possibly can to the new tiers of local government and that it is a great pity that the suggestions for the assembly and the suggestions for the reorganisation of local government should have clashed in this way. I am one who supported the noble Lord, Lord Hughes, when we had our debate on the reorganisation plans, particularly with reference to the Strathclyde Region. It is a great pity that the reorganisation cannot be altered now. I can see the difficulties, because I know how far matters have gone; it would be difficult to stop the reorganisation and to create the four Regions that we wanted when we discussed the matter. Possibly it could be done but it would not be easy, and if the creation of four Regions took place there would be a period of great disruption. Nevertheless, it will be extremely difficult to fit the Strathclyde Region into the plans for an assembly.
I wonder whether the noble Lord who is to reply to the debate can tell us how the plans for the new assembly will fit in with the Regions. Will there be new constituencies for the Scottish assembly which are based upon Parliamentary boundaries or upon the boundaries of the tiers for local government elections? How will the voting be arranged? Will there be a Parliamentary vote on the present basis of one man, one vote? Will there be voting for the Scottish assembly on another basis? Will there be voting for the regional representatives on a third basis? Will there be voting for the district councils on a fourth basis? We do not yet know how the community councils will be elected, and that is an additional factor to take into account.
My Lords, if these complicated matters are put before the electors, then, quite frankly, having taken part in something like 14 contested elections in my life and knowing what a nightmare it is to get the electorate to understand even the most simple electoral forms, there will be a real problem. I do not agree with the noble Earl, Lord Dundee, when he speaks so strongly on the subject of propor-
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tional representation. This is not the moment to discuss that system, although it has been discussed many times. However, do not let us forget that there are countries in Europe which have always had proportional representation. I think I am right in saying that in France there were 22 Governments between the end of the Second World War and the time when General de Gaulle took over the French Parliament, and one of the reasons for this was that the French were so fed up with their Parliamentary system. This could happen anywhere. I would not be in favour of having proportional representation to the extent to which it is carried on in certain European countries, although the alternative vote or some other modified system might be advisable.
My Lords, I do not wish to encourage a great number of Parties in Scotland. The noble Lord, Lord Hughes, knows as well as I do that one of the things which we are best at is arguing. You can argue about almost anything in Scotland, particularly if it has a religious flavour. To encourage people to argue indefinitely and to argue with each other, and to encourage them to think that each small group has a right to be represented in Parliament would, in my opinion, create complete chaos. Therefore I say to myself, "Let us make this as simple as possible". We had a slogan during the war which ran, "Is your journey really necessary?" I feel inclined to ask, is all this organisation really necessary? I think that anything the Government are able to put forward to simplify matters will meet with great support.
One other problem with regard to devolution I should like to raise concerns the rural areas of Scotland. Compared with the industrial belt, they are enormous in area. None the less, the great proportion of the population lives in those industrial areas. This is a well-known and well-appreciated fact. Will there be any way in which in the assembly the importance of the rural areas in the devolution plans can be strengthened? The Highlands and Islands Development Board helps the Highlands enormously, and I think that everybody would say that it has been very successful. Those of us who live in the rural areas of the South—in the Border country, the great areas of Dumfrieshire, Wigtownshire and

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Ayrshire—have very few people to speak up for us. However, the noble Lord, Lord Hughes, knows that I speak up quite often! In our Border areas we suffer very much from not having any real say in the government of Scotland, for the simple reason that although we cover a big area of Scotland we are sparsely populated. I hate to see the people leaving the villages and the rural areas to go to work in the towns, all because of transport difficulties. Transport is indeed a problem in country areas and nowadays, because of the rise in the cost of petrol, it will be absolutely killing to the country people. I have been questioned about this already in my own area. People ask what they are to do. We have no public transport in the Borders. Our nearest airport is 50 miles away and our nearest station is 50 miles away. Every time that I drive my car to board the train at Berwick or Carlisle I have a journey of 100 miles. That also applies if I drive to the airport in Newcastle. It will be a very big expense for all of us, and I hope that so far as the question of devolution is concerned the imbalance between the rural and urban areas will be looked at very closely. If it were, I think it would be a great help.
May I suggest to the Minister that when the Committee on devolution to which he referred is considering these matters they might look into the question of the rural areas in relation to the influence they might have; and, let us face it, if the development of agriculture and other developments in rural areas are to go ahead, our rural voice in the assembly will have to be heard in no uncertain terms.
Finally, my Lords, I do not want Scotland to put up barriers to protect a narrow nationalism. This is something which, as the noble Lord, Lord Raglan, said, is bedevilling the world today. In the past, Scottish people have spread themselves all over the world. No part of the United Kingdom has been more enterprising or more far-seeing. We have provided the United Kingdom with Prime Ministers, great scientists, doctors, scholars and members of many other great professions. I do not want the threat of nationalism to restrict our contribution to the United Kingdom and to world affairs.
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I have heard of horrid things being done today to English children being educated in certain Scottish schools. How widespread this kind of quarrelling is I do not know, but in any case it should not exist. It is monstrous that children coming from England, their parents perhaps having been transferred to Glasgow or some other city in connection with one of the big developments, should, on attending Scottish schools, find themselves being laughed at or being treated in some way differently from other children. I hope this will be stamped out at once. We in Scotland have always welcomed people from the United Kingdom and from overseas. In the very early days, going back to the days of Mary Stuart, Frenchmen and Frenchwomen used to come to Scotland and we sent our students to universities in Paris and other parts of France. Today, we have visitors from all over the world coming to Scotland—from Europe, from America, from the East—and they spend their time with us sightseeing and travelling. This year I have had two Israeli friends who have spent three weeks touring round and stopping anywhere they felt inclined in Scotland. They have told me they had never been happier and they had never had a more kind or generous welcome. Let us do nothing to spoil our reputation for hospitality and friendship.
The Government have a difficult job to plan devolution. As the noble Lord, Lord Crowther-Hunt, said, the Report came out with at least six different plans and also quite a large minority volume. I believe the Government are right to stress the vital importance of the United Kingdom and the need to preserve our Parliamentary system. I am sure that we on this side of the House all wholeheartedly support this. With this basic principle accepted I believe it will be found that we on this side of the House will do all we can to help the Government and the noble Lord to plan wisely; but it is wise policy, not wild slogans, which are needed today.
5.3 p.m.
Lord TAYLOR of GRYFE: My Lords, the Motion before us today calls for some form of devolution, and I suppose we are all in favour of some form of that. I think the call for some form of devolution is the healthy reaction of

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people to a society which is increasingly dominated by large scale organisation, sometimes multinational organisation, where economic activity frequently condemns people to dull impersonal tasks, and in the field of politics the greater degree of centralisation diminishes the significance of the democratic processes. It is in this situation that "small is beautiful" becomes a favourable idea, and the anti-growth school in economics begins to take hold. In industry there is a demand for devolution in the sense that there is a greater cry for worker participation and involvement, and in politics we seek new constitutional arrangements to satisfy this demand. The Scottish assembly is the latest exercise in satisfying the demand for making democracy more effective.
I think we are in great danger—at least, we were in great danger until the noble Lord, Lord Raglan, spoke—of claiming too much for the Scottish assembly. I was—as I always am—deeply moved by the eloquence of the noble Viscount, Lord Thurso, who with his usual eloquence exaggerated the possibilities and the potentiality, and the great release of creative activity which would inevitably flow from the establishment of the Scottish assembly. In fact, I believe that one of the reasons for the present upsurge of Scottish nationalism is not due to a desire for self-government, but is substantially due to the relatively poor performance of the Scottish economy; and it may be that because of our obsession with constitutional change we shall overlook some of the devolution which is possible without the complicated processes that we are discussing this afternoon.
Like the noble Earl, Lord Perth, I was interested in the submission of the Scottish Council for Industry. I am a member of the executive of that Council and have some responsibility for the policy document to which he referred. The Scottish Council for development and industry stated that what they were concerned about was not so much the constitutional changes in the Scottish assembly; they were concerned about economic devolution because, as has already been said, regional policy has been directed in the past towards creating more jobs, and more jobs are frequently created by decisions made else-
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where. As a result, Scotland has been a great centre of the branch plant economy.
But creativity and innovation by management is not exercised in that kind of environment. So if we are to achieve economic devolution there must be a new attitude to moving headquarters of industry into the regions, and not simply regarding the regions as places to put the branch factory. So before we claim too much for the Scottish assembly and make the constitutional changes, let us examine what is now possible in terms of devolution. Economic devolution such as I have described is now possible and should be put in the forefront of any discussion on devolution.
Secondly, I should like to say a word about what I regard as cultural devolution, for lack of a better term, since I believe that any form of constitutional change must only be regarded as a means to an end. It should, in fact, be concerned with its impact on the condition of our nation and its spiritual resources. I live in Scotland and have lived in the heart of the industrial area of Scotland and, if I may say so in your Lordships' House this afternoon, I have been impressed by many of the speeches that have been made today. But many have been based on a rural background, and it is significant that the majority of the people in Scotland live in the industrial areas. The people living in those industrial areas have shown less enthusiasm for the current fashion of Scottish nationalism than people in the rural areas. I believe we should think a little about what the Scottish assembly might in fact achieve.
In Scotland today we suffer from a great number of ills, and it is very easy for the Scottish Nationalists to claim that these ills can be attributed to English rule. The feeling is that if we could only get rid of this English rule all our problems would be solved, which of course they would not. I came through the City of Glasgow on Monday evening. It was a dirty night, as it frequently is in Glasgow. It was snowing and sleeting and I watched women, who had taken their children Christmas shopping, with their babies by the hand, waiting in a freezing atmosphere, trying to get home, because municipal transport workers had decided to

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call a strike as someone had been dismissed for having a bad attendance record in the municipal garage.
I was interested in the decision the other week of the Hoover Company which came to Scotland and had just decided, after an 11 weeks' strike, that it would suspend any further investment in Scotland, including a £15 million investment in Lanarkshire with the prospect of 3,000 jobs. I was interested, too, that to make themselves less vulnerable the Hoover Company decided to transfer part of their plant elsewhere in future. But with, I suppose, a great resurgence of Scottish feeling, the workers determined not to Jet them transfer any plant elsewhere. These ills are self-inflicted.
We could also discuss the terrible tragedy of the teachers' strike that is going on with considerable encouragement from the Scottish Nationalists, denying thousands of children the opportunity of sitting their examinations this year. This is being done in Scotland; it is not happening in England. Scottish Nationalists claim that we are all right; we can coast home on North Sea oil, on the slogan, "Will you be a poor Briton or a rich Scot?"—a selfish slogan which is alien to the whole traditions of the Scottish people. So we have to be careful of the kind of things we are encouraging in getting on the bandwagon of Scottish nationalism.
The cultural revolution, or devolution, which I should like to encourage consists in fostering these organisations and institutions which protect and cherish our national heritage, in cultivating these qualities in our national character which have gained us respect—respect for our democratic national Church, the preservation of the best elements of Scottish law. We have a culture in Scotland and we should cherish it, and resist some of the factors in modern society which are destroying that culture. The present upsurge of Scottish nationalism, the demand for self-government with its selfish slogans bordering on occasions—as was said by my noble friend Lord Raglan—on racism does nothing to improve the economic situation in Scotland. It has created uncertainty about investment. I met a Glasgow lawyer the other day who told me of a contract which had passed over his desk
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that day from an overseas company and contained the interesting clause, "In the event of Scotland seceding from the United Kingdom, the above contract will be declared null and void". This may sound amusing but it happens to be a fact.
The present enthusiasm for Scottish nationalism is sometimes well motivated and supported by reasonable people, but it has its other face. I do not believe that the separation of Scotland from the United Kingdom can isolate it from the troubles of this world. Yet I believe that the establishment of an assembly can hasten this eventuality. There is in the United Kingdom at the moment a mood seeking the disintegration of the United Kingdom. It is part of the antidemocratic process that is going on. There is a great danger in the upsurge of separatism and nationalism of destroying the centre. I know that the Scottish Nationalists may rejoice in that prospect, but it is not a prospect that fills me with joy.
I should like to ask the noble Lord, Lord Crowther-Hunt, and the noble Lord, Lord Hughes, who will be winding-up here tonight, the question: Do you think you will satisfy the current tide of the Scottish Nationalists who thrive on the fact that each day in the Press and on TV there are reports of Britain's desperate plight, while the Nationalists offer the prospect of safety and security based on the vast incomes of North Sea oil? They will not regard as enough an assembly with the proposed powers. It will be only the first step towards the achievement of complete independence, and it will be extremely difficult to prevent that taking place. It would be useful if there were a great educational exercise carried out in this country, placing before the people in Scotland the effect and impact of separation. It certainly does not mean that there will be some sudden increase in wealth in Scotland itself.
There are difficulties in the proposed assembly and there are vast areas of conflict. Some of them have been brought out in this debate and, like others, I am sorry that there are few English Members of your Lordships' House present, for we are discussing a constitutional change which affects the place of the United Kingdom Parliament. If the assembly is

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to discuss the matters presently handled by the Secretary of State—education, health, prisons, housing, agriculture and so on—what is the position of the Secretary of State in that assembly? Is he to be an elected member of' the assembly? Is he answerable to the assembly and does it not diminish—if these powers are to be discussed and responsibility is to be discharged in Edinburgh—the influence of the Secretary of State in the United Kingdom Parliament and in United Kingdom politics? What is to be his relationship with the United Kingdom Cabinet of which he is a member? Let me take the position of the 71 MPs who are to be retained in the proposals. If the assembly in Scotland is to discuss agriculture, health and other matters, which are the province of the Secretary of State, does that mean that the 71 Scottish MPs elected to the Westminster Parliament will be discussing health, education and other matters in relation to England? It is an extremely complicated and difficult situation and I wish the noble Lord, Lord Crowther-Hunt, well in resolving some of these problems.
Obviously, the new assembly will have powers to levy taxation and allocate resources. Aneurin Bevan once said, "politics is about priorities", and I suspect that a Labour-dominated assembly would have very different priorities from those of Westminster. Yet Kilbrandon insists that the whole structure be cast within the ultimate power of an English, or a British, legislative assembly. I can see continual tensions emerging in that situation and even a national Clay Cross situation may not be ruled out.
There is another danger that the new Parliament—and this has been mentioned by several Members of this House who have spoken today—will run into difficulty with the regions. One speaker said today that it was arrogant of the Strath-clyde Region—and I speak with some sympathy for the Strathclyde Region—to suggest that the assembly should be delayed until the new regional authorities had established their position and had taken up office in May 1975. I think it is perfectly reasonable, now that Parliament has agreed that the new regions should exist and should operate, and people have found posts and have been appointed to their tasks, to suggest that the assembly should be delayed until the new regions
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have become well established. Otherwise, you may have a vast bureaucratic jungle with powers not too clearly defined. New organisations of this magnitude take time to settle. I feel that this may contribute to bringing democratic government into disrepute, rather than strengthening it.
My Lords, Kilbrandon proposed a Scottish assembly and the two major Parties, largely under Scottish Nationalist pressure, have fallen into line. Kilbrandon diagnosed the problem as being a demand for self-government due to dissatisfaction with government structure, when in my opinion it was due, first, to dissatisfaction with economic performance; and. secondly, to general dissatisfaction existing in the land with the two main Parties. I suggest that the assembly will not itself solve these problems. The major Parties are committed to the assembly, and I suppose it will be set up. I wish it well. All of us who are working and active in Scotland will try to make it work effectively. But I can see very grave dangers in the line we are now taking. It could readily lead to a demand for ever-increasing powers being given to the assembly, leading to the ultimate disintegration of the United Kingdom as we know it.
5.21 p.m.
Lord STRATHCLYDE: My Lords, like others who have spoken I am grateful to the noble Earl, Lord Cromartie, for enabling us to express our views on devolution for Scotland by putting this Motion on the Order Paper. In the course of our debate I have felt that I was likely to be akin to the Scottish soldier taking part in a march past with his mother looking on; she suddenly turned to her neighbour and said, "Look. Maggie, they are all out of step but our Jock". But I have taken some comfort from the words which have fallen from the lips of the noble Lord, Lord Raglan, the noble Baroness, Lady Elliot of Harwood, and the noble Lord who has just resumed his seat.
My Lords, as has already been said, the Motion calls attention to the necessity for some form of devolution of government for Scotland. I cannot believe that there is any such necessity. For some minor adjustments in the existing arrangements there may be a case, but none, in my judgment, for the scheme set out in the White Paper. The Royal Commission on the Constitution was set up,

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I think, in 1968; the noble Lord, Lord Crowther-Hunt, said it was 1969. At any rate, the Royal Commission reported in October, 1973. Even for a Royal Commission, four or five years is a long time to deliberate before submitting its Report. It seems to me possible that the cause was that they could not find very much wrong with the existing arrangements, at least so far as Scotland was concerned.
Since the Scottish Office was established in Edinburgh in 1939, as we have been told, a very wide measure of administrative devolution has taken place. The White Paper—I am referring to Cmnd. 5732—lists the responsibilities of the Secretary of State for the formation of policy and its execution in regard to agriculture, education, local government, health, housing, environmental services, social work, police, fire services, and a great deal more. I will not bother your Lordships by referring to the others, but I would ask your Lordships to compare what is said in paragraph 5 of the White Paper with the list appearing in the Appendix, page 12, paragraph 3. We are told in that paragraph that legislative power is to pass to the Scottish Legislative assembly. But I refer your Lordships to paragraph 2 of the Appendix:
"The ultimate power and sovereignty of the United Kingdom Parliament would be preserved in all matters ߪ"
At present, all Scottish Bills are dealt with by the Scottish Grand Committee, by the two Scottish Standing Committees, and, thereafter, are submitted to Parliament for approval. I am not aware of any occasion when Parliament did not so approve.
So far as legislation is concerned, the duties and responsibilities of the Secretary of State are merely to be transferred to the assembly, and those of the Scottish Members of Parliament at Westminster, so far as Scottish affairs are concerned, are transferred to the members of the Scottish assembly also. United Kingdom Departments with significant responsibility in Scotland now have offices in Scotland, and have had them for a long time. They have worked in the closest co-operation with the Secretary of State and his officials. I understand that the work of those with offices in Scotland is to be transferred to the assembly. In that connection, I notice
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that frequently in the White Paper the assembly is called the "Scottish Government". Two electricity boards have always been the responsibility of the Secretary of State, and they will no doubt also be transferred to the Scottish Government.
My Lords, so far as finance is concerned, the Scottish Government are to get a fair share of United Kingdom resources. Hitherto, under the Goschen formula and others, we received more per head of population than elsewhere in the United Kingdom. As a Scot, I can only hope that that may long continue, but I have my doubts on that point. Here again, things remain very much as they are, with the exception that the Scottish Government will be allowed freedom to allocate expenditure according to their chosen priorities. Possibly they will be given limited powers of independent taxation. I am sure that that is something that will be much welcomed by the Scottish taxpayers.
My Lords, is this transfer of duties and responsibilities from one set of elected Scottish Ministers and elected Scottish MP's to another set of elected Ministers and elected MP's really worth all the fuss and expense that will result? I understand that plans are already being studied and sites looked at for the placing of a new parliament building somewhere in Scotland. But is it really true, as is stated, that the proposals in the White Paper will bring great benefits to the people of Scotland? Will the proposals really give them a more decisive voice in the running of their own domestic affairs? I wonder! I am quite sure that there are many others who are wondering about that, too. For the power of the purse, notwithstanding the fair shares (which I understand will be decided by an Exchequer Board), will remain at Whitehall.
The scheme for devolution comes not from any feelings of generosity or of great friendliness towards Scotland by the Government or any other Party, but is a result of the apprehension created by the appearance of the body called the Scottish National Party. I do not believe that these apprehensions are fully justified by the course of events over recent years. As we have been told before, the Scottish National Party was founded in 1928. Two of its members contested seats in the

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1929 Election. In April, 1945, there was a by-election at Motherwell; this was a marginal scat held by the Conservatives in 1931 and by Labour in 1935. It was won by Dr. Macintyre of the Scottish National Party with a majority of some 600. It was a very surprising result and caused some concern in the dovecotes of the Parties. So far as the Conservative Party was concerned—and fortunately from my own point of view at least—our leader at that time was a man not very easily excited or upset, who treated the result as a little frolic on the part of the Motherwell electors. He was right; for at the General Election some two or three months later, Labour regained the scat with a majority of no fewer than 7,800 votes.
In the 1945 Election there were eight Nationalist candidates; in 1951 there was but one. The Party, so far as I can discover, did not contest an Election again until 1964, when it put 15 candidates forward, without meeting any success. They went on trying, with 23 candidates in 1966, but again without any success. Then came the great surprise. In November, 1967, at Hamilton, a by-election caused by the retirement of the right honourable Tom Fraser, who had held the seat from 1943 with majorities in the vicinity of 10,000 or more, was won by the Scottish Nationalist Mrs. Ewing with a 1,799 majority, Again there was concern in the traditional Party headquarters.
In the next year—that was 1968—the Prime Minister set up the Royal Commission, while at the Scottish Conserva-tive and Unionist Conference in May of that year, my right honourable friend Mr. Heath put forward proposals for a Scottish assembly. Three times did the Scottish Annual Conference consider and debate this matter of the assembly. The first time many of the older members spoke, together with many of the younger, but the winding-up was left to Sir Alec Douglas-Home, and the result was never in doubt, since he is so regarded at this Conference that what he says inevitably carries the day. But in the following year, when the younger members of the Party were given free play and none of the elders took any part whatsoever—Sir Alec was not present—the result was a very great defeat for the assembly. In
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the next year it was again debated—with Sir Alec on the platform but taking no part—and the vote was in favour of the assembly. So there is no very great consensus of agreement there.
We come to 1970. The Scottish Nationalists put up 65 candidates; 42 lost their deposits. Mrs. Ewing lost Hamilton, where the Labour majority was 8,500 odd, and the turnover so far as Mrs. Ewing was concerned was over 10,000. But they won the Western Isles, so they had one Member of Parliament. In the Election of February this year, with 70 candidates, the Nationalists won seven seats; in October, with 71 candidates they won 11 seats. One for whose political judgment I have the greatest possible respect, the late Viscount Stuart of Find-horn maintained that whenever we had a Socialist Government in this country, there would be an upsurge of Scottish Nationalism, for whatever may be our views on the Labour Party's policies on nationalisation, we certainly do not like the control of our Scottish enterprises being taken away to England. If one looks at the increases in Nationalist candidates, from one in 1951, to 23 in 1966, to 65 in 1970 (in which year a Labour win was also predicted), the noble Lord's judgment appears to have been largely vindicated.
The two Elections this year followed the same pattern exactly, though the success of the Nationalists, mainly in agricultural constituencies, was no doubt helped by the farmers' grievances with both Labour and Conservative Parties; accordingly they were induced to vote in protest for the Scottish National Party. They were also helped by the confident assertions which the Party gave in connection with Scottish oil and the wealth it would bring to Scotland. The truth, of course, is that there is no such thing as Scottish oil. As I understand it, when oil was discovered in the North Sea, areas were allotted by international agreement to various countries, the countries having their shores on that sea. One of the areas came to Britain. It is, however, fortunate for Scotland that the wells discovered in the British area are closer to our shores and therefore make it more convenient and economical to land the oil there. I hope that it may well bring increased prosperity with it.

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There was one other matter which I think may have helped the Nationalists. That is the fear, unfounded though it was, which was nourished among the fishing populations of the Moray Firth and the North-East coast, that, upon our entry into the Common Market, the fishery waters around our coasts would be open to all the fishermen of the EEC countries. Be that as it may, one really would like to know the attitude of the Scottish people to the assembly as set forth in the White Paper. How is it to be fitted in with the new local government arrangements? Can we find candidates of the desired quality to man our district and regional councils, the proposed assembly, and at the same time provide 71 Members for Westminster and a suitable number to watch over our interests in the European Parliament? What is the estimated cost, not only in regard to remuneration of the members of these various bodies, but also in regard to the services which they will require for the adequate performance of their duties?
The Royal Commission took immense pains in an endeavour to ascertain the attitude of the Scottish people to the proposed assembly and to obtain their views as to its functions and other matters concerning it. But your Lordships will all have found, from reading the White Paper—particularly paragraphs 15 to 18—that the results of their efforts were inconclusive and very disappointing. Some of the highly knowledgeable people and bodies which they consulted were in favour; some were against. Some wanted delays. There was no agreement on what the powers and functions of the assembly should be. Individual members of the public showed little interest; only 170 letters or papers were received. There was no clear majority for any solution, while many expressed no view.
That is the state of informed opinion in the country. So far as ordinary people are concerned, while I meet and mix with all kinds of people, I have never yet had a question put to me about this proposed Scottish assembly. Truth to tell, I find that the ordinary citizen is quite disillusioned, in common terms he is fed up, with politicians. They seem to be constantly moving about with this or that. They have recently reorganised the Health Service. I have been spoken to about that, and then I have been told that we politi-
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cians seemingly place more importance on administration than we do on medical, surgical and nursing skills and care. We have also reorganised local government. I have been spoken to about that, too, mostly in very uncomplimentary terms, with particular reference to the Strath-clyde region. The silence on the assembly speaks perhaps more than words.
It has been said many times that no one really knows what the assembly will do. No one I know wants it. It will not create more health, more wealth. It will not increase the standard of living of the people. It will not help cure the curse of inflation. It will cost a lot of money, leading possibly to further taxation. No one can prove that it will be more efficient than our existing system of Government. So I interpret the silence of the man in the street, the ordinary citizen, as arising from indifference. He sees little in it for himself or for his family. The politicians, he seems to think, must be kept amused, so let them get on with their little game of musical chairs. For myself, I find the whole conception of a Scottish assembly rather nonsensical, and worthless nonsense at that, so far as the needs of our country at the present time are concerned. It may well be preparing the way, as has been said by others who have spoken, for the complete separation of our country from England and the rest of the United Kingdom.
5.41 p.m.
Lord O'NEILL of the MAINE: My Lords, it is with some trepidation that someone from Northern Ireland rises to speak about matters Scottish, but I have done so on several occasions since I had the honour to come to your Lordships' House; and as I gave evidence at the Kilbrandon Inquiry I feel entitled to say just a few words from my "devolved" knowledge. After my first year at Stormont, I was so impressed with the possibilities which a provincial Parliament gave to a provincial area, that I was unwise enough to make a little speech in my constituency which led to a headline the next day in the local paper, "O'Neill in favour of Scottish Nationalists". That was in 1947, so I have not come to these views lately. In my view there has been a long delay on this subject, and I think "your Lordships know why this is. The Tory Party could not

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face the idea of being ruled by a permanent Labour Government in Edinburgh, and the Labour Party in London could not face the idea, as proposed by Kilbrandon, that the number of Labour seats at Westminster should be reduced. Therefore, there was this unholy alliance, and this delay.
I think I am right in saying that there was no debate on Kilbrandon in another place. One of the great privileges that we have in this House is that little gallery we can go to in the other place, and last summer I heard Mr. Jo Grimmond I think on no less than three occasions on Thurs-days when the business of the House was being discussed, asking that Kilbrandon should be debated. So far as I know it was not; but it was in this House, which I think shows the value of your Lordships' House. In that debate I suggested that in order to get Scottish devolution going it would be far better not to carry out that portion of Kilbrandon which suggested that the number of seats at Westminster from Wales and Scotland should be reduced, and I am glad to see that that suggestion was in fact carried out in the little White Paper which came out so conveniently just before the Election.
The noble Earl, who so kindly made it possible for us to discuss these matters tonight, said that he was in favour of real devolution. He was kind enough to show me his remarks, because I am afraid that I arrived a little late. How much I agree with him. May I suggest—and I do so with great humility in view of what has happened in Northern Ireland in the last five or six years—that full Stormont Parliamentary powers should be conferred on Scotland. Just because that system failed in Northern Ireland, there is no reason at all why it should fail in Scotland which, thank heavens! is not burdened with the same problems as Northern Ireland. Take, for instance, our Ministry of Agriculture: we have an excellent Ministry of Agriculture—and I am delighted to see that the noble Lord, Lord Donaldson of Kingsbridge, agrees with me. We stamped out brucellosis in Northern Ireland but, so far as I know, it still exists in Scotland today. If it does not, I am out of date. We have an excellent Ministry of Commerce which has done a wonderful job for Northern Ireland. The British Industrial Development
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Office in New York, under the aegis of the British Consulate General there, was set up in 1960 under an excellent Scottish civil servant and under his deputy, who was my former Private Secretary in the Northern Ireland Government. They did a wonderful job in attracting branch factories—which the noble Lord, Lord Taylor of Gryfe, seems to be so much against—to the development areas in the United Kingdom, and surely it is better to have a branch factory than to have no factory at all.
I was very disappointed when the British Government abolished the British Industrial Development Office in New York three years ago, and I am glad to be able to tell your Lordships that even today, after all our difficulties in Northern Ireland, we now have a Northern Ireland Industrial Development Office in New York because you, my Lords, abolished your own British Industrial Development Office in New York. I have no doubt whatever that as soon as the Scottish Parliament is under way, they will immediately demand that a senior civil servant should be sent to New York to attract these so-called unnecessary branch factories, which may well be the lifeblood of Scotland in the future.
Several noble Lords—including, I am glad to notice, the noble Earl who has just returned—came out in favour of proportional representation. I feel absolutely certain that this would be of benefit to Scotland. Once again let us consider Northern Ireland. There was a fear three years ago that devolution would produce a permanent Labour Government in Edinburgh. We have had a permanent Unionist Government in Northern Ireland, one-Party rule, for fifty years, and it does not work. It would be far better to try proportional representation, and if you, the British people, were prepared to force this upon the people of Northern Ireland, quite rightly, why should you not allow the Scottish people to have it as well? I believe that as soon as the new Scottish Parliament, or assembly, is under way it will demand to have proportional representation, and it may well be that it will come in God's good time, but I think that it would be an act of grace to confer it upon the Scottish people straight away.
Obviously—and many people have said this before—Scottish Nationalism has

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been fuelled by Scottish oil. We must accept that, it is a fact of life; but nevertheless I believe that it would have come. I am sorry, speaking from these Benches, that the Tory Party allowed their clothes to be stolen by the Labour Party because they do not have the courage to continue with their own plans for devolution in Scotland. However, that is a matter of history. Despite the death bed repentance of the Party opposite, it seems to have worked; we have only to look at the results of the last Election in Scotland.
So my message is this: because devolution failed in Northern Ireland, there is absolutely no reason at all why it should fail in Scotland and Wales. I wish it well. I hope that it will be well and truly launched with generosity by the central Government here in London, and not done in a niggardly way so that the new assembly has to demand more and more power as it goes along. I hope that this will be a new venture, a new era. I have said before now that if countries such as Canada, Australia, and America can be run on the federal system, there is no reason why a country of over 50 million people should not be run on the federal system here in Britain. We must all hope that it will work. It is inevitable. There is no point in jobbing backwards. I personally think that it should have happened ten years ago.
5.50 p.m.
Viscount BROOKEBOROUGH: My Lords I am going to follow my noble friend Lord O'Neill of the Maine by asking for the indulgence of this House in having the trepidation to speak on Scottish affairs. But Northern Ireland and Scotland are inextricably mixed up in this question of devolution of the United Kingdom. I believe that whatever solution the Government provide for Scotland, it will have a great influence on matters which arise in Northern Ireland. I welcome the emphasis of the noble Lord, Lord Crowther-Hunt, on the importance of the proper position within the United Kingdom Parliament of each of the devolved Parliaments because on that depends the unity of the United Kingdom; and beyond all other things, for my part, I am absolutely against any dissolution of the United Kingdom as a whole.
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I am delighted that the noble Lord, Lord Crowther-Hunt, emphasised the importance of full Parliamentary democracy and full and proper representation in the Mother of Parliaments in Westminster. I believe that the Government and all Parties here will have to recognise the under-representation that exists for Northern Ireland in this Parliament. It was certainly one of the problems which made easy the attacks on the Executive which was set up under the 1973 Act. It is a civil right belonging to every United Kingdom citizen that he should be fully represented, with properly elected representatives, in the Mother of Parliaments, to deal with matters which are centred here.
There are many forms of devolved Government and the Kilbrandon Report, when it first came to examine Northern Ireland, was impressed by the success of Stormont. I should like to join battle with my noble friend Lord O'Neill of the Maine when he says that Stormont was a failure. Stormont was an enormous success. Nobody has any right to say what the state of Northern Ireland would have been had there not been a devolved Parliament for it in 1920. It is pure speculation. What we can say is that the development for Northern Ireland, in matters which were specially tailored for Northern Ireland, were tremendous. The Civil Service was developed in a way by which I believe all parts of the United Kingdom should benefit. The Report of Sir Edmund Compton as Ombudsman said that the citizens of Northern Ireland had as good—and in many cases better—Administration than the rest of the United Kingdom. So I feel it is quite wrong to say that Stormont was a failure. It was a great success. That it failed proves what a delicate instrument Parliamentary democracy is; and the fact that a concerted effort was made to ensure that a proportion of the population withdrew its consent to be governed by that Parliamentary democracy does not mean that it was a failure, or that that system was a failure.
The first effort to withdraw consent was, of course, made in the revolution organised by the IRA. I do not believe that in 1969 we in this country fully realised that this was to be the end. But surely the Ulster Workers' Council strike proved exactly the opposite; another

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large proportion of the population of Northern Ireland withdrew its consent and therefore it failed. What was proved was that Parliamentary democracy required the consent of the people and not that the system was a failure. Therefore, I ask the Government not to throw the Stormont principle out of the window without careful thought. But I say to the noble Lord, Lord Crowther-Hunt, that there is no doubt that if Scotland has some form of executive, and providing it does not replicate Stormont, it will be easier to insist on some form of executive sharing in government in Northern Ireland, because if we have full democracy in Westminster this Parliament has the right to say what sort of democratically evolved government we should have in other parts of the United Kingdom. It may be different in Wales or in other regions, and we must not be too rigid in our approach to this matter, remembering at all times that we must have consent or, rather, that there must be only a small proportion of any population which withholds consent to that type of evolved government.
I feel, first from experience in the old Stormont and, secondly, from my short experience in the Assembly, that it might be worth while if I told your Lordships one or two of the principles which I feel were brought out during the various controversies. First, the Assembly must be democratically elected. It is not of great importance which way the elected members are elected; what matters is that they must be fully democratically elected and that the people believe them to be so. The second element, which really had a very big influence on undermining the authority of the Executive—and there were many other items—was the feeling that it did not matter whether or not the Assembly supported the Executive; the Executive could be held in place by the Government of the United Kingdom. Therefore, I say that the Assembly must be able to support or withhold support of the Executive, however it be formed. Thirdly, I believe that the Executive must be able—maybe not by a simple majority: maybe it should be a two-thirds majority or some other mechanism—to threaten its elected representatives with dissolution in order to get some form of discipline of them.
My Lords, if proportional representa-
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tion is chosen, may I appeal to the Government not to accept the large proportional representation constituencies that we have in Northern Ireland? They are far too large for any member to serve a community properly. The effect of having a large area, especially if one part of it is populous and one has a majority of votes, is that the Members—seven of them in our case and eight in other cases—are inclined to service an area where the population is concentrated, which is very definitely to the disadvantage of the people. It is, after all, the people whom we are trying to serve.
Further, if one has large areas which stretch right across the country—my constituency is about 90 miles—one finds it difficult for a member to take independent action, because if he depends on being elected he cannot in certain circumstances go against the electorate in his constituency. If the constituency is so large that every action the Government takes offends some very powerful section within it, it removes the independent judgment of the elected member. After all, whether they like it or not, elected members are specialist welfare officers looking after the very detailed legislation and administration which has to go on in the country today. If we do not have a complete copy of Westminster, then it is very important that we do not have something that can be compared to Westminster. Let it be totally different. If it is totally different, nobody can start to chip away at it, or to question whether or not it is a Legislature, or a Cabinet. This, again, was a factor in our downfall.
I should like to recommend the Government—and this involves a very important principle which was raised by a noble Lord whose name I cannot remember—to consider the position of the Secretary of State. In my view, the Secretary of State can have no position within the assembly itself. His position must be within the Cabinet of the Government of the United Kingdom. But, more than that, I believe that there must be a buffer between the Secretary of State and the Government of the devolved Parliament. I am not absolutely certain about this, but I believe that the Government of the noble Lord, Lord Crowther-Hunt, had a very difficult task placed on them after the February Election, in that they were directly responsible, sitting right on top

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of the Northern Ireland Executive. Unless you have a buffer of, may be, a quorum of Privy Counsellors—what we used to have is the Governor; I am not suggesting that that is the answer, but there should be a neutral buffer—then all that will happen is that members of the Government of the devolved Parliament will appear to be nothing but lackies of the Secretary of State, and this will be a negation of what is being attempted.
I should also like to recommend very strongly this point on taxation. Even in the old Stormont, where we had only a very small amount of room in which to manoeuvre in regard to taxation, this produced a discipline which was totally lacking in the Assembly and in the government of the Executive afterwards. Therefore, while the amount of taxation to be available to the devolved government is a matter of great debate, what is not open to discussion is the fact that there must be some element of financial discipline enforced by reason of the necessity to raise taxation. It makes for very much better discipline.
Some noble Lords raised the question of getting a suitable quality of material to come forward. This is all tied up very much with the question of prestige and with the powers that are devolved. We have enormous difficulty in getting people of sufficient quality, and I believe we shall need to have a very big think about how much we pay and how we provide the proper prestige for people who undertake these tasks. Noble Lords here know exactly the length of time and effort which we all have to put into our public duties, and how very little reward there is for it. I feel we shall need to have a really solid look at this matter, and it may mean looking at the whole of our Parliamentary salaries, the whole of the structure, right down to district councils and dealing with the matter on a proper basis, rather than on a haphazard basis.
My Lords, I feel that in the proper devolution of power lies the future of the United Kingdom. If we get a proper relationship between devolved Parliaments, we then have a great chance to maintain the unity of the United Kingdom—and it would be a major disaster were that not maintained. In Northern Ireland we had a political catch cry
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which I think applies to the United Kingdom now:
"United we stand and divided we'll all".
6.3 p.m.
Lord BALERNO: My Lords, I want to join in thanking the noble Earl, Lord Cromartie, for opening this debate and giving us a chance to air our views. I should like to apologise to him if I have to leave before he makes his final reply, as I have a longstanding engagement later this evening. I am one who considers devolution inevitable, and I have done so for some time—and I am fortified in this by the speech of the noble Lord who has just sat down. I listened with care to what the noble Lord, Lord Crowther-Hunt, said about the office to be set up under the Privy Council. It sounded to me an extremely cumbersome thing, with a very large number of people operating, perhaps separately, in London and in Scotland. More than once—in fact, very much more than once—the noble Lord emphasised the enormous amount of work that would need to be done, and from that I draw the conclusion that it would be utterly impossible, if it was proceeded with in this way, for devolution to become effective before 1979. It might come in 1978, but as I see it, it is bound to be a very long time hence.
I feel that events are moving so fast now that unless we take the bull by the horns and go all out to get this done with a measure of speed, we shall be in for a lot more trouble. In this matter I agree entirely with the appreciation of the situation by my noble friend Lord Glenkinglas. We are on a slippery slope, as he said, and we have got to see where we can stop. But we have got to stop quickly, and not continue on the slope for too long. The proposal of the Conservative Party in their Election Manifesto was to have an assembly with its members nominated from the district and regional councils, which could have been set up in a year. I regret that it has not been possible to go forward with that idea. That would have enabled the assembly to be set up within a year, needing only a comparatively simple piece of legislation. The assembly itself could then have hammered out its proper scheme for a fully-elected assembly, and there would have been no recrimination afterwards

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that we had in any way been dictated to by the English.
My Lords, I could continue at considerable length along those lines, but time is getting short and there is one specific point that I wish to make tonight in relation to the Scottish universities. My noble friend Lord Glenkinglas mentioned this matter. Already all education in Scotland, except the universities, is devolved to the Scottish Education Department, and the universities are under the financial control of the University Grants Committee. That is a United Kingdom body which, in its turn, is financially controlled by the English and Welsh Department of Education and Science. God forbid that any attempt should be made to put the Scottish universities under the Scottish Department of Education! In Scotland there is quite a body of opinion which thinks that this should be done. At the same time, to my mind it is unthinkable that an English Department should be seen to have, or even be thought to have, a final decision. There is one very simple passage between these two hazards: it is the formation of a Scottish University Grants Committee for which the Government, through the appropriate body, would provide the proportional share of the total grant for all the United Kingdom universities. This would preserve the integrity of the universities and recognise the universality of university education.
As my noble friend Lord Glenkinglas has said, the Scottish universities have a long history. For over 300 years we had three or four universities to England's two; and the quality of the education was recognised and appreciated throughout the world, not least by that most English of Englishmen, Dr. Johnson. There are now eight universities in Scotland—about the same number as there were in the United Kingdom when the first University Grants Committee was formed. My Lords, the British system of the University Grants Committee has been copied by countries all over the world: not just by the countries of the Commonwealth, but by many other countries—by the United States, and by some South American countries; and I believe certain European countries are tending towards the same thing. They admire our system, and the fact that it takes the university out of the political
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I field almost entirely but still allows them to contribute to the welfare of the country and to come in on all political matters. Their integrity must be maintained. I beseech the Government that, in any form that Scottish devolution may take, steps will be taken to ensure the continuing integrity of the Scottish universities of which we are so justly proud.
6.10 p.m.
Lord MACKIE of BENSHIE: My Lords, I was glad to hear speeches in opposition to the idea of a Scottish assembly; because I was beginning to think that in this House there had been the biggest conversions since a Chinese General baptised his troops with a hose. There is no need for conversion on the part of my noble friend Lord Thurso and myself in that the Scottish Liberal Party—and the English Liberal Party too—have for many years recognised, not from prejudice but from liberal thoughts (as the noble Lord, Lord Raglan, if he were in his place may say) and a practical application of politics. We in Scotland, in spite of Parliaments having been joined since 1707 and the Crown since 1603, the only two dates I can remember, have retained this identity. We have retained the feeling of Scottishness and we are now in a position where the Scottish National Party, not from logic or liberal reasons in all cases, but through the play of emotion and perhaps a lack of understanding of the facts, has nevertheless forced on the two major Parties the recognition that this feeling of identity and the need for its expression is there in Scotland.
Of course, we have heard from Wales and from Northern Ireland that it is there too. I am happy that the noble Lord, Lord Crowther-Hunt, is in his place. I feel that the noble Lord, Lord Hughes, for whom I have an enormous respect. may be a little too steeped in the older tradition of United Kingdom government, but if we can add to this conversion it would do some good. We must recognise that the people in Scotland have long looked at England and at London and have seen the centre of every sort of power in London. Whether it be social, financial or political, all power is here in London. There is not a centre of Parliament in Scotland, and this is what they want. With enormous respect for my

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personal, though not political, friend the noble Lord, Lord Glenkinglas, the Secretary of State is not a sufficient substitute. His role must be seen as in the United Kingdom Parliament and the Scottish Parliament must be called upon, in my view, and it must have a Government and a Prime Minister. I was sorry that the noble Lord, Lord O'Neill of the Maine, spoke, because he said exactly and so much better than I could what I was going to say about Northern Ireland. In spite of the appalling history of strife there, the mechanics worked well. I know a little about agriculture and I think he is right that, long before we came to any realisation of the value of silage for example, in Northern Ireland, they were on to it; and certainly they were so much more competent in attracting industry than were the Scottish Office.
I hope that the Ministers will look carefully at the excellent evolvement and use of power in Northern Ireland and will apply it to Scotland. I was glad to hear the noble Lord, Lord Crowther-Hunt, say that Trade and Industry obviously was going to be part of the Scottish Government (and I use the term advisedly) for it must be so. It is of great importance, and without it the whole thing would be a sham. I was glad, too, that the question of taxation would be considered. The noble Lord, Lord Glenkinglas, had fears. I thought he showed rather a paternalistic attitude to the assembly or Parliament, which I do not think the Secretary of State is going to be able to show; because unless he recognises that this is a centre of Scottish power and representation, they will take over all his powers. The Government today must go at this; they must realise that unless they produce something real and not a sop and something which has not political overtones, it will be overturned in another way which everyone in this House would regret.
My Lords, I have one or two points I wish to make on other speeches. I hope that the excellent speech of my noble friend Lord Dundee will be endorsed from the Front Bench, from the noble Lord, Lord Mowbray and Stourton, and that there conversion to proportional representatioin will be announced, followed by an announcement from the Government that they, too are converted to what is logical and real. The noble Lord, Lord Hughes, shakes his
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head. Did I not say that the Old Guard were ready against any advance? We must have proportional representation. In every case where we have had trouble it has been forced upon the Government: and unless we have such representation in this country as a whole we will continue to get the trouble that the Government are striving so unsuccessfully to deal with.
I do not want to say much more except that the devolution of power to Scotland fits in totally and completely with the idea of our becoming a real part of the European Economic Community. The bigger the unit, the more the people who are being governed need a centre of power of their own to put their point of view. It is logical that the bigger the unit we go into, the more effectively the power must be near the people in the countries which are a definite unit like Scotland. I have spoken for six minutes; this is far too long, and I can hear the howls of agreement. I will sit down hoping that the Government will really think about this matter, will set up a Parliament in Scotland and will think again about regionalisation; because one of the great troubles, as the noble Lord, Lord Crowther-Hunt, will know, is that Wheatley was set up at the wrong time. It was set up before Kilbrandon and Crowther, with the result that we in the Scottish Liberal Party changed our evidence when we came before Kilbrandon and said that obviously the correct unit was a Scottish assembly and a Scottish parliament; and this is logical today. I think the Government should take their courage in their hands in this matter. No matter how many contracts must be renegotiated, it will not be as expensive or bad as the sort of government we shall have if we try to put the United Kingdom Parliament on top of the assembly or Parliament, on top of the Regions, on top of the districts, and on top of community councils. The Government should stop it now and set up an assembly first.
6.18 p.m.
Lord LYELL: My Lords, I must begin by thanking the noble Earl, Lord Cromartie, for this opportunity of discussing what to us in Scotland is a very relevant and major problem. I should like also to congratulate the noble Viscount, Lord Thurso, and the noble Lord, Lord

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Glenkinglas, for what I personally consider was their outstanding contributions among other excellent speeches in this debate. At this hour, I must make only a brief contribution. Finding the best and most effective form of devolution worries me slightly. The noble Lord, Lord Glenkinglas, said that to a large extent the problems in Northern Ireland arose from the wilful refusal over many ysears of the Wesminster Government to grant any form of home rule or, as we have it now, devolution. From my point of view I have had to do a great deal of research into the Kilbrandon Report and various other documents, and I found a large amount of relevant and detailed material which for me posed as many questions as the Report settled.
On the first of these questions, I have heard little this afternoon, apart from the noble Earl, Lord Perth, of how this settlement of running our own show in Scotland and self-government, not to mention self-determination, will affect the lives of Scottish people within the next five or ten years, because I believe these will be the problems affecting us certainly as much as devolution. But will self-government or an assembly make a better job of encouraging the Scottish economy? Is the economy or the wellbeing of the Scottish people merely a case of being more Scottish or just different from the English? I believe the main problems facing Scotland now are not entirely constitutional but almost entirely economic. Solving them will be difficult, but if the Scots can produce viable and well-thought-out answers to the restructuring of the Scottish economy, then Scotland—and of course the United Kingdom—will be that much stronger. The noble Earls, Lord Perth and Lord Lauderdale, have been urging the implementation of the admirable Oceanspan concept for many years, and I should like once again to add my support to their untiring efforts.
The second question, which has not been answered entirely to my satisfaction this afternoon—nor indeed did I find a satisfactory answer in the Kilbrandon Report—refers to finance. Paragraph 459 of the Report raised the very thorny question of the net inflow of funds into Scotland from England. In 1969 I believe
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the Treasury made a stab at this figure and found there was a £460 million net inflow in. one year. This amounted to nearly 30 per cent. of public expenditure in Scotland. Naturally, this figure is bitterly disputed by all kinds of opinion in Scotland, but I am not myself aware of more accurate estimates. Certainly it gives a measure of the Scottish economic dependence on England. I should like to think that the restructuring of the Scottish economy can be carried out from the profits arising from what is still United Kingdom oil lying off the Scottish and Shetland coasts. But there is no guarantee that the profits and not just the revenues will be the method by which the restructuring can be effected. Oil will not necessarily be the panacea for all Scottish woes, but it can be the starting point of a solution, and for that we can at least be grateful.
The tide of national feeling we have seen sweeping through Scotland in the last four or five years, as the noble Baroness, Lady Elliot of Harwood, pointed out, represents a great threat of disunity in the United Kingdom. I believe that separatism, or any form of federalism, will very seriously weaken our links within the United Kingdom. I believe there may be similar disquiet in the rest of the United Kingdom, and particularly in England. Much of the devolutionary talk in Scotland I have found to be far too imprecise. There is talk of self-government and self-determination, but these mean different things to different people. But from some attempts to discover the opinions of the Scottish people by opinion polls—and of course these can be misleading—it appears that about 70 per cent. of those who were questioned in Scotland felt that a Scotland with devolved powers was desirable, whereas only 10 to 15 per cent. were prepared to pursue devolution and felt that it should come to Scotland come what may, even though the accompanying financial restructuring might at first cause a lower standard of living. This is a very small minority and I believe it is indicative of much of the feeling of separatism sweeping through Scotland, accompanied by woolly thinking. This seems to point out that this minority feels that we could run our own lives and our own economy, but that it must not involve any financial

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loss to the Scottish people. This thought is foremost in my mind and, happily, it seems to be in the minds of many other noble Lords.
What system, I wonder, could provide an effective solution to the problems of devolution if we must have it?—and I think we must. I would tend to go along broadly with the conclusions reached by the noble Lord, Lord Kilbrandon, and his colleagues. These seem to me to indicate the best, most practical and most effective form of legislative devolution, but firm guidelines would be required as to the responsibilities of the United Kingdom Parliament and the Scottish Assembly, or Parliament, or whatever it might be called. with what we hope will be its full powers in certain prescribed subjects. I would hope that it could have full powers over local government, housing, planning, roads, agriculture and, as the noble Earl, Lord Perth, also mentioned, over trade and industry. Will the assembly receive its financial "muscle" from an Exchequer Board, independent of the United Kingdom Government, as I understand is the case in Northern Ireland, which receives its financial support from taxation? We need firm guidelines on this before committing ourselves. I would hope that such a method would satisfy the desire to control the finances of Scotland by Scots themselves. If some of these questions which are in my mind and also, I believe, in the minds of many thinking Scots, can be partially resolved, then the unity of the United Kingdom need not be threatened. I hope and trust that the need for devolution can be met by an assembly, but I still agree with the noble Viscount, Lord Thurso, that with local government as at present constituted in Scotland there is a great danger of being gravely over-governed.
The Kilbrandon Report concluded:
"The Government has developed a momentum of its own"—
that is referring to the United Kingdom Government—
"which seems to leave people out of account."
If this is true—and the electorate may well feel that it is—then the blame probably attaches to all we Parliamentarians here at Westminster as well as to local councillors. I should like to add my support to the noble Lord, Lord
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Glenkinglas, when he said that devolution would take some of this pressure off the wish for a wholly unthinking and emotional separatism or federalism or some worse form of government that we have at the moment. Whatever happens, the economic problems must be solved by the Scots themselves, and if devolution helps with this then I would support it entirely. But should the Scots decide to carry on a sterile and bitter constitutional argument with England and also with other Scots, then devolution will solve absolutely nothing. I personally have absolute confidence in the ability of Scotsmen—I live in Scotland and hope to continue living there for the rest of my life—to solve the economic and constitutional problems, but may this solution come sooner rather than later!
6.28 p.m.
Lord POLWARTH: My Lords, I had not intended to intervene in this debate, but after listening to some very fascinating contributions I should like to make two brief points. First, I was a member of the Committee which, under Sir Alec Douglas-Home, looked into this matter some years ago. At the conclusion of that Committee's work, I signed the Majority Report advocating a degree of devolution and an assembly, admittedly after a great deal of heart-searching as to whether this was the right course. We did not then know the form that local government reorganisation would take; and this is my first point of concern regarding any form of legislative devolution such as we have been discussing. It is a year ago since I was responsible for putting through your Lordships' House the Scottish Local Government Reorganisation Bill. I do not wish to say too much about my personal views on it, except to say that I doubt whether the noble Lord, Lord Hughes, will shortly be defending the continued existence of the Strathclyde Region with any more joy than I had in trying to persuade your Lordships a year ago of the justification for it. Perhaps I should leave the matter there.
I am very much concerned about a matter which has been referred to by a number of speakers, including the noble Lord, Lord Mackie of Benshie. I refer to the great heap of local government structures that we are creating. We are

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indeed piling Pelion upon Ossa: certainly there are two other layers underneath, and in between there are a variety of layers. I think this is a very real problem. We are creating an additional bureaucracy and an additional layer of politicians. I think that we shall have many problems; people will be confused about the carrying through of these different elections and voting for so many different layers of Government. We have to find the people prepared to stand and fill all these places. This is a major problem, although it does not affect what is politically inevitable; namely, that devolution of this kind must come.
I endorse virtually every word of the outstanding and realistic speech of the noble Lord, Lord Taylor of Gryfe. He was one of the few speakers to refer to the place in all this of the Scottish economy, Scottish industry and commerce. The proposals for devolution have tended to come—or rather the greater part of the enthusiasm for them in their present suggested form—on the whole from politicians, academics, economists and lawyers. That is not to decry their part in this, we need them, they are vital to the process; they are of no use to us unless we have a sound, healthy and prosperous economy, industry, trade and commerce.
The voice of industry, trade and commerce has been somewhat silent on this question. I suspect that the reason is, on the whole, that those in business tend to be somewhat concerned as to the arrival of a new and additional form of administrative machinery with which they in turn will have to deal. I cannot subscribe to the view that more government is necessarily good for business; very often it is the other way round. Government is there to help business, but it is apt to try to become unduly involved in business. Therefore there is a justifiable concern on the part of business in general in Scotland at what this will mean for the creation of a new structure of the kind that is being considered. Without a healthy, prosperous economy, what is the use of all the Constitutions in the world? I believe that now, in the light of all that has happened, some form of devolution of this kind is a political necessity. The problems are many; I have mentioned
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two which worry me personally, and I can say only that I do not think we envy the noble Lord, Lord Crowther-Hunt, in his task of carrying this further, but we wish him well in it.
6.33 p.m.
Lord MOWBRAY and STOURTON: My Lords, at this stage of the debate it is very hard to be original. Most parts of the subject have been discussed by your Lordships and I know the House is waiting to hear the reply of the noble Lord, Lord Hughes, so I shall definitely be brief. Living as I do, as also do my noble friends Lord Lyell and Lord Mackie of Benshie, in an area which has suddenly gone Nationalist for the first time in its history, it is obvious to me that the vast majority of these new Nationalists around my home do not want all that the SNP stands for. Nearly all people in Angus have relations and friends South of the Borders; they do not think of them as people living in a different country. When, as now, times are hard there will always be a tendency to be fully aware of how bad things are locally, with the troubles of one's personal life and work. These people, being far away, think in a Dick Whittington sort of way that the streets of Whitehall and Westminster are paved with gold, and there grows a wish that those soft-living people down there could see conditions North of the Borders.
We all know that conditions for the people of London and other large cities in Britain are not very much different from those of people in Scotland. And despite the claims of the SNP about the rich English milking the poor Scots, it is, as we all know, just not true. The great export of Scotland to Britain is Scots manpower and brainpower. British industry, the British Colonies and Empire, and the Armed Services all owe a great deal to Scotsmen coming down and doing very well in competition with their English brethren. Scotland, with only 9½ per cent. of the population of Great Britain, has always, as has been said in this debate, had more than her actuarial share of the national expenditure. I am told it is estimated by the Treasury that she gets some 20 per cent. more per capita expenditure than England—a considerable figure.
The noble Lord, Lord Davies of Leek, in an intervention, asked about education.

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Scotland, with only 9½ per cent. of the population, even now after the great university explosion in England, has 15½ per cent. of United Kingdom university places, and Scots graduates actually amount to some 13¼ per cent. of university graduates throughout the country. The Scots are not falling behind in these matters. That said, the fact still remains that most Scots think they can manage things better. Well, my Lords, they will soon, if the plans discussed in the White Paper are speedily implemented, get the chance, and the Conservative Party has, as your Lordships know, been working on plans for a form of devolution in Scotland since 1968.
I am pleased that my noble friend Lord Polwarth, who was on my right honourable friend Sir Alec Douglas-Home's Committee, is able to be here today. As my noble friend Lord Glenkinglas said, he has been working on this matter since 1963. I do not think that the noble Lord, Lord O'Neill of the Maine, was very fair in saying we had been catnapping and had had our clothes stolen. I do not think that is true. If anything, the Party opposite has themselves taken a peek at our clothes, and I welcome the conversion of the present Secretary of State to the necessity for a form of devolution. It is to be hoped that plans to implement these discussions into law and life will be energetically pressed.
My noble kinsman Lord Perth remarked that it took this side of the House to provide an opportunity for this debate, and that he had been trying since July to have such a debate. My noble friends Lord Glenkinglas and Lord Polwarth both emphasised in this matter that time is probably not on our side. The sooner we have an assembly in being, the better pleased we on these Benches will be. We support, as your Lordships know, the idea of this assembly having block grants so that it will be able to plan its own priorities, instead of having this done for them as at present. We support the idea that some of the detailed stages of Scottish legislation could be dealt with by this assembly, and I feel that direct election to this assembly has the best chance of starting it off on the right footing.
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I noted what my noble friend Lord Dundee said about proportional representation; despite the invitation of the noble Lord, Lord Mackie, I shall not endorse that remark. This is something which ought to be discussed and thought about a bit more. We shall, if necessary, prod the Government into action; if there is too much delay we might find ourselves having three different sets of elections in the same year. That has not been mentioned tonight. But we would all be horrified about three different types of elections in the same year. I was therefore delighted to hear the noble Lord, Lord Crowther-Hunt, say that the Government would push ahead as fast as possible. He then uttered a slight word: the speed would be tempered with caution. I was glad to hear the speed was going to be there. I am sure that with the noble Lord, Lord Crowther-Hunt, the caution will always be taken into account.
Before sitting down I should like to thank my noble friend Lord Cromartie for introducing this debate on this important subject here today, and to congratulate him on the spirited way in which he has done so. I do not envy the noble Lord, Lord Hughes, having to answer tonight so many points which have been made so very well, or having to choose where among the galaxy of tartan talent—and a bit of shamrock added as well—to award his bouquets. But I sincerely believe that this form of devolution will be an exciting constitutional development. Despite all the thought and work done by the noble Lord, Lord Crowther-Hunt, the noble Lord, Lord Kilbrandon, my right honourable friend Sir Alec-Douglas-Home, and the Government themselves—as shown in the White Paper—we shall need to give much more time to this subject when the Government produce their Bill. The noble Lord, Lord Taylor of Gryfe, queried whether this was, in fact, going to be adequate—would it satisfy the aspiration of the Nationalist? No one can answer this hypothetical question. I think that there is a good chance that it will satisfy most, for the reasons which I have already expressed. Then I hope that Scotland will, within the larger framework of the United Kingdom, again enjoy some greater measure of choice in their own affairs which will

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gladden many hearts and, I hope, confound those wreckers who would dismember our country.
The MINISTER of STATE, SCOTTISH OFFICE (Lord HUGHES): My Lords, this is not the first time I find myself in the position at the end of a Scottish debate of being faced with an almost impossible task—one of attempting to reply to all the points which have been made or to comment on the points which have been made, and, at the same time, to keep my reply within reasonable bounds. I am afraid on this occasion I must make a certain departure from my previous line of action: I am not going to attempt to refer to every noble Lord who has taken part in the debate. I would, however, wish to start off in a democratic fashion by paying attention to the views of the minority. Three noble Lords have taken a line different from the rest of your Lordships—my noble friend Lord Raglan, my noble friend Lord Taylor of Gryfe, and the noble Lord, Lord Strathclyde. They received the proposal for a form of devolution, as in the case of Lord Taylor of Gryfe, with muted enthusiasm, or as in the case of Lord Strathclyde with no enthusiasm at all; and apparently my noble friend Lord Raglan has the intention of getting a new kilt and proceeding through Scotland with a fiery cross to represent against this iniquity which the English are proposing to thrust upon them.
I enjoyed the remarks of my noble friend Lord Raglan; I thought this was one of the most interesting speeches I have heard in a very long time. My enjoyment was not diminished in the slightest by the fact that I did not agree with a single word of it. In the first instance—and this is a theme which was not confined to him—he expressed the view that the Government were attempting to meet the demands of the Scottish National Party. Nothing is true in that belief at all. I would remind your Lordships that the previous Labour Government set up the Kilbrandon Commission—and the noble Lord, Lord Strathclyde, was correct when he spoke about the year 1969, but my noble friend Lord Crowther-Hunt was also correct when he spoke about 1968, because the chairman, Lord Crowther, was appointed, if I remember
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rightly, in November, 1968, but the rest of the Commission were not appointed until the following year. But in both 1968 and 1969 the position was that there was no resurgence of Scottish nationalism in Scotland. There was one Member of Parliament from the Scottish National Party: Mrs. Ewing was there from Hamilton. Long before Mrs. Ewing lost her seat in 1970 at the ensuing General Election I took part with her in a television broadcast from Grampian Television in Aberdeen. I had the pleasure of taking her back to Dundee because she had missed a train at Aberdeen, and we had a long discussion. It nearly ceased to be a friendly journey because I predicted to her with complete certainty that when the General Election came along she would lose her seat. I proved to be right. I did not, in fact, think there were going to be any Scottish Nationalists, but, of course, Mr. Stewart came in from the Western Isles. So until 1974, this year, there was only one Scottish Nationalist. So there is no Scottish Nationalist upsurge which directed the setting up of the Kilbrandon Commission.
What was accepted, and what this Parliament will ignore at its peril, is the fact that there is undoubtedly—there can be no dispute at all about this—a demand from the people of Scotland, irrespective of their political allegiance, for a more obvious part in making the decisions that affect their daily lives in so many fields. It is one thing to recognise that there is this demand, and another to interpret this as a demand for a break-up of the United Kingdom. I want, first of all, to emphasise that the view of this Government remains quite definitely that we are opposed to any form of separation and we attach to the Union a real and permanent value: we are at one with all those noble Lords who have spoken of the value of maintaining the Union.
I noticed—and I should have begun my remarks by thanking the noble Earl, Lord Cromartie, for having given us the opportunity of this debate today—the noble Earl said that he was not going to use the emotive word "separatism". If I might refer to the Scottish National Party contribution to the debate from the noble Lord, Lord Belhaven and Stenton, his reception of the Government's proposals surprised me by its very friendly nature. I thought we might have been subject to

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a root and branch attack, but his reception was exceedingly friendly indeed. I also welcomed his undertaking—and I hope he speaks with authority on behalf of the Scottish National Party—when he said they would enter into the assembly with every intention of making it work. I am prepared to accept that he is the spokesman of the Scottish National Party provided that is, in fact, the line they will take. He also avoided the word "separatism", but he spoke in one of the other general terms which seem to indicate that it is the view of the Scottish National Party that there should be a completely separate, independent Scotland.
Lord RAGLAN: My Lords, of course the noble Lord, Lord Belhaven and Stenton, gave the Government's proposals a friendly reception because the Government are going his way.
Lord HUGHES: No, my Lords. The Government are going the way of the people of Scotland. Of course, if the noble Lord, Lord Belhaven and Stenton, is a Scot he must be included. If it should turn out that my noble friend Lord Raglan is right, and that this is just a step on an inevitable journey towards the break-up of the United Kingdom, it will only be so if it is quite clearly shown by the vote and the voice of the people of Scotland that that is what they want. That has not been shown up to the present time. I do not believe it will ever be shown that that is what they want, but if it should be shown then nobody has the right to stop it.
Lord MACKIE of BENSHIE: My Lords, will the noble Lord agree that the only way that it can be shown properly is under a system of proportional representation?
Lord HUGHES: My Lords, if the noble Lord will possess himself in patience, I may manage to touch on the subject of proportional representation before I sit down. My noble friend Lord Taylor of Gryfe greeted these proposals with muted enthusiasm. The noble Lord, Lord Polwarth, emphasised that he agreed with much of what my noble friend had said in relation to economic devolution within Scotland, and I must say that that part of my noble friend's speech was one with which I can find no cause to disagree. Both noble Lords
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have played so great a part in this particular field in Scotland that we must pay serious attention to anything that they say on this subject.
My Lords, I have dealt with the minority aspect. The remainder of your Lordships made it perfectly clear to Her Majesty's Government that they welcome devolution, so I do not think it is necessary to say anything in favour of the proposals, other than that it is the determination of Her Majesty's Government that devolution will be put into operation in the way which is most likely to work. It was because of this that my noble friend Lord Crowther-Hunt emphasised the need for caution as well as speed; but caution does not mean that there will not be speed. I think that I should make it perfectly clear that it is the intention of Her Majesty's Government that legislation to give effect to devolution proposals will be put before Parliament in the next Session.
The noble Lord, Lord Balerno, criticised the Constitution Unit and said that he thought it was a rather cumbersome affair. I can assure the noble Lord that the Constitution Unit is working very well indeed. The speed which is desirable is quite obviously being observed, and I am certain that when the proposals of the Government emerge—and they are not so very far away—it will be quite clear that the Constitution Unit has done a first-class job.
My Lords, I envy the beauty of the language in which the noble Viscount, Lord Thurso, can put forward general views with which all of us find it impossible to disagree. I wish that I could reply in similar general terms, but your Lordships would not accept that. However, while admiring the beauty of the noble Viscount's language, I was a little horrified when he came to the question of postponing the reorganisation of local government, and his suggestion that as a first step one should take away the local government officials who will be looking after it and turn it over to civil servants at St. Andrew's House, who at some later stage would become local authority officials.
Viscount THURSO: My Lords, I think that the noble Lord has misunderstood me. However, I shall leave it to Hansard rather than go into it now.
Lord HUGHES: My Lords, nothing will please me more than to find that my horror is unjustified. However, it certainly sounded as if that was the suggestion. The noble Lord, Lord Glenkinglas, stated correctly that there is a general view in Scotland. The noble Lord made it perfectly clear that he was not saying that that is his view but that there is a general view in Scotland that our needs are not looked after properly at Westminster. Undoubtedly, this is one of the things which lies behind the demand for a form of legislative body in Scotland. I cannot agree with him about the difficulty of finding suitable young men to come to Westminster.
One of the times when this is quite obvious is when a constituency Party, no matter which Party, attempts to get candidates—except perhaps attempts to get the last 100 Liberal candidates. But I am quite certain that with the first 200 Liberal candidates they are in exactly the same position as the Conservative and Labour Parties. There is no shortage of suitable applicants for consideration to fight even the unlikely seats. Sometimes it is easier to find somebody to fight the unlikely seats, which may to a certain extent meet the point of the noble Lord. However, one just has to look at the new Members from all Parties who have come in as a result of the Elections this year to realise that we can still get good young men to come forward. I believe that one of the effects of the Assembly will be to make it easier for some of these young men, who perhaps turned down the idea of coming to Westminster, to serve Scotland in an assembly which meets somewhere in Scotland.
One point which a noble Lord raised was the question of the responsibilities of the assembly, and whether it would be responsible to the Secretary of State. Another noble Lord—I do not remember who it was—asked whether the Secretary of State would be a member of the assembly. It is not envisaged that the assembly will be responsible to the Secretary of State. The Secretary of State will be a member of the British Government and it will be his duty to look after the interests of Scotland in those fields which must continue to be exercised from Westminster. However, he will not have a responsibility to the
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assembly, nor will the assembly have a responsibility to him.
My Lords, on the question of the trade and industry functions, I found extremely interesting the views which the noble Lord, Lord Glenkinglas, expressed in relation to these matters, from his vast experience at the Department of Trade and Industry. I wish to say that I should like to have another look at them in Hansard tomorrow, because I think that I may wish to pass these on to my friends. I come now to the contribution from the noble Earl, Lord Perth. I must admit that I was a little disappointed that there was almost a carping note in the noble Earl's remarks. He started off by pointing out that the Government do not seem to be seized with a sense of urgency, since he has been trying since July to get this debate. May I remind your Lordships that Parliament rose before the end of July and did not resume until the end of October. Therefore it would have been very difficult for the noble Earl to have got a debate in your Lordships' House during that period. In fact, the debate is taking place within less than a period of seven weeks of Parliamentary time since the matter was first discussed. May I say that even in your Lordships' House—I make no comment about how it may happen in another place—that is remarkably speedy. On that matter, therefore, I do not think the House can be faulted at all. Nor can the Government be faulted, because it is in the tradition of your Lordships' House that these debates generally arise on a Motion from the other side of the House, and preferably, when it is a Scottish Motion, at the initiation of the Scottish Peers' Association, of which the noble Earl is chairman.
The noble Earl referred to a number of points relating particularly to the Scottish Development Agency, and he tied these up with steel and forestry. If I may deal, first of all, with the forestry point, the question of taxation powers is a major issue and what will be decided on forestry taxation will naturally depend on the decisions which are taken in the wider sphere. Whether it would be desirable or necessary to provide a special subsidy for forestry in Scotland would have to be decided by the assembly in the light of the precise scope of its powers, as finally worked out, and the various other demands on the

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resources available. I have no doubt that the significance of both State and private forestry in Scotland will be very clearly in mind in any consideration that takes place, and if it is any consolation to the noble Earl I think he will agree—because I am certain that the noble Earl, Lord Dundee, would agree—that the greatest strides in forestry in recent years have been taken during periods of Labour Government, because we attach very considerable importance, particularly for Scotland, to the expansion of forestry.
I now come to the main heads to which people spoke during the debate. The two subjects which I think concern most of your Lordships are the reorganisation of local government and the place it occupies in relation to an assembly, and the method of election to the assembly—the subject of proportional representation or otherwise. On the subject of local government reorganisation, I cannot guarantee that I noted everybody as they spoke, but I did note that the noble Earl, Lord Cromartie, the noble Viscount, Lord Thurso, the noble Lord, Lord Belhaven and Stenton, the noble Earl, Lord Perth, the noble Baroness, Lady Elliot of Harwood, my noble friend Lord Taylor of Gryfe and the noble Lord, Lord Mackie of Benshie, all referred to the subject of local government reorganisation. The last intervention on this subject was from the noble Lord, Lord Polwarth. I made notes about what various people said in the course of the debate, and under the name of Lord Polwarth my comment was "Strathclyde" followed by three exclamation marks.
In one sense I believe that the debate is a little early. Having regard to the importance which so many noble Lords have attached to local government reorganisation and its relationship to the assembly, it would have been better if the debate had taken place after Mr. Gordon Campbell had taken his seat, because so far as I know Mr. Gordon Campbell is the only person who attached any enthusiasm to the defence of the Strathclyde Region. It did not surprise me when the noble Lord, Lord Polwarth, said that he would not say anything about his personal views, or when he found difficulty in defending these proposals before your Lordships.
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My views on the Strathclyde Region are well known. They have not changed in the slightest because I am on this side of the House; and the views on Strathclyde of my right honourable friend the Secretary of State for Scotland are well known. If it could conceivably have been possible in February to postpone these elections, we should have done so with enthusiasm. It was impossible at the I beginning of March to get legislation through to prevent the elections taking place. In the time that has elapsed it has been even more difficult to contemplate the chaos which would arise if we attempted to alter this position.
Local government may well be one of the important fields in which the assembly will have legislative powers, but I should be very much surprised if, when the assembly came into being, they regarded the most urgent task facing them to be the problem of reorganising local government once again—and I think we are probably lucky in that. This scheme having gone through, it is in the interests of Scotland that those of us who thought Strathclyde would not work should be proved wrong, because there will be no satisfaction in having a system of government which is not working properly. But what is quite clear is that when it has been running for two, three or four years, it will be much more obvious to the assembly what steps need to be taken at the appropriate time to meet the resulting change in local government. I think none of us believes that without the assembly a reorganised form of local government would last anything like as long as its predecessor. I myself publicly made a prediction that I thought there would be a change in the system before ten years had elapsed. There will be other tasks which I am quite certain the assembly will regard as having a prior claim on their legislative attention, before they embark on the thorny path of reorganising local government once again.
Is it necessary to defend the reorganisation of local government? Remember that almost everything that has been said has been in relation to Strathclyde. There is so much misconception about the powers and duties of the bodies. The assembly is to be a legislative body. In some way, whether by means of a Cabinet system or a committee system, it will have administrative responsibilities, just as

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Ministers at Westminster have administrative responsibilities, and just as Westminster has legislative responsibilities. The bringing into operation of an assembly does not alter that at all. The local authorities will be given powers from Parliament, whether the British Parliament as at present or a Scottish Parliament as it may be. Sometimes these powers will be mandatory, in which case the local authorities will have to carry them out; and sometimes (and more often) they will be permissive, and it will be for them to decide the extent to which they use the powers. That will not be changed. Therefore I can see no logical reason for creating the chaos which would arise, apart altogether from the complete disruption of the Parliamentary programme which would be involved in attempting to get this very complicated legislation framed and carried through before May 1975.
So for these reasons, not because I, or any other Scottish Minister, have any personal love for what we have got in a reorganised local government, but because of the sheer practical impossibilities of an alternative, the form of reorganised local government will go ahead.
Viscount THURSO: My Lords, if the noble Lord will allow me, he is now making it clear on behalf of Her Majesty's Government that it is their intention that the assembly should be responsible for the boundaries of all the local authorities within their area; that the boundaries of local authorities should not in any way be a United Kingdom responsibility, and that all the functions and tasks of local government will come under the Scottish assembly? Is that quite clear?
Lord HUGHES: My Lords, I am not writing the next White Paper tonight! The noble Viscount, Lord Thurso, must contain himself in patience for a little longer. On this matter I do not think that at the end of the day he will find any cause for dissatisfaction. I cannot go beyond that.
Lord TAYLOR of GRYFE: My Lords, may I ask the noble Lord, Lord Hughes, in view of the representations made to the Government by the StrathClyde Region, and in view of the fact that what is now proposed in the Scottish assembly is a major constitutional change in this country affecting Westminster—
Lord MOWBRAY and STOURTON: My Lords, may I point out to the noble Lord that I think he is occupying a Bishop's Bench.
Lord TAYLOR of GRYFE: My Lords, I apologise. May I ask the noble Lord, Lord Hughes, whether he is proposing in the assembly a major constitutional change which affects the powers of Westminster and the powers of a Scottish assembly, something which does not happen very often in our constitutional history, and is saying that this is urgent and must be pushed through quickly? In view of the representations made by Strathclyde, that they be given the opportunity to settle down before the assembly is created, does he not consider that reasonable, rather than visualising a 10-year period, such as he has suggested, where there could be continued conflict?
Lord HUGHES: My Lords, I have tried to make it clear that I do not see any conflict between the assembly and the Strathclyde Region; and I would remind my noble friend—if I am recollecting correctly—that these representations from the Strathclyde Region were made before what has been referred to as the belated conversion of my Party to this matter and, as somebody else said, "fortunately before the General Election". The Strathclyde Region have not pursued these objections, because I think they accept that they will be given, both by this Parliament and a Scottish assembly, a fair chance to see how the scheme works, if for no other reason than the one I put that the assembly will find other more urgent tasks to turn its hand to in its first year of existence than taking on that very thorny one. They might even have the Scottish equivalent of a body set up to investigate the reorganisation of, local government, and if it took as long as the proposals of the noble Lord, Lord Glenkinglas, from 1963 to 1973, to get, into operation. Strathclyde may well get what it has asked for.
May I come briefly to the method of election? The White Paper on democracy and devolution did not discuss the electoral arrangements for the Scottish assembly, beyond stating the Government's intention that it should be directly elected and that election to it should be on the same basis as to the United Kingdom

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Parliament. The Kilbrandon Commission recommended a system of proportional representation. It is the Government's view, however, that the present system is simple to operate, easily understood by the public and provides for clear and direct accountability of the elected representative to his constituents. I accept the point that the 1973 Northern Ireland Constitution embodied proportional representation, but the special circumstances calling for that solution in Northern Ireland are happily not apparent in Scotland.
My Lords, I was particularly interested to hear the remarks of the noble Lord, Lord O'Neill of the Maine, and the noble Viscount, Lord Brookeborough, on this subject, and I am certain that what has been said, particularly about the difficulties of large constituencies, will be studied by Her Majesty's Government. I will, however, make quite certain that the strength of opinion which has been put forward in support of proportional representation is brought to the attention of my friends. I am sure they will not be unduly influenced by the apparent conversion—although a caveat has been entered by the noble Lord, Lord Mowbray and Stourton—of the Conservative Party to this principle.
I could not help reflecting that there was a long period between the wars when this country had a three-Party system, when the Liberals were returned to Parliament in a strength even greater than was thought might be possible at the recent Election. However, it never occurred to the Conservative Party then that the existence of three Parties was justification for having proportional representation. I wonder if the conversion is related to the fact that the Conservative Party, at least in Scotland, are reconciled to the prospect of being permanently a third Party, and perhaps increasingly a minority Party, and that they would therefore be the beneficiaries of proportional representation. On the subject of a permanent Labour majority in Scotland, we must set against that the views of the noble Lord, Lord Belhaven and Stenton, who finished his speech with the comfortable hope that the assembly would have a Scottish National majority. I cannot share his hope in that matter, but at least there is not now unanimity of the view
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that there would be a permanent Labour majority in Scotland.
On the subject of the Scottish Development Agency, to which some of the questions of the noble Earl, Lord Perth, related, I would draw the attention of your Lordships to a statement which was made in another place by my right honourable friend the Secretary of State, in reply to a question from one of the Scottish National Party Members. I am not supposed to quote what other people say, so I will confine myself to quoting what the Secretary of State said, which was:
"That honourable Member should cease his speculation about rumours. We shall be publishing soon a consultative document which will be available to everyone. We shall be grateful for constructive criticism from all parts of the House in respect of it."—[OFFICIAL REPORT, Commons, 11/12/74, col. 501.]
I would therefore just say that it ought not to be very long—in any sense of what people regard as not very long—before that document is available, and I think that many of the answers on the economic, industrial and trade matters will be found in it.
My Lords, I am quite certain that it will not be many months before we have another debate on devolution for Scotland. At that time we will almost certainly be discussing much more detailed proposals from Her Majesty's Government. It is now four hours and 25 minutes since this debate started. I have sat through every minute of it and I have enjoyed them all, except the last 33 when I have been on my feet. I am quite certain that the Government will treat this debate in the way mentioned by my noble friend Lord Crowther-Hunt, when he said that Her Majesty's Government looked forward to the debate and looked forward to what noble Lords would say. I can assure your Lordships that what has been said in this debate will form a not unimportant part of our thinking on devolution for Scotland.
7.16 p.m.
The Earl of CROMARTIE: My Lords, before I ask leave to withdraw my Motion, I should like to thank all those noble Lords who have taken part in what, in my view, has been a most excellent debate. One does not necessarily agree with everything that everybody has said, but it has all been interesting and I think of very great value. I should like to

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thank all noble Lords very much indeed. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

PETROL: PRICE INCREASE
7.17 p.m.
Lord LUCAS of CHILWORTH Lord LUCAS of CHILWORTH rose to ask Her Majesty's Government why they have permitted petrol supply companies to increase the wholesale price of petroleum spirit with effect from midnight, 17th December, while at the same time maintaining the Motor Fuel (Maximum Retail Price) Code 73 S.I. 1973/2119 until midnight, Thursday, 19th December, thereby forcing retailers of petroleum spirit to sell the product at a figure below their gross profit margin during that period. The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In asking the Question, I feel obliged to declare to your Lordships that I am a National Petrol Forecourt Committee member of the Motorists Agents Association, who in turn represent about three-quarters of the people who sell petrol retail in this country. I should also like to remind your Lordships that I have a personal involvement in petrol retailing.
My Lords, this Question arises from a most extraordinary Written Answer given in the House of Commons yesterday at col. 365 of Hansard in which Mr. Varley. of the Department of Energy, announced the removal of certain price controls over petrol supplies. At the same time, he indicated that he would not expect to see prices rise by a certain figure, and yet at the same time he did not announce in that reply that that day the petrol companies had allowed the machinery of their price increase application to go through with the result that they were entitled to increase the wholesale price of petrol and the retailer was held back by two days.
It is quite surprising, my Lords, that the oil companies moved with an alacrity usually associated with sprint runners. Indeed within a very few hours of that announcement in the Written Answer being made a number of leading petrol companies put staff on standby, to work throughout the night if necessary, to re-bill at new prices deliveries of petrol
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I scheduled for this morning. This is an incontrovertible and undeniable fact, and as the afternoon wore on and the import of the Written Answer became known and understood, some petrol companies were faintly embarrassed by the position in which they had found themselves. Indeed, the Mobil Oil Company said to a number of their dealers, "Oh dear, it looks as if you will be selling petrol at a loss; you had best close your shop". I understand the Esso Petroleum Company said to some of their dealers, "Oh dear, this is an embarrassment. We shall have to have a talk to see what can be done". British Petroleum said to me on the telephone last night, "Oh well, yes—difficult—well, yes, you must make your own best judgment". What an extraordinary position !
Two days' notice were given to the general buying public that there was to be a relaxation in retail price controls, with the result that the queues lengthened at the petrol stations. At one petrol station in Southampton with which I am particularly familiar, we sold as much petrol in three hours on a Tuesday night as we would have sold on Monday and Tuesday of an ordinary week, with the consequence that by this morning I have no petrol to sell. Of six petrol stations over which I have some supervisory control—perhaps that is the best way of putting it; certainly some personal knowledge—only one had any substantial stocks of petrol by 10 o'clock this morning.
My Lords, from whom did the Department of Energy receive any advice? Did they, in fact, receive any advice? It is my understanding that they went to the petrol companies and said: "Can you tell us what might be the average stock of petrol in a retailer's tanks?" The reply was "48 hours'. "Forty eight hours is the time-scale between ordering petrol from a petrol company and having it delivered. A period of 48 hours may be a reasonable stock level in ordinary circumstances, but not when Her Majesty's Government give notice that the price control is to be lifted. It went in a matter of hours. What, then, did the retailer do? There were three things he could do: he could close the shop, break the law and sell the new stocks arriving this morning at the increased

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price; or he could sell it at a gross loss of some 2½p or, put another way, his old profit margin—inadequate as it was then—and the new differential which has forced many dealers out of business; or soldier on.
Of course, the reputable motor trade was not going to break the law, and so far as I know it has not. But these people cannot afford to sell at a loss. While they have had controlled prices for the last twelve months (controlled margins in fact) rates and electricity have gone up—in fact everything has gone up. They have been losing money, and thousands have gone out of business. Thousands more will shortly do what they have done; that is, close shop. As you drive out of London tonight, you will see stations closing. Reports have been coming in to me about this. There will be chaos just before Christmas, chaos because the Government have not made their intentions clear, and because retailers got half a reply to the crucial question. It is reported in a newspaper that the Government say: "Ah, by this method we will ensure that no dealer can get a few gallons of petrol from the petrol company, or sell his stock underground and make a l0p a gallon profit". Of course, he cannot make 10p a gallon profit because he has to pay the tax on his net sale of 5p or 7p a gallon. The Government say: "We will deny him this windfall profit." If one-fifth of the 30,000 dealers had any substantial stocks, it might in total amount to about £200 or £300 windfall profit per dealer—not a matter that concerns anybody very greatly.
My Lords, it is then said: "Ah, but I recognise that the retail trade must have an increased margin, so I do not expect the petrol companies to increase their price by more than about 7p". Most of the petrol companies have gone to 7·3 p, plus VAT, which leaves the retailer with the derisory sum of 0·635p per gallon. At the same time, the Department of Energy says: "We do not expect the overall price to move by more than 10p". If you hold a loaf of bread out to a starving man, do not be surprised if he snatches the lot and bites your hand at the same time. That could well happen, with the result that prices can escalate even further to save a great number of small businesses which provide a service
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from 7.30 in the morning to 11 o'clock or 12 o'clock at night, and some all through the day and night.
My Lords, dealers cannot stockpile any more. Bankers do not like petrol company retailers; there is no security of tenure, the profitability is too small, there is nothing they can get their hands on. Petrol leaks and evaporates; there is no asset or security there for a bank to lend money. I know, because on behalf of one of the companies with which I am associated, I went to ask for help with the increased VAT and potential increase in wholesale price. The people at the bank laughed and said, "No thank you, we do not like this kind of business. We do not want to lend money on this kind of thing". And quite a reputable bank it was, too!
Does it really suit Her Majesty's Government—and all the petrol companies for that matter—to see the retail petrol distribution of this country break down through lack of profit, through the kind of actions we have had over the last 18 months? An average load of petrol was worth about £1,600 or £1,700 cash 18 months ago. My last load was worth £3,838 cash on delivery including £700 worth of tax, which is probably going to take me six, seven or eight days to collect from the consumer. Is this the way we want this kind of business to go?
My Lords, perhaps I have strayed a little wide of my original Question. This moment in time was the only opportunity to draw the attention of your Lordships and, indeed, the attention of the Government, to the remarkable and ridiculous situation that has now occurred because of the completely ineffective, misleading Written Answer in the House of Commons yesterday. Were it not for the Recess, I should have delayed putting down a Question. I apologise now for having to do it today, at short notice and at this time of night.
Finally, with regard to the new price increase, with this increase of VAT, may I ask the Minister just how much saving in our total import bill for oil Her Majesty's Government hope to achieve? What advice can they give to the petrol companies, the retailers and the public at large regarding this matter? It is against this background that I raise the Question, and I now invite the reply of Her Majesty's Government.
7.30 p.m.
Lord STRATHCONA and MOUNT ROYAL: My Lords, my noble friend seems to have raised an important point. It suggests to me some miserably inept timing on the part of the Government, and all apparently to pre-empt some very modest once-for-all windfall profits by an industry which has been having a fairly thin time, at a time when sales have been falling and there has been pressure on the cash flow of garages, they having to finance increasingly expensive petrol without any additional margins. Perhaps the noble Lord can tell us how much stock, in total in the country, the Government thought there was in the tanks of the garages, because if he cannot answer that question I think we are bound to assume that this was a slip-shod operation done without adequate thought.
I am staggered to discover that the Government never consulted the Motor Agents Association on the question of timing. I checked this afternoon, and found that they did not consult the Association on this issue of timing. If they had, they would have been told the kind of situation my noble friend has explained to us. Of course we are bound to applaud any efforts to restrict untoward profits. We have had a good many discussions, and indeed some agreement, on the rather larger question of windfall profits to the oil companies. If the Government are very concerned about the effect of rising petrol prices on the cost of living, have they given any thought to the notion which has been floated more than once of having a basic ration of rebate coupons, something like luncheon vouchers which would be perfectly openly traded? This would enable there to be a basic ration of lower priced petrol and still achieve the saving of energy hoped for by pricing it higher.
Meantime, are we not in the situation where the public is being now, and probably will be tomorrow, extremely incovenienced? May I declare a personal interest in this matter. With my large family I intend to drive to Scotland during tomorrow night, and should I find myself on the motorway at 4 o'clock in the morning unable to buy any petrol I shall be calling down coals of fire upon the head of the noble Lord opposite. I am just sorry I shall not be able to be here to tell what I think.
7.32 p.m.
The MINISTER of STATE, DEPARTMENT of ENERGY (Lord BALOGH): My Lords, in view of the very lengthy debate we have had, I hope your Lordships will allow me to be as short as I am usually long. I cannot equal the intimate knowledge which the noble Lord opposite has evinced. His expert contribution well illustrates the grave dilemma which faces all Governments in relation to petrol price increases. May I briefly outline the reasoning behind the Government's policy. T think he will see that in the circumstances what we have done strikes a fair balance between the interests of the consumer and the interests of the petrol retailers. However, I cannot answer some of the points which have been made by both noble Lords. They go far beyond any sort of interpretation of the Question originally put down. Obviously I am not omniscient, though perhaps at times Lord Strathcona thinks I am. My modesty is much greater than is apparent.
The 48 hours moratorium on price increases should affect only a limited proportion of garages who have to take petrol at new prices and sell it within the maximum retail price controls, and that is only for 48 hours. Noble Lords will appreciate that only a small addition to the price would be required over the next quarter in order to recover losses in the 48 hours moratorium period. It has been suggested, not here but elsewhere, that taking this course of action shows that we have no reliance on the efficiency of the Price Code. If I may say so, that is a complete misunderstanding of the position. The Price Code was never designed to deal with individual retail prices. I would remind the House that the purpose of the Code is to protect the consumer while at the same time allowing industry reasonable recovery of costs in profit margins. It will not be lost on the House that the Code specifically prohibits increases in the prices of goods displayed for sale, even though the price increase could be justified by other provisions of the Code: that is to say, you cannot increase the price of your stock.
Not to have taken action in the way we have would have led to allegations that the Government had allowed wholesale profiteering through the petrol retailing

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industry. I sympathise with the grave position of that industry, but it seems to me that alternative attacks, sometimes because we allow price increases and at other times because we do not allow the price to rise, is a somewhat biased approach to the treatment of what is certainly a very important and grave problem. Many garages are, of course, playing fair with the public. For example, one chain has just announced that it will not increase prices until Boxing Day. Other garages, I regret to say, have closed down in order to conserve their existing stocks until prices can be increased on Friday.
Lord LUCAS of CHILWORTH: My Lords, will the Minister justify that statement? How can he say they have closed down to conserve stocks? Who are they? And what and how much stock is involved? That is an allegation which I for one, with a certain amount of detailed knowledge, could not possibly accept.
Lord BALOGH: My Lords, if the noble Lord will send me a detailed statement, I shall be very glad to answer him. I hope those are in the minority. To conclude, therefore, the interest of consumers demands that there should not be automatic lifting of prices in relation to existing stocks of petrol, and general equity demands that those retailers who have had to accept and sell deliveries at increased wholesale prices should not be penalised. I believe that the action taken by the Government fulfils both these objectives. I sympathise with the temporary difficulties that have been so eloquently expressed by the noble Lord, Lord Lucas, and I hope that those garages who still have stocks of petrol left at the old prices on Friday will continue voluntarily to give the benefit of it to the consumer.
BRITISH RAILWAYS (No. 2)
BRITISH TRANSPORT DOCKS
BRITISH WATERWAYS
BROOKWOOD CEMETERY
COMMONWELATH PORTLAND CEMENT COMPANY, LIMITED
CORN EXCHANGE
COUNTY OF SOUTH GLAMORGAN
DART HARBOUR AND NAVIGATION AUTHORITY
FRIENDS' PROVIDENT LIFE OFFICE
GREATER LONDON COUNCIL (GENERAL POWERS)
LONDON TRANSPORT
LONDON TRANSPORT (ADDITIONAL POWERS)
MILFORD HAVEN CONSERVANCY
OCEAN TRANSPORT AND TRADING (DELIVERY WARRANTS)
PLYMOUTH CITY COUNCIL
QUEEN'S ROAD BRIGHTON BURIAL GROUND
SHARD BRIDGE
SHEFFIELD CITY COUNCIL
STANDARD AND CHARTERED BANK
STOKE PARK GUILDFORD
UNITED DOMINIONS TRUST

WESTMINSTER ABBEY
Examiners' Certificates that the Standing Orders applicable to the Petitions have been complied with.
EUROPEAN COMMUNITIES
Seventh Report from the Select Committee made, and printed pursuant to the Order of the House of 26th November 1974.
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