Sitting of 27 March 1974

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

SELECTION
Ordered,
That Mr. Ronald Brown, Mr. Hugh Delargy, Mr. Harold Gurden, Mr. Cledwyn Hughes, Mr. Adam Hunter, Mr. Bryant Godman Irvine, Mr. Ken Lewis, Mr. Martin McLaren, Miss Quennell, Mr. Albert Roberts and Mr. Frederick Willey, be members of the Committee.—[Mr. Walter Harrison.]

PRIVATE BUSINESS
  AYR COUNTY COUNCIL ORDER CONFIRMATION BILL
  Mr. William Ross presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to Ayr County Council; and the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 10.]
  ST. ANDREWS LINKS ORDER CONFIRMATION BILL
  Mr. William Ross presented a Bill to confirm a Provisional Order under Section 7 of the Private Legislation Procedure (Scotland) Act 1936, relating to St. Andrews Links; and the same was read the First time; and ordered to be considered upon Tuesday next and to be printed. [Bill 11.]
ORAL ANSWERS TO QUESTIONS
  FOREIGN AND COMMONWEALTH AFFAIRS

    Falkland Islands
    Mr. Kershawasked the Secretary of State for Foreign and Commonwealth Affairs what steps he is taking to improve the economic development of the Falkland Islands; and if he will make a statement.
    The Under-Secretary of State for Foreign and Commonwealth Affairs (Miss Joan Lestor): A development plan for the period 1973–74 to 1977–78 has been approved by the Falkland Islands Govment. Over half the funds required for the plan's implementation will be met from United Kingdom development aid.
    Mr. Kershaw: I congratulate the hon. Lady on her first appearance at the Box at Question Time. Will she keep in mind the question of a fuel monopoly given to the Argentine State oil company, which appears to be commercially unnecessary and politically potentially undesirable, and which, if persisted with, is likely to frighten away British capital which might wish to go there privately?
    Miss Lestor: I thank the hon. Gentleman for his kind remarks. I shall bear his comments in mind should the situation arise.
    Mr. Luce: Does not the hon. Lady agree that one way of helping the economic development of the Falkland Islands would be to improve communications there? What progress is being made on the construction of the permanent airstrip on the Falkland Islands?
    Miss Lestor: Tenders are now being examined by the consultants. The airfield has been designed to the specifications required to enable aircraft to fly to other destinations in Latin America, besides Argentine airfields.

    South Africa
    Mr. Huckfieldasked the Secretary of State for Foreign and Commonwealth

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    Affairs whether he will make a statement about the United Kingdom's future relationship with the Government of the Republic of South Africa.
    The Secretary of State for Foreign and Commonwealth Affairs (Mr. James Callaghan): I refer my hon. Friend to my speech in the House on 19th March about South Africa.—[Vol. 870, c. 872–3.]
    Mr. Huckfield: I have read that speech. Will my right hon. Friend do his best to ensure that his staff in South Africa do their best to maintain contact with all strands of opinion, including bodies such as the Christian Institute and the National Union of South African Students? Will he do his best also to stress to everybody in this country, particularly the supporters of the proposed British Lions' tour, that the best way in which they can show their disapproval of apartheid and similar policies is to stop such tours taking place?
    Mr. Callaghan: As regards the first part of my hon. Friend's supplementary question, in view of our fundamental opposition to apartheid and our intention to play our full part in the international community in seeking to end discrimination throughout southern Africa, I feel that it would be right for Her Majesty's representative there, and all others, to keep closely in touch with all strands of opinion in southern Africa.
    As regards the British Lions' tour, I expressed my view on that when in Opposition. These sporting matches are ill-conceived when they are played against teams which are selected on the basis of race. I have no reason to change my view now that I am in Government.
    Mr. Wall: Whatever our personal opinions of the internal affairs of South Africa, will the Minister continue to bear in mind the important strategic position of South Africa and its importance as a trade partner—I believe our fourth best?
    Mr. Callaghan: Yes, Sir. I said in my speech originally that we often have to do business with people whose views we do not share and, indeed, may bitterly oppose.

    Chile
    Mr. Whiteheadasked the Secretary of State for Foreign and Commonwealth Affairs if he will recall Her
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    Majesty's Ambassador in Santiago, Chile.
    Mr. Newensasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on future relations with the Chilean military junta.
    Mr. James Callaghan: Chile has a strong tradition of democratic government, and our policy towards the military junta will be governed by our desire to see democracy restored and human rights fully respected there. To this end, we shall take part in any future representations to be made by the United Nations on human rights in Chile, and our ambassador has been instructed to represent strongly to the military junta our concern at the treatment of prisoners. Aid will be suspended, and my right hon. Friend the Minister of Overseas Development will announce details in reply to a later Question. A projected naval training exercise has been cancelled. Existing contracts are being urgently reviewed, but we shall not grant new export licences for arms. I am glad to inform the House that the Home Secretary will consider applications from Chilean refugees sympathetically.
    Mr. Whitehead: I thank my right hon. Friend for that exhaustive statement. There was great disquiet on this side of the House about the behaviour of our accredited representatives in Santiago at the time of the coup and afterwards, particularly in their attitude towards refugees from the junta. Will my right hon. Friend say a further word about the stopping of all arms assistance to the junta? Has that been stopped from the date of the General Election onwards?
    Mr. Callaghan: As for the attitude of our ambassador, I am sure that he was carrying out the instructions of the administration at the time. It was proper that he should do so. New instructions have now been sent to him.
    As regards arms, I cannot go further this afternoon than I have already said. I have made clear that existing contracts are being urgently reviewed, but we shall not grant new export licences for arms.
    Mr. Evelyn King: If we are to trade discourtesies with countries of whose internal régimes we disapprove—a policy

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    that can be all too easily counter-productive—will the Foreign Secretary undertake to act similarly towards Left-wing as well as Right-wing dictatorships?
    Mr. Callaghan: There has never been any hesitation on the part of the Labour Party about making clear where we stood in relation to matters of human rights, no matter what Government were involved. My hon. Friends and I have made personal representations to ambassadors of countries where we thought that human rights were being suppressed, irrespective of the nature of the régime.
    Mr. Newens: Will my right hon. Friend refute the report that appeared in the Sunday Telegraph to the effect that warships now being constructed will be supplied?
    Will he make it clear that the position of the Governmment is the same as that expressed by the then Opposition in the debate on 28th November of last year? Will he bear in mind the murder, torture and imprisonment of thousands of people in Chile who were merely pursuing their democratic rights, and so uphold our world position and honour on this issue?
    Mr. Callaghan: I cannot give a clear undertaking on existing contracts, as I have said, because that matter is being reviewed. There are industrial and commercial considerations that have to be and will be taken into account. Contracts are involved here, but what I say now, for the third time, is that no new export licences will be granted.
    Mr. Amery: Has the right hon. Gentleman analysed the effects on employment in Chile of cutting back aid, particularly in the technical branch, and what the effect of employment in British shipyards will be if there are no future contracts?
    Mr. Callaghan: The first consideration will be dealt with by my right hon. Friend the Minister of Overseas Development when she answers a later Question. The second consideration is, of course, always in our minds and must be one of the matters taken into account.

  OVERSEAS DEVELOPMENT

    Chile
    Mr. Leeasked the Minister of Overseas Development whether she will stop the supply of overseas aid to Chile.
    The Minister of Overseas Development (Mrs. Judith Hart): Yes, Sir. There will be no new aid to Chile and I am stopping all present aid except that concerned with the support of Chilean students and graduates coming to Britain, which I am prepared to extend. I am allowing the completion of one or two minor technical assistance projects.
    Mr. Lee: Will my right hon. Friend bear in mind that her reply will give great satisfaction to the House, in view of the fact that the present Chilean Government, if it can be so called, indulge in the murder of their opponents on a scale unknown of any Government since that of Stalin?
    Mrs. Hart: I am grateful to my hon. Friend. That is also my understanding of the situation in Chile.
    Sir Frederic Bennett: The Minister will remember that when in opposition she said not only that when she got into office she would take immediate steps to stop aid to Chile but that she would bring effective pressure on the World Bank and the International Monetary Fund to stop all international aid to Chile. Will the right hon. Lady give an account of the pressures which she has so far exerted?
    Mrs. Hart: I fear not. I can tell the hon. Gentleman that I have had discussions with ministerial colleagues in Europe but I am afraid I cannot reveal the contents of those.
    Mr. Kerr: Will my right hon. Friend confirm that there is no question of the delivery of the naval frigates currently on order to Chile in the near future?
    Mrs. Hart: On that point I must refer my hon. Friend to the earlier answer of my right hon. Friend the Secretary of State.
    Mr. Wood: Is the right hon. Lady aware that, small as the British programme was in Chile, her decision is not only illogical but will do great damage to a country whose needs are very great? Will she finally confirm that she has now totally abandoned the view that she argued with passion when in opposition—that political considerations should be subordinate to development needs?
    Mrs. Hart: On the latter point, if the right hon. Gentleman refreshes his

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    memory correctly he will find that I argued somewhat differently. On his main point, as he will know, the three main areas of technical assistance in Chile were in industrial training, where in the whole of industry the trade unions have been suppressed and trade unionists have been imprisoned, persecuted and killed; in agriculture, where the present military régime is totally reversing the programme of land reform to which our aid is directed; and, thirdly, in education, where most of the educational institutions are now in the hands of generals, departments have been closed and there has been suppression and persecution of people engaged in education.
    Mr. Kinnock: I congratulate my right hon Friend and my other right hon. and hon. Friends in the Foreign Office on the approach that they have taken to refugees from, armaments to, and aid to the Fascist junta in Chile. In her current policy my right hon. Friend has the endorsement of a large proportion of the anti-Fascist world. Would it not have been illogical for my right hon. Friend to give aid to Chile which would have provided the generals with resources to buy armaments to suppress their people?
    Mrs. Hart: I am grateful to my hon. Friend for his endorsement of the policy. In Britain, as in Chile, there are two versions of the facts. I fear that most right hon. and hon. Members of the Opposition have completely accepted the propaganda version of the facts put out by the military régime.
    Mr. Amery: Is the right hon. Lady aware that we are all very understanding of the fact that she has to console the left wing of her party for the minority Government's inability to fulfil a truly Socialist manifesto?
    Mrs. Hart: The right hon. Gentleman should look back at the history of the Labour Party's reactions to the events in Chile from the moment at which they occurred.

  FOREIGN AND COMMONWEALTH AFFAIRS

    European Economic Community
    Mr. Martenasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on re-
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    negotiating the terms of entry to the EEC.
    Mr. Moateasked the Secretary of State for Foreign and Commonwealth Affairs if he will make arrangements for the fundamental review of British membership of the EEC; and if he will make a statement.
    Mr. Laneasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the stage reached in his preparation for the renegotiation of the EEC Treaty.
    Mr. Leeasked the Secretary of State for Foreign and Commonwealth Affairs what is Her Majesty's Government's policy towards renegotiating the terms of the Treaty of Rome.
    Mr. Blakerasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the arrangements for renegotiating the terms of entry into the EEC.
    Mr. James Callaghan: I would refer the hon. Member to the statement which I made to the House on 19th March.—[Vol. 870, c. 859–70.]
    Mr. Marten: As renegotiation, it successful, will fundamentally alter the whole concept of the Common Market, or, if renegotiation is unsuccessful and the question is put for referendum, it will almost certainly mean that we shall withdraw, will the Government now begin to consider the creation of a wider free trade area?
    Mr. Callaghan: The first two parts of the hon. Gentleman's supplementary question are hypothetical. I do not wish to be drawn into that territory yet. As to the creation of wider areas, we have always argued that we need the widest area for trade and, indeed, that many of these monetary and trade questions can be solved satisfactorily for all countries only on a world-wide basis.
    Mr. Lee: Will my right hon. Friend find a new job for Mr. George Thomson, whose undoubted talents could be more usefully employed this side of the Channel than in Brussels, where he appears to be sabotaging my right hon. Friend's—[HON MEMBERS: "Oh!"]—suggestions.
    Mr Callaghan: There does not seem to be complete unanimity about the

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    whole of my hon. Friend's question, but I understand that there is unanimity on what he said about Mr. George Thomson's merits. I should like to see his merits deployed in any field that would serve best.
    I understand, although I was not aware that I was to be asked this question, that I do not have any power to remove him, even if I thought it right to do so. He is independent and, as long as he is independent, he expresses his own views.
    Mr. Lane: Is it not already clear that there is ample scope for continuing the last Government's programme for reshaping the Community from within? Will not the right hon. Gentleman now acknowledge that Labour's talk of renegotiating terms of entry has been phoney and will not impress either the British public or our fellow members of the Community?
    Mr. Callaghan: I am not sure which leg the hon. Gentleman is trying to stand on. Is it possible to renegotiate or is it not?
    Mr. Christopher Mayhew: While the Foreign Secretary is mobilising all possible influence to improve the terms of entry into the Common Market, is it logical for him to prevent his supporters from going to the European Parliament to support him on this matter?
    Mr. Callaghan: I have nothing to add to what the Lord President said on that subject in the recent debate.
    Mr. Blaker: The Government gave the impression in the foreign affairs debate last week that, pending the outcome of the renegotiation, no new commitments would be undertaken vis-à-vis the other eight members of the Community. Does that mean that the Government do not propose to try to bring to a conclusion the negotiations on the regional development fund, which were already far advanced under the previous administration and which, if concluded, would bring this country great benefits?
    Mr. Callaghan: We shall certainly need to reconsider that and other questions to see how far it is necessary to increase the size of the Community budget as an offset to an extremely large agricultural
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    expenditure by this country, or how far it would be more sensible to reduce the size of the total budget and thereby reduce the size of any regional fund. These considerations have obviously to be taken into account in our negotiating approach.
    Mr. Moate: In the fundamental renegotiations, will the right hon. Gentleman be seeking to restore the full powers of this Parliament over all Community enactments, including, particularly, Commission regulations, with which the Foster Committee did not deal specifically?
    Mr. Callaghan: In principle, yes. The method I am not clear about, but I think that what has been clear from the attitude of the Labour Party, both in Opposition and in Government, is that we wish this House to be in a position to give the final answer.
    Mr. Jay: While conducting these negotiations, will my right hon. Friend also have talks with countries such as New Zealand, Australia and Canada, in order to resume the previous close economic relations with those countries?
    Mr. Callaghan: With pleasure. Mr. Walding, the New Zealand Deputy Prime Minister, has already discussed these matters with Ministers here.
    I am bound to say that quite a lot of diversification by these countries has taken place during the last couple of years because they felt that they were being told to go elsewhere. Therefore, they have to be given assurances of long-term arrangements if they are to redivert their trade here.
    Mrs. Winifred Ewing: May I ask the right hon. Gentleman a much easier question? In the renegotiation, is there any exclusive responsibililty, either by staff or subject matter, for Scottish interests—agriculture, fishing, energy, and so on?
    Mr. Callaghan: It is being undertaken on a United Kingdom basis, but representing, as I do, one of the—shall I say?—"Trinity" inside Great Britain, I shall make absolutely certain that our interests, whichever side of the border they may happen to be, are fully looked after.
    Mr. Russell Johnston: Given the response that the Foreign Secretary gave

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    to the hon. Member for Faversham (Mr. Moate), do I gather from his approach that the fundamental renegotiations are not concerned solely with the financial terms negotiated by the previous Government but go to the very heart of the nature of the Community? Will the right hon. Gentleman therefore make clear whether he is in favour of our membership of the Community as it is in principle?
    Mr. Callaghan: I do not think that I want to go any further than the Labour Party manifesto, which I recommend the hon. Government to study.
    Mr. Milne: Will the Foreign Secretary have talks with our EFTA partners in order to learn from them how, without seeking Community membership, they got better agreements in many areas than we did with membership?
    Mr. Callaghan: If there had been a Labour Government three years ago, perhaps that would have been an appropriate question, but we are now part of the Community and it is important to observe how deeply embedded the institutions have become since we joined. Therefore, I think that it is better that we should start by seeing how we are to renegotiate—which was the basis of our agreement inside the party and at our own conference—than that we should try to start from the outside.
    Mr. Rippon: Will the Foreign Secretary say something in this context about his recent visit to Bonn? Did he reiterate the view he expressed in his speech last week—that he was broadly in agreement with the objectives of European unity? In particular, did he raise the question of new negotiations in the sphere not only of regional policy but of social, industrial and aid policy?
    Mr. Callaghan: Yes, Sir, we covered the whole field. I had very cordial conversations with both Chancellor Brandt and Herr Walter Scheel. We did not agree on everything, which was hardly surprising, but I think that they understood the reasons for our approach on many of these matters, and I hope to have further conversations with others in due course.
    Mr. Christopher Mayhewasked the Secretary of State for Foreign and Com-
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    monwealth Affairs if, during the period of renegotiating the terms of entry into the EEC he will also put forward proposals for strengthening the democratic institutions of the Community.
    Mr. James Callaghan: The need for greater democratic control over the work of the Community will be considered in the light of the results attained in the renegotiation of the terms of entry.
    Mr. Mayhew: May I ask my right hon. Friend again to give his reasons for insisting that the case for lower farm prices, a better regional policy, a smaller British contribution to the budget, and so on, should be put in the European Parliament only by Opposition Members of Parliament? Why does not he allow his own supporters, who can put the case a lot better, to go as well?
    Mr. Callaghan: I would not differ from the view expressed in the last part of that supplementary question, but my right hon. Friend the Prime Minister has made the position clear, and that is the position of the Government.
    Sir Douglas Dodds-Parker: Is the Foreign Secretary aware that in the last 15 months a number of proposals have been put forward by my hon. Friend the Member for Saffron Walden (Mr. Kirk) and sympathetically received, and particularly by Mr. Rafton Pounder, about budgetary control, which have largely been adopted and will come into effect next year?
    Mr. Callaghan: I am very glad to hear that.
    Mr. Arthur Lewis: Will my right hon. Friend correct my hon. Friend the Member for Woolwich, East (Mr. Mayhew) and the hon. Member for Cheltenham (Sir D. Dodds-Parker) by pointing out that we are not represented by Members of Parliament? They are men some of whom have either voluntarily decided not to stand for Parliament, or who were defeated at the polls. Is it not absolutely anti-democratic for people to be there—allegedly in Parliament—receiving tax-free fees, although they do not want to stand as Members of Parliament?
    Sir Derek Walker-Smith: As the institutions of the Community work on a somewhat paradoxical basis, in that the primarily legislative function is vested in

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    a mainly executive body, to wit, the Council of Ministers, will the right hon. Gentleman give his powerful support to the adoption of the suggestion—which I made more than once last year—that the legislative processes of the Council of Ministers be as far as possible conducted in public, as a contribution to the improvement to the democratic process?
    Mr. Callaghan: I think that is a very interesting suggestion, and in due course I shall want to consider it, without giving a final reply today.

    Middle East
    Mr. William Hamiltonasked the Secretary of State for Foreign and Commonwealth Affairs when he next intends to pay an official visit to the Middle East.
    Mr. McCrindleasked the Secretary of State for Foreign and Commonwealth Affairs what plans he has to pay an official visit to Jerusalem.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. David Ennals): My right hon. Friend visited both Egypt and Israel shortly before the election was announced. He has no plans to visit the Middle East at present.
    Mr. Hamilton: Will the Minister give an assurance that he will pursue an even-handed policy in this extremely sensitive area, and try at the earliest opportunity to bring together the oil-importing and oil-exporting countries, with particular regard to the problems of the Third World and the underdeveloped countries generally?
    Mr. Ennals: To take the second part of my hon. Friend's supplementary question first, the answer is "Yes, indeed." That matter is being discussed at the Washington conference at present and will certainly be taken up at the special session of the United Nations Assembly in two weeks' time.
    As regards the first part of the supplementary question, we are anxious to do everything that we can to assist Dr. Kissinger in his delicate negotiations—so far with considerable success, but there are difficulties ahead.
    Mr. McCrindle: When the Foreign Secretary next visits Jerusalem, will he try to improve still further Anglo-Israeli
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    relations, which reached a very low point last October? Does the right hon. Gentleman not agree that, rather than achieve that improvement by resuming arms sales, he might do worse than consider the possibility of improved economic and trade relations, particularly with regard to citrus products?
    Mr. Ennals: My right hon. Friend is concerned with the whole question of trade relations with Israel and, of course, with the other Middle East countries, but he will bear in mind what the hon. Gentleman said.
    Mr. Sandelson: Has my right hon. Friend had an opportunity of considering the views expressed in the foreign affairs debate last Tuesday by my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley), some of which caused offence to certain people? Will he now comment on what my hon. Friend said? I told my hon. Friend the Member for Heeley that I would raise this question.
    Mr. Ennals: Yes, Sir. At the time of my hon. Friend's statement I was asked whether I would comment on his remarks, and I replied that I preferred to see HANSARD before doing so. I have looked carefully at my hon. Friend's remarks, and I must say that Her Majesty's Government would in no way wish to be associated with the language used by him about Israel, or with his comparison between the situation there and that in South Africa. I am sure that it is neither right nor helpful to use such language.
    Mr. Fidler: I thank the right hon. Gentleman for his response to my intervention last week. However, I wonder whether he has seen two reports in The Times today. One indicates that the British Government have supported the European Declaration on the Middle East, made on 6th November. I hope that that is not so.
    Far worse, is there any truth in the other report, that the British Government have approved the appointment of General Shazly as the next Egyptian ambassador to the Court of St. James? Bearing in mind General Shazly's background of about 10 years ago, when he was closely associated with Fascist organisations in this country which were endeavouring to raise a large sum of money from him in order to engage in

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    anti-Semitic activities here, such an appointment is unacceptable and an offence not only to the Jewish community but to all freedom lovers in this country.
    Mr. Ennals: Let me deal first with the 6th November declaration. It was a restatement of the principles contained in the United Nations resolution. Her Majesty's Government accept the wording of that resolution which, in our view, in no way changes the position adopted by the Labour Party both in opposition and now in government.
    In answer to the second question, I confirm that agreement has been granted for General Shazly to become the ambassador. It is not right for me to discuss allegations about General Shazly which have appeared in the Press. He has been accepted as the ambassador of Egypt, with which it is our wish to have friendly relations.
    Mr. Jackson: Will my right hon. Friend give an assurance that the policy of Her Majesty's Government is that Arab Jerusalem should remain an integral part of Jordan?
    Mr. Ennals: I do not intend to be drawn into confirming statements of that nature. At a time when Dr. Kissinger is involved in very delicate negotiations, it is in no way helpful for Governments to line themselves up on one side or the other.
    Mr. Walters: Do the Government intend to continue to encourage schemes for industrial co-operation and partnership in Egypt and other Arab countries which are of great long-term economic and political value to this country?
    Mr. Ennals: Yes, Sir. In the article written by my right hon. Friend when he returned from his visit to both Israel and Egypt, he emphasised the value that we place on our economic relationship with those countries.

    French Nuclear Tests
    Mr. Dalyellasked the Secretary of State for Foreign and Commonwealth Affairs what representations he is making to the French Government on nuclear testing in the Pacific.
    Mr. James Callaghan: I am examining all aspects of this subject. Her Majesty's Government's general policy will be based
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    on the Commonwealth Prime Ministers' declaration at Ottawa, concerning the Partial Test Ban Treaty.
    Mr. Dalyell: Are we supporting the views put on behalf of New Zealand by Mr. Walding?
    Mr. Callaghan: My hon. Friend has a capacity for asking short, succinct and difficult questions. I do not want to go further than I have today until I have examined this matter. Then, no doubt, my hon. Friend will probe me again.

    Hong Kong
    Mr. Sillarsasked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an early visit to Hong Kong.
    Mr. Ennals: My right hon. Friend has no present plans for a visit.
    Mr. Sillars: Is my right hon. Friend aware that a large number of ILO conventions which operate fully inside the United Kingdom are not applied fully inside Hong Kong? Is my hon. Friend further aware that we want him either to go personally or to send a commission of inquiry to Hong Kong to see how we can match that model economy's technological advance with similar measures in employment protection?
    Mr. Ennals: The statistics of human rights conventions show, at 31st December 1973, 20 ILO conventions which had been applied without modification to Hong Kong, and nine which had been applied with some modifications. That compares very well with other countries in the area. I understand my hon. Friend's question, and I can tell him that the overseas labour adviser recently paid a visit to the colony. I expect his report shortly. I think that it will throw new light on the situation. I shall bear in mind the points made by my hon. Friend.
    Mr. Royle: Is the right hon. Gentleman aware that there is severe concern in Hong Kong following the Budget speech yesterday of his right hon. Friend the Chancellor of the Exchequer? The statement indicated that Her Majesty's Government may be considering withdrawing from South-East Asia. Will the right hon. Gentleman confirm that Her Majesty's Government are determined to support Hong Kong, to stay in Hong

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    Kong and to maintain the garrison in that colony?
    Mr. Ennals: The hon. Gentleman will remember that my right hon. Friend referred in his Budget speech also to the defence review being carried out by my right hon. Friend the Secretary of State for Defence. Clearly, it is an all-embracing review. It would be unwise—I have no intention of doing so—either to trespass on his territory or to answer questions that relate to particular parts of the review. Before the hon. Gentleman leaps to his feet, I can assure him that no changes will be made affecting any part of the world without the fullest consultation with our allies and the occupants of the area.
    Mr. George Cunningham: Does my right hon. Friend recall the case of the British police officer in Hong Kong who committed a criminal offence there, came to this country and could not be returned to stand trial in Hong Kong? Are there any plans to avoid a repetition of that situation, so that people who commit an offence in a British colony cannot then seek refuge in the United Kingdom?
    Mr. Ennals: This is a difficult problem. The offence alleged against the gentleman in question, in respect of which a warrant has been issued in Hong Kong, concerns a matter which is not an offence in this country. It is an offence under Section 10 of the Hong Kong Prevention of Bribery Ordinance, but, since there is no corresponding offence in this country, the Hong Kong Government are not in a position to seek his return under the Fugitive Offenders Act. It would not be easy, therefore, to produce legislation that would enable this to take place in the case of a matter which is not an offence in the United Kingdom.
    Sir Alec Douglas-Home: Does the right hon. Gentleman recall that when his party, in earlier years, proposed to withdraw from east of Suez, it never proposed to withdraw from Hong Kong? Does he recognise, also, the absolute importance of maintaining confidence in Hong Kong?
    Mr. Ennals: I can give the right hon. Gentleman that assurance. There is no doubt that Her Majesty's Government's commitments to Hong Kong will remain, and there is no suggestion at all that
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    our presence in Hong Kong should be withdrawn.

    EEC and Greece
    Mr. Woodhouseasked the Secretary of State for Foreign and Commonwealth Affairs if he will terminate the negotiations for the adherence of the United Kingdom to the treaty of association between the European Economic Community and Greece.
    The Minister of State for Foreign and Commonwealth Affairs (Mr. Roy Hattersley): The negotiations on the protocol to adapt the association agreement between Greece and the EEC have made no progress for some months. The Community's relations with Greece will be considered as necessary in our continuing review of EEC policy.
    Mr. Woodhouse: Does the hon. Gentleman appreciate that these negotiations offer the Government a much more effective lever for persuading the Greek Government to restore democratic institutions than the mere cancellation of a naval visit? Will he at least agree to make any renewal of these negotiations conditional upon the release of Mr. George Mavros, the leader of one of the major political parties in Greece, whose only offence has been to support the Government's policy towards Greece?
    Mr. Hattersley: These negotiations are on a narrow commercial point concerning not membership but association. As to the attitude of the Government, I hope that hon. Gentlemen opposite have no doubt where we stand on the need for the restitution of democracy in Greece and our feelings about the imprisonment of those people who thought it right to express their support for the action which the Government took.
    Mr. Whitehead: Is my hon. Friend aware that the decision to cancel the naval visit to Greece was widely welcomed in all parts of the House? Will he convey to the Greek Government the fact that many of us believe that incidents such as the arrest of Mr. George Mavros make it less rather than more likely that the Treaty of Accession negotiations can be continued?
    Mr. Hattersley: I am in strong agreement with my hon. Friend's comment

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    about the necessity for democracy to be restored in Greece before proper negotiations can continue concerning the relationship between the Community and Greece. I hope that the Government of Greece will understand the strength and depth of feeling held not only by the Government, but in all parts of the United Kingdom, and will feel that it is in their own interests, as well as the interests of the restoration of freedom in general, that they should make substantial progress towards achieving in Greece the sort of democracy we expect in the Western world.
    Mr. Mather: Nevertheless, is not the hon. Gentleman aware that many people believe this to be a petty and spiteful attitude that may have an effect on our shipyards, which are to construct naval vessels for Greece?
    Mr. Hattersley: For 150 years, not least concerning the revolution in Hungary 150 years ago and the American Civil War, workers in Britain have been prepared to pay the commercial price for standing up for principles on freedom. Long may they continue.

    Gibraltar
    Mr. Greville Jannerasked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an official visit to Gibraltar.
    Mr. Hattersley: My right hon. Friend has no plans to do so at present but would not wish to rule it out later if a suitable opportunity arose.
    Mr. Janner: Will my hon. Friend confirm that the Government have no intention of ditching the people of Gibraltar by changing its status in any way contrary to their wishes?
    Mr. Hattersley: My hon. and learned Friend will recall the Gibraltar Constitution Order of 1969, prepared and approved under the same Prime Minister in a different administration. That remains our policy and endorses exactly the point made by my hon. and learned Friend.
    Sir Frederic Bennett: Does not the Minister agree, too, that the problem in Gibraltar now is not so much economic as psychological, in the sense of the claustrophobia that is developing there?
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    Should not we look at all possibilities of making it easier both for Gibraltarians to come here on visits and for English people to go there at more reasonable cost than is possible today? Does not the hon. Gentleman agree that the Gibraltarians are locked up in a very small area and that in that context they need assistance?
    Mr. Hattersley: I share the hon. Gentleman's view in principle about the feeling of claustrophobia felt by the people in Gibraltar. I hope that that feeling may soon be overcome. But the initiative to overcome that feeling rests largely with the Spanish Government, who are in a position to make progress along those lines. I hope that the Spanish Government will learn what the hon. Gentleman has said, and the Government's attitude to the matter, and make a reduction in claustrophobia possible.

    Namibia
    Mr. Hooleyasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the policy of Her Majesty's Government on the question of Namibia.
    Miss Joan Lestor: We support the undoubted right of the people of Namibia freely to decide their own destiny, and we shall play our part in promoting a settlement based on full self-determination.
    Mr. Hooley: Is my hon. Friend aware that I am vigorously opposed to racialism wherever it appears, whether in South Africa or the Middle East? Will she initiate discussions with the United Nations High Commissioner for Namibia, Mr. Séan MacBride, to see what useful diplomatic or other action we can take to bring pressure on South Africa to relinquish her hold on that territory?
    Miss Lestor: I agree with my hon. Friend. We want to make a decision in the matter as quickly as possible. The Security Council has not yet resumed its debate, but we hope that it will soon do so in order that those matters may be fully discussed.
    Mr. Rifkind: In view of the international status of South-West Africa, will the Government consider making representations to the South African Government about some of the more barbaric

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    forms of punishment being carried out against those who are politically active against the present South African system?
    Miss Lestor: I agree with what the hon. Gentleman said and I shall certainly bear it in mind when the discussions are resumed.

    Personnel (Appointments)
    Mr. Luceasked the Secretary of State for Foreign and Commonwealth Affairs whether he has changed the basis upon which senior Foreign Office personnel are appointed.
    Mr. James Callaghan: No, Sir.
    Mr. Luce: Is the right hon. Gentleman quite sure about that? Although I am not in any way criticising the calibre of Mr. Ivor Richard as the new ambassador to the United Nations, is the right hon. Gentleman aware that many people feel it a great insult, not just to the Diplomatic Service but to the United Nations, that he should remove Sir Donald Maitland after only a few months in office and replace him by a man who in public has said that he plans to return to this country in a few months' time to fight the next General Election?
    Mr. Callaghan: A great many people may feel that, but I have not heard it until this afternoon.
    Mr. Greville Janner: Is my right hon. Friend aware that the appointment of Mr. Ivor Richard has given great satisfaction—[HON. MEMBERS: "No."] Oh, yes, and the better they know him, the more satisfaction it has given. They wish him well in this difficult job. Hon. Members should not make it more difficult, as the hon. Gentleman has.
    Mr. Callaghan: I expect that the appointment of Mr. Ivor Richard has given as much satisfaction—[An HON. MEMBER: "In Blyth?"]—perhaps to different people as did the appointment of Lord Cromer in his day and Sir Christopher Soames on an earlier occasion.

    Law of the Sea Conference
    Mr. McNamaraasked the Secretary of State for Foreign and Commonwealth Affairs whether he will publish a White Paper outlining the Government's
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    proposals for discussion at the Law of the Sea Conference.
    Mr. Ennals: I am not sure that a White Paper is appropriate, but I am considering how best hon. Members can be informed and consulted about the issues that will arise at the conference.
    Mr. McNamara: I am obliged to my right hon. Friend for that reply. Will he bear in mind that there is a great deal of confusion about what will be the policy of Her Majesty's Government on the extension of limits, ownership of the seabed, fishing and all the other matters? It would be most helpful not only to hon. Members but to the community as a whole if all the options, objections, discussions and possibilities were included in one document and fully discussed so that there was an informed public opinion before the conference.
    Mr. Ennals: I shall consider the point made by my hon. Friend. I agree that there are some extremely important issues to be taken up at the Law of the Sea Conference. I welcome and appreciate any representations that are made by organisations with a particular interest, and I shall seek to find a way in which we can have an informed discussion before the conference.
    Mr. Douglas Henderson: Is the hon. Gentleman aware that the United Kingdom is almost alone among the approximately 130 States represented at the conference in not announcing its position in advance? Is he aware that there have not been proper consultations with the fishing industry about the evidence put forward? Will he also take into account that Scottish inshore fishermen will not be satisfied with a United Kingdom delegation that does not represent their interests separately?
    Mr. Ennals: I do not for a moment accept that the United Kingdom delegation will not both represent and take into consideration the interests and the needs of all parts of the United Kingdom, including that part represented by the hon. Member. I assure him that there will be consultations and that any representations, from whatever part of the country and from whatever interests, will be taken very seriously indeed.
    Mr. James Johnson: This important conference, opening in Caracas on 20th

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    June, will be discussing the total affairs of 72 per cent. of the globe's surface—conservation, pollution, wealth of the seabed and the like. May I ask one question on the limited subject of fishing? Is my right hon. Friend aware that, unlike the unhappy days of the Icelandic dispute, when the House was divided about our policy, we come to this conference with everybody—vessel owners, unions, deck hands—wishing to make our fishing limits, like those of Iceland perhaps, 50 miles or even 200 miles? Will he bear in mind that it is a united team that wishes Her Majesty's Government to have our limits extended?
    Mr. Ennals: I shall not comment on every part of my hon. Friend's supplementary question. I am aware that there has been an encouraging change of opinion and that there is much more unity than previously. I shall be delighted to discuss these matters with my hon. Friend, who knows so much about them, before the conference takes place.
    Mr. Wall: Can the Minister confirm that discussions are taking place with our partners in the EEC about whether an EEC policy can be advanced at the Law of the Sea Conference?
    Mr. Ennals: I can confirm that wide consultations are taking place with the other members of the European Economic Community. Obviously some of them have different interests. Our task at the conference will be to represent the interests of the whole of the United Kingdom and we do not want to seek a watered-down approach which would mean that the interests of particular parts of the United Kingdom were not taken fully into consideration.
    Mrs. Winifred Ewing: The right hon. Gentleman has not answered the Question.
    Mr. Ennals: I did not hear the hon. Lady's intervention from her seated position.

    Anglo-American Relations
    Mr. Matherasked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Anglo-American relations.
    Mr. James Callaghan: Her Majesty's Government attach very great impor-
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    tance to maintaining and improving the friendly relationship which exists between the United Kingdom and the United States.
    Mr. Mather: What are the right hon. Gentleman's views on the future of American military bases in this country? Does he not feel that these are important factors in cementing Anglo-American relations and for the future of NATO as a whole?
    Mr. Callaghan: They are important factors, and they would form part of any multilateral discussions that would take place on disarmament.
    Mr. Dalyell: Will my right hon. Friend exploit his 25 years' friendship with leading Americans to persuade the United States that, in its own interests, it is not sensible, against the wishes of Mrs. Gandhi, Mrs. Bandaranaike, President Suharto and many Africans, to have a nuclear zone and bases such as Diego Garcia in the Indian Ocean?
    Mr. Callaghan: I understand that there is more than one view in the United States on this matter. It is one of the problems to which I intend to give careful attention. However, I do not wish to take up a position on it this afternoon.
    Mr. Russell Johnston: Does the Foreign Secretary intend to have discussions with our EEC partners about a joint energy policy with the United States in view of the unsatisfactory outcome of the Washington conference?
    Mr. Callaghan: Yes, Sir, these discussions are taking place. Dr. Kissinger will be here tomorrow, and I hope to have further discussions with him about any differences that may have arisen.

    European Parliament
    Mr. Gryllsasked the Secretary of State for Foreign and Commonwealth Affairs what is his policy in regard to the appointment of a Labour Party delegation to the European Assembly.
    Mr. James Callaghan: I would refer the hon. Gentleman to the reply given by my right hon. Friend the Lord President of the Council on 18th March to a Question from the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith).—[Vol. 870, c. 664–5.]
    Mr. Grylls: The Foreign Secretary has tried to hide behind the Leader of the House and, this afternoon, the Prime Minister. Will the right hon. Gentleman now, once and for all, come clean and tell the country why the Socialist Government have used the institutions of the Community, such as the Council of Ministers, but still refuse to send a Socialist delegation to Strasbourg to swell the Socialist benches? If he still will not send a Labour Party delegation, will he recognise that this country is well represented by the Liberal and Conservative delegations?
    Mr. Callaghan: I think that the Prime Minister and the Lord President of the Council are ample figures behind which to shelter. They have stated the case, and I do not have to repeat it.
    Mr. Wellbeloved: Will my right hon. Friend refrain from wasting time considering whether the Government should send official representatives to the European Parliament? Will he concentrate, instead, on reviewing the allowances and travel arrangements of Members who attend at present?
    Mr. Callaghan: May I say that, on all these matters which excite so many hon. Members, our first priority is renegotiation. That is what we are going ahead with. The other questions can no doubt, be considered in due course.
    Sir Douglas Dodds-Parker: As the European Parliament is considering questions of renegotiation, does the Foreign Secretary appreciate the widespread dismay in the European Parliament at the continued emptiness of the 18 chairs, because of the great history of help to social democracy by Ernest Bevin, John Hynd and others in the years after the war?
    Mr. Callaghan: Yes, Sir. We have played our full part in various forums of this sort. We can consider this matter again in due course, but it is not a matter of first priority, bearing in mind the limited powers of that Assembly.
    Mr. Faulds: Would not my right hon. Friend be well advised to reconsider the question of sending a Labour delegation to the European Assembly? Does he not agree that such a delegation, particularly in view of our renegotiations, would
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    much better represent the interests of Britain than do the tattered remnants of a discredited Opposition?
    Mr. Callaghan: I find myself in agreement with parts of that supplementary question.
    Mr. Skinner: Would not the right answer be not to listen to my hon. Friend the Member for Smethwick and some hon. Gentlemen opposite, but to fetch back those who are already there and thus relieve us of part of the cost to the Community budget which arises from having to pay inflated expenses while those concerned use charter flights at £46 a time and put the difference in their pockets?
    Mr. Faulds: On a point of order, Mr. Speaker. As he so often is, my hon. Friend is out of touch with reality. I am the Member for Warley, East, not Smethwick.
    Mr. Kelley: On a point of order, Mr. Speaker. Would my right hon. Friend care to take the opportunity to define what authority the Foreign Secretary has over decisions—
    Mr. Speaker: Order. That is not a matter for the Chair.

  OVERSEAS DEVELOPMENT

    Dependent Territories (Investment Funds)
    Mr. George Cunninghamasked the Minister of Overseas Development what is the total value of funds placed with the Crown Agents for investment by Governments of British dependent territories.
    Mrs. Hart: The holdings of the British dependent territories amounted to approximately £309 million at the end of January.
    Mr. Cunningham: Will my right hon. Friend accept my congratulations, on the ground that she has just answered a Question in identical terms to one which I put to her predecessor some months ago which he categorically refused to answer? Does my right hon. Friend agree that there is deep resentment that British colonial funds are going into property

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    investment in this country through the medium of the Crown Agents? Does she further agree that it would be a good thing if the investigation of the activities of the Crown Agents by the Select Committee on Overseas Developments in the last Parliament were to be continued in this Parliament?
    Mrs. Hart: I am grateful to my hon. Friend for his congratulations. It would not be proper for me to comment on what the Select Committee might or might not in its wisdom choose to do. I assure my hon. Friend that I am taking further the inquiries which I originally initiated into the Crown Agents, but it will take some time to reach a conclusion, as my hon. Friend will no doubt understand.

    Sahelian Africa
    Mr. Hooleyasked the Minister of Overseas Development what is the total value of aid supplied by Her Majesty's Government for the relief of peoples affected by the drought in the Sahel region of Africa; and what further help is proposed in the immediate future.
    The Parliamentary Secretary to the Ministry of Overseas Development (Mr. William Price): Last year the amount was about £2 million. This year it will be in excess of £3½ million. In addition, in response to an appeal by the United Nations Secretary-General, my right hon. Friend proposes, subject to parliamentary approval, to contribute £500,000 to his Sahel disaster fund.
    Mr. Hooley: I greatly welcome the contributions which have been made by the United Kingdom. Is my hon. Friend aware that the Secretary-General of the United Nations has said that at least $30 million is needed to alleviate what has been one of the greatest natural disasters in the history of this century? Will my hon. Friend consider persuading his right hon. Friend the Chancellor of the Exchequer to be more generous than the further £500,000 promised?
    Mr. Price: We are doing all that we can, and we believe that we are one of the first nations to respond to the appeal. That is something. I met the voluntary organisations last week, and they tell me that a far bigger problem than money or food is transport. We are doing all
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    that we can to get the vehicles so that the food will go to the people.
    Sir Bernard Braine: Does the hon. Gentleman not agree that one of the most disturbing features of the situation in the Sahel region, particularly in Ethiopia, is that famine arising from persistent drought over a long period is largely predictable, and that if people are dying, as they did last year and are now, that is due largely to the failure of the international community and the governments concerned to co-ordinate aid effectively and in time? Are the Government prepared to take any initiative at international level to deal with this tragic situation?
    Mr. Price: Again, my right hon. Friend and I invited a number of people, including Jonathan Dimbleby, to the Ministry last week to discover precisely what was happening. We discovered that this was a major problem and that information was not getting through. We have asked for all the help and assistance that we can get, and shall then do whatever we can to mitigate what, as the right hon. Gentleman says, is one of the great tragedies of this century.
    Mr. James Johnson: May I congratulate my hon. Friend on his first excellent answer to my question in the House? I should like to ask him, at his leisure, to look into the question whether the Sahara is advancing into the coastal Littoral of West Africa, and whether it is not a short-term matter of too many mouths to feed, or, even more important, whether there are too many animals to feed upon the venegation in that belt.
    Mr. Price: This is a matter which our officials are studying very closely, but there are differences of opinion.
    Sir Douglas Dodds-Parker: In view of the excellent work done by the Royal Air Force during the past three or four years in this area, will the Service be asked to help again?
    Mr. Price: That is another matter which is being considered. There is a possibility that some of the Governments who have been helping will be withdrawing their assistance. We hope that that will not happen but if it does we shall have to consider the possibilities of replacing it.

    Developing Countries (Aid)
    Mr. Tebbitasked the Minister of Overseas Development if it is the policy of Her Majesty's Government to discriminate in the grant of aid to developing countries according to the political alignment of their Governments.
    Mrs. Hart: Political considerations can never be ignored in deciding on the allocation of aid resources; they have always been a factor and they will continue to be given due weight by Her Majesty's Government. But the major consideration is the developmental value of aid for the people of the country concerned.
    Mr. Tebbit: Is the right hon. Lady aware that her fondness for supporting Communist causes has given grave concern to Governments and people of developing countries that have suffered internal or external Communistic aggression? Will she state more clearly that she will suppress her worst prejudices and consider the interests of the people concerned, and not the left wing of her party?
    Mrs. Hart: Perhaps the hon. Gentleman will write to me and explain what on earth he means.
    Mr. Royle: Although I have some sympathy for the attitude of the right hon. Lady and her Government towards Greece, I think that there is considerable uncertainty among many business men about Her Majesty's Government's attitude to many countries overseas, ranging from Greece, Portugal and Spain to Chile. Will she therefore consider consulting her right hon. Friend the Foreign Secretary with a view to setting up a boycott office in order that British business men may be aware to which countries they may arrange to export with the certain knowledge that they will not, after completing a contract, be undermined by Her Majesty's Government?
    Mrs. Hart: The hon. Gentleman might do well to refresh his memory by reference to some of the courses which the Labour Party completely supported when his Government was taking action in relation to the suspension of aid to other countries. I assure him that I am in close consultation with my right hon. Friend the Foreign Secretary. I would
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    also add that we have to consider whether the very limited development aid budget is being correctly used.
    Mr. Boyle: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on Adjournment.

    Overseas Civil Servants (Aden and Zanzibar)
    Mr. Allasonasked the Minister of Overseas Development if she will review the grants given in lieu of pension to former employees of the Aden and Zanzibar Governments, in the light of the rise in the cost of living since December 1971.
    Mr. William Price: British pensions increase arrangements already apply to certain overseas pensioners, and those former employees of the Aden and Zanzibar Governments who fulfil the criteria are beng paid the increases due to them. The arrangements do not, however, apply to former local officers of overseas Government services for whom the British Government had no special responsibility during their service or for their pensions.
    Mr. Allason: But these are the very people for whom I am seeking help, who in many cases have no other income and who have relied upon the generosity of the British Government. Now they have found that this aid extended to them has been reduced by at least one quarter, owing to the rise in the cost of living in, for example, India. Will not the Government help these unfortunate people?
    Mr. Price: We believe that we are, as did the previous Government, fulfilling our moral obligations. We know of the hon. Gentleman's interest in this matter. There are practical difficulties. If the hon. Member cares to discuss them with us, we shall explain in detail to him.

SOCIAL SECURITY
The Secretary of State for Social Services (Mrs. Barbara Castle): With permission, Mr. Speaker. I should like to make a statement about increases in social security benefits and contributions.
My right hon. Friend the Chancellor of the Exchequer yesterday announced the main proposals. The increases in

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benefits will take effect in the week beginning 22nd July. This means 17 weeks from now—and in the last three years the shortest timetable achieved has been 25 weeks The 17-week timetable can be met only at a risk that some beneficiaries may not receive their increases until shortly after the operative date We will do our best to avoid this happening but, given our overriding objective of introducing the increases at the earliest possible date, I am sure the House will agree that it is a risk we should be prepared to take
The standard rate of pensions—that is, of retirement pensions, invalidity pensions and widows' pensions—will go up by £2·25 for single persons Married couples will get an increase of £3·50 Thus our pledge to increase pensions to the levels of £10 for single persons and £16 for married couples will be honoured. Old persons' pensions will go up from £2·85 to £3·70 for wives and from £4·65 to £6 for other people.
Short-term benefits—namely, unemployment benefit and sickness benefit—will be increased by £1·25 for a single person and £2 for a married couple, making the single person's rate £8·60 and the married couple's £13·90 a week. Maternity allowance and injury benefit will go up by the same amounts.
We are thus giving the highest priority to the long-term beneficiaries—the pensioners, the chronic sick and the widows. Nevertheless the increase in short-term benefits will be more than sufficient to maintain their purchasing power, and I should remind the House that short-term beneficiaries can receive an earnings-related supplement which can itself bring their benefits up to levels in excess of £10 or £16.
Attendance allowance where attendance is required both by day and by night will go up from £6·20 to £8; and where attendance is required by day or by night the rate will go up from £4·15 to £5·35.
The 100 per cent. war and industrial injuries disablement pension will go up from £12·80 to £16·40. The standard war widow's pension will be increased from £10·10 to £13 and the industrial injuries widow's pension from £8·30 to £10·55.
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For the older war disabled and war widows we propose a further improvement in addition to the increases in the basic pensions themselves. The age allowances, which a war widow receives at the rates of 65p at the age of 65 and £1·30 at the age of 70, and which a disabled man with an assessment of 40 per cent. or more receives at the age of 65 at rates varying from 60p to £1·80, will all be doubled. Thus war widows will receive an age allowance of £1·30 at the age of 65 and £2·60 at the age of 70; and a disabled man with an assessment of 100 per cent. will get an allowance of £3·60 at the age of 65. Over 40,000 disablement pensioners and over 50,000 war widows will benefit from this special help. The net cost will be £4·5 million in a full year.
The earnings rule will be relaxed as part of the uprating so as to increase the amount at which the rule starts to operate from the present £9·50 to £13 a week.
I turn now to supplementary benefit. The increases in the main scale rates will be the same as, and will come into force at the same time as, the increases in the related national insurance benefits. The increase of £3·50 for a married couple—proposed for retirement pensioners—will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term rates. The increase of £2·25 proposed for single retirement pensioners will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term scale rates, where they live alone. Thus a supplementary pensioner living alone will become entitled to at least £10·40 a week plus rent and rates—£10·65 plus rent and rates if he is over 80. A supplementary pensioner couple will become entitled to at least £16·35 plus rent and rates, or £16·60 plus rent and rates if one of them is over 80.
The supplementary benefit ordinary rates—for persons who are neither of pension age nor qualify for the long-term rates—will go up by £2 for a married couple and £1·25 for a person living alone, to match the increases in the short-term national insurance benefits.
The prescribed amounts which govern title to family income supplement will also be increased.

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The cost of all these increases in social security benefits will be over £1,250 million in 1975–76. Over £1,100 million of this cost will fall on the National Insurance Funds.
Next I come to national insurance contributions. My right hon. Friend explained to the House yesterday how we are proposing to allocate the extra contribution burden so as to put most of it on the employer and, in particular, to help the lower paid.
The net effect of our proposals is that men earning £20 a week will pay 3p less than they do now and that, in general, no man earning less than £27 a week will have to pay more than he does at present, while the highest increases in contributions will fall on those earning £62 a week or more. These men will pay an extra 57p a week; and men earning £40 a week will pay an extra 7p a week. Women's contributions will be changed correspondingly. All the contribution changes are proposed to come into effect on 5th August. The Treasury contribution will continue at about 18 per cent. of the income from contributions.
For the convenience of the House I am circulating details of the new rates of benefits and contributions in the OFFICIAL REPORT. These, with copies of my statement, are available in the Vote Office. I should add that I shall shortly be presenting the necessary Bill, which will be accompanied by the Government Actuary's report.
Before I end I should say a word about financing after the end of the 1974–75 financial year. The proposed contribution rates, together with the associated Treasury supplement, will provide sufficient income to cover the cost of benefits at the new levels whilst the present national insurance scheme lasts. However, if the new structure and level of contributions provided by the Social Security Act 1973 were to come into force in April 1975, the income of the National Insurance Fund would not be sufficient to finance an uprating of the basic pension on the generous scale we propose. We have not yet decided precisely how we are going to deal with all the interim problems raised by the Social Security Act, but I can say now that we intend to introduce legislation later in the year to secure income to the National Insur-
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ance Fund which will still be adequate to the new levels of benefit after April 1975.
I conclude by reminding the House that we are pledged to work for a greater measure of social justice. The proposals I am putting before the House will take us along that road. The increases in pensions will be the largest ever within the national insurance scheme, both in money and in real terms. The Government intend to build on this foundation by ensuring that in future pensions will be increased annually in proportion to increases in average national earnings. This is a pledge never before given to the most vulnerable members of our society. It is a pledge long overdue.
Sir Geoffrey Howe: Hon. Members on both sides will welcome the increases announced by the right hon. Lady and will particularly congratulate her both on the speed with which she has been able to effect them and on the provision for war disability and war widows' pensions. We shall, however, want to look with more care at the changes which she may or may not have in mind for financing the higher pensions by changes in the provisions of the Social Security Act 1973.
We also welcome the fact that the right hon. Lady is continuing to distinguish, as did my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), between the short-term and long-term benefits. We also welcome the relaxation of the earnings rule, but can she say whether the cost of relaxing this rule is included in the £1,250 million which she mentioned as being the total cost. Precisely how much will this particular change cost?
Mr. George Cunningham: The Tories refused to do it last year.
Sir G. Howe: We also welcome the increases in supplementary benefits. We welcome, too, the right hon. Lady's conversion to the prospect of continuing the family income supplement scheme. Can she confirm that by increases in supplementary benefits and family income supplementary benefits the numbers of beneficiaries on means-tested benefits will remain at least at the present level?
We notice that the right hon. Lady intends to increase pensions annually.

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Does this mean that she has rejected our proposal for a six-monthly review of pensions?
What is the total size of the sum being raised by increased contributions from employers, and what estimate has the right hon. Lady made of the impact on the retail price index—which affects pensioners' purchasing power—of the increased employers' contributions?
What estimate has the right hon. Lady made of the impact on the retail price index, particularly with reference to pensioners, of the higher taxes announced by the Chancellor of the Exchequer yesterday on tobacco, beer and other beverages, and certain food items?
Further, what estimate has the right hon. Lady made of the impact on the retail price index of the higher prices for coal, transport, electricity and postal services announced yesterday? Does she, in the light of those increases, have any proposals for considering the level of the heating allowances payable to pensioners? Why has the right hon. Lady done nothing to vary the disregard, an important element in the social security scheme, as a means of encouraging thrift?
Mrs. Castle: It might be an abuse of the procedure of the House if I were to attempt to answer in detail all of the right hon. and learned Gentleman's questions, particularly as we are to have a debate on these matters tomorrow, which will enable us to deal in fuller detail and at greater length with all the points involved. However, I shall try as briefly as I can to answer as many of the right hon. and learned Gentleman's questions as I can recall.
With regard to the six-monthly uprating, the right hon. and learned Gentleman asked whether this meant that we had turned our backs on the proposals which the Conservatives thought up rather at the last minute in the middle of the election campaign. [HON. MEMBERS: "No, no."]. I am entitled to say that, in view of the fact that the Conservative legislation of 1973 provided for annual reviews and never mentioned six-monthly reviews. If we had had the return of a Conservative Government pledged to six-monthly upratings, that Government would, presumably, have given the pen-
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sioners only half of what in any case would have been a lower uprating.
With regard to the family income supplement, I shall be giving, in due course, fuller details of the application of the increases to the prescribed amounts. I remind the House that the Government remain—as they have always been—opposed to the principle of means testing which underlies this scheme. We do not like it, and we intend to replace it with something better within the normal lifetime of a Parliament, but in the meantime we cannot allow the poorest in the land to be left relatively worse off.
The second question was about the earnings rule. The cost of the concession will be £9 million, and I think that I am correct in saying that that figure is included in the total that I gave, but I am subject to checking on that point. The right hon. and learned Gentleman referred to our retention of a different rate for short-term benefits, a proposal, of course, which was included in the Conservative legislation last year. On this occasion, we felt that the urgent priority was to give the maximum possible help to pensioners and other long-term beneficiaries.
However, our increase in the short-term benefits is one of 17 per cent. for the single person, introduced less than 10 months after the last uprating, whereas the Conservative Government gave them an increase of only 8·9 per cent. after a 12-month interval. So there again we have done substantially better than they did. I cannot remember the rest of the detail of the right hon. and learned Gentleman's questions, but I think that other hon. Members should be given a chance to get in a word.
Mr. Arthur Lewis: First, I congratulate my right hon. Friend both on an excellent statement, and, more particularly, on the speed and expedition with which she intends to pay these old-age pensioners in July. She will know that many of them may unfortunately be dead come October, the usual date for which they would have to wait. Since the right hon. and learned Member for Surrey, East (Sir G. Howe) said that he welcomed the statement, will the Secretary of State take an early opportunity to have a ministerial broadcast on this matter?

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Many old people and many of the sick and disabled would like to hear from her personally exactly what all this means.
Mrs. Castle: I am very grateful to my hon. Friend for appreciating that this was administratively the earliest possible date that we could put these huge increases into payment. The delay will be only 17 weeks, compared with the 29 weeks that elapsed between the last Conservative Government's announcement and the actual uprating.
I must point out that these proposals will mean putting the staff of my Department under considerable strain. I want to pay tribute to them. I want them and the House to realise that it means asking a great deal of them in the way of overtime and extra pressure, and I am sure that they will accept this burden on behalf of these weaker members of the community, whom we are trying to help as quickly as possible.
I will certainly bear in mind my hon. Friend's suggestion about a ministerial broadcast, because the details are complicated. It is essential to bring reassurance to the old people on all the detailed points about which they have been wondering.
Sir B. Rhys Williams: While the House is delighted that the pensioners will get their increase in 17 weeks, is the right hon. Lady aware that, on the Continent, machinery has been in use for a number of years which makes it possible to introduce changes of this kind in less than a fortnight?
Mr. Tuck: Why did you not do it?
Sir B. Rhys Williams: Will the right hon. Lady now see to it that the administration of this and her Department are modernised?
Mrs. Castle: The administrative methods that I inherited from my predecessor made it impossible to do it at any greater speed than I propose.
Dr. M. S. Miller: Will my right hon. Friend accept that her statement will be welcomed not only by the people who will benefit but by all sections of the community? Will she undertake a review in her Department of the attendance allowance, since it is to a great extent limited and does not go to many people who well deserve it?
Mrs. Castle: I am sure that my hon. Friend will appreciate that we have made a substantial increase in the rates. This will be of immediate considerable benefit to many disabled people. I have already told the House that I shall be reviewing the whole of the social security provisions for the disabled and will be reporting in the autumn. Of course, this will be one of the things that we shall be studying.
Dr. Winstanley: Is the right hon. Lady aware that we on this bench greatly welcome these proposals and assure her of our fullest and enthusiastic support for their implementation? But would it not have been administratively easier and even cheaper, considering all the factors involved, to abolish the earnings rule rather than merely fiddle about with the qualifying level? Is it not also regrettable that she has not seized this opportunity to change the £2 disregard for the part-time earnings of wives whose husbands are on supplementary benefit? This is very low in present circumstances. Could she not have raised it to bring the family income at least up to the family income supplement level? Finally, will she take active steps to see that these new proposals are brought to the notice of those whom they are intended to benefit?
Mrs. Castle: I am grateful for the spirit in which the hon. Gentleman has responded to my statement; I had hoped that the whole House would have welcomed it in the unqualified way that he has done. I agree, of course, that there are many points still remaining to be dealt with—among them, the disregards. I recognise that the purchasing power of the disregards has fallen considerably. My answer to the hon. Gentleman must be partly that I cannot do everything at once, but it is also an administrative answer. I was concerned to get the main increase into payment as early as possible, and, therefore, I had to say to my Department "There are many other detailed aspects that we could have dealt with and eventually must deal with, but let us streamline our attack on this point since this is the only way administratively that I can get it through by the end of July." The hon. Member is a little optimistic to say that there would be an administrative saving in abolishing

459
the earnings rule altogether. The cost of that abolition would be £160 million.
Mr. R. C. Mitchell: Would my right hon. Friend be prepared to have another look at the heating allowances?
Mrs. Castle: Yes, the Supplementary Benefits Commission already has them under review.
Mr. Ridsdale: May I congratulate the right hon. Lady on having followed the example of the previous Government in the proper care of the elderly, and also press her, as one of her back benchers did, about the attendance allowance? This is something which, with inflation, many people in my constituency who are

DETAILS OF NEW RATES OF BENEFIT AND CONTRIBUTIONS

MAIN INCREASED NATIONAL INSURANCE BENEFIT RATES:

Proposed Weekly Rate

Existing Rate

£

£

Standard rate of invalidity, widows' and retirement pensions and widowed mothers' allowances:

Single person

…

…

…

…

…

…

10·00

7·75

Wife or other adult dependant

…

…

…

…

…

…

6·00

4·75

Standard rate of unemployment and sickness benefits:

Single person

…

…

…

…

…

…

8·60

7·35

Wife or other adult dependant

…

…

…

…

…

…

5·30

4·55

Married woman (normal rate)

…

…

…

…

…

…

6·05

5·15

Persons under 18

…

…

…

…

…

…

4·75

4·05

Widow's allowance (first 26 weeks of widowhood)

…

…

…

…

…

…

14·00

10·85

Widow's basic pension

…

…

…

…

…

…

3·00

2·33

Maternity allowance

…

…

…

…

…

…

8·60

7·35

Invalidity allowance payable with invalidity pension, when incapacity began before age:

35

…

…

…

…

…

…

2·05

1·60

45

…

…

…

…

…

…

1·30

1·00

60 for men or 55 for women

…

…

…

…

…

…

0·65

0·50

Attendance allowance:

Higher rate

…

…

…

…

…

…

8·00

6·20

Lower rate

…

…

…

…

…

…

5·35

4·15

Old persons' pensions:

Wife

…

…

…

…

…

…

3·70

2·85

Any other person

…

…

…

…

…

…

6·00

4·65

Guardian's allowance

…

…

…

…

…

…

4·90

3·80

Child's special allowance and increases for children of widows, invalidity and retirement pensioners:

First child

…

…

…

…

…

…

4·90

3·80

Second child*

…

…

…

…

…

…

4·00

2·90

Any other child*

…

…

…

…

…

…

3·90

2·80

Increases for children of all other beneficiaries:

First child

…

…

…

…

…

…

2·70

2·30

Second child*

…

…

…

…

…

…

1·80

1·40

Any other child*

…

…

…

…

…

…

1·70

1·30

* Family allowances are payable for second and subsequent children.

looking after members of their families need examined very carefully. Will she do so as quickly as possible?
Mrs. Castle: I assume the hon. Member is referring to the criteria rather than the rates. I think that the House will agree that the increase in the rates is a good one and that that is what the House is concerned with, rather than the eligibility criteria. I repeat that we shall be looking at this as part of our comprehensive review of the provision for the disabled.
Several hon. Members rose—
Mr. Speaker: Order. As the right hon. Lady said, this is all debatable tomorrow.
The following is the information:

MAIN INCREASED INDUSTRIAL INJURIES BENEFIT RATES:

Proposed Weekly Rate

Existing Rate

£

£

Injury benefit*†

…

…

…

11·35

10·10

Disablement benefit (100 per cent assessment)*

…

…

…

16·40

12·80

Unemployability supplement‡

…

…

…

10·00

7·75

Special hardship allowance (maximum)

…

…

…

6·56

5·12

Constant attendance allowance (normal maximum)

…

…

…

6·60

5·15

Exceptionally severe disablement allowance

…

…

…

6·60

5·15

Industrial death benefit:

Widow's pension during first 26 weeks of widowhood

…

…

…

14·00

10·85

Widow's pension now payable at £8·30 rate

…

…

…

10·55

8·30

Widow's pension now payable at £2·33 rate

…

…

…

3·00

2·33

* Increases will also be made in the juvenile rates.

† Increases for adult dependants and children will be the same as those for unemployment and sickness benefit—see National Insurance table.

‡ Invalidity allowances and increases for adult dependants and children will be the same as thoss for invalidity pensions—see National Insurance table.

PART II: DEATH BENEFITS:

Proposed Weekly Rate

Existing Rate

£

£

Widow's pension—private's widow:

Standard rate

…

…

13·00

10·10

Childless widow under 40

…

…

3·00

2·33

Rent allowance

…

…

5·00

3·90

Age allowance for elderly widows:

Between age 65 and 70

…

…

1·30

0·65

Over age 70

…

…

2·60

1·30

Widower's pension

…

…

13·00

10·10

Widow's children:

Eldest child

…

…

5·10

4·00

Other children with family allowances

…

…

4·60

3·50

Other children without family allowances

…

…

4·95

3·85

Motherless and fatherless children aged:

Under 15

Eldest child or other children with no family allowances

…

5·10

4·00

Over 15

6·60

5·50

Under 15

Other children with family allowances

…

4·60

3·50

Over 15

6·10

5·00

Adult orphans

…

…

10·00

7·75

Proposed Weekly Rate

Existing Rate

£

£

Non-householder rent allowance

…

…

…

…

…

…

0·90

0·80

Attendance requirements:

Higher rate

…

…

…

…

…

…

8·00

6·20

Lower rate

…

…

…

…

…

…

5·35

4·15

* Where the claimant or a dependant is aged 80 or over a further 25p is to be added to these long-term rates.

PROPOSED NEW RATES OF CONTRIBUTION POR ADULTS:

CLASS 1—EMPLOYED PERSONS—EMPLOYER (including N.H.S. contributions but excluding Redundancy Fund contribution):

Class 2—SELF-EMPLOYED PERSONS (including N.H.S. contributions):

Present Rate

Increase

New Rate

£

£

£

Men over 18

…

…

…

1·99

0·42

2·41

Women over 18

…

…

…

1·67

0·34

2·01

CLASS 3—NON-EMPLOYED PERSONS (including N.H.S. contributions):

Present Rate

Increase

New Rate

£

£

£

Men over 18

…

…

…

1·56

0·34

1·90

Women over 18

…

…

…

1·23

0·26

1·49

BEAVERBROOK NEWSPAPERS (SCOTLAND)
The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): With permission. I should like to make a statement.
In my statement of 19th March, I promised to keep the House informed of the discussions I was having about Beaverbrook's Scottish newspapers. Since then, my colleagues and I have talked to the various interests concerned.
On the question of the transfer of Beaverbrook's Glasgow Citizen to the proprietors of the Glasgow Evening Times, my right hon. Friend the Secretary of State for Prices and Consumer Protection has satisfied herself under the terms of the Fair Trading Act that the Glasgow Citizen is not economic as a going concern, and as a separate newspaper. She has, therefore, today granted her consent, as under the Act she was bound to do, to the proposed acquisition.
The House will recall that it was when this application had been lodged with the then DTI on 19th February of this year that the larger problem of the future arrangements for the Scottish Daily Express and the Scottish Sunday Express became apparent. Labour Ministers met the Beaverbrook management on 13th March, and they impressed on us their view that the transfer of the arrangements for printing their two Scottish newspapers to Manchester had become essential to the financial viability of the group. We requested that the whole Beaverbrook group should look again urgently at its position, in the light of the number of jobs that would be lost, and against the background of the Government's development area policy and the special assistance available to firms in them.
That was the position when I made my last statement. Immediately afterwards,
468
the Prime Minister, together with the Secretary of State for Scotland and me, met the Scottish TUC at its request. My colleagues and I then met a strong deputation from the trade unions concerned. This was followed on the same day by a long and detailed discussion with the Beaverbrook management when we put to it the suggestions and criticisms that had arisen from our talks with the trade unions and our own concern about the implications of its decision. It became clear at that meeting that there was only a slim prospect of arrangements being agreed to safeguard employment for the Albion Street labour force. This was contingent upon a satisfactory agreement between Beaverbrooks and Sir Hugh Fraser under which the latter would, on contract, continue printing the Scottish Express papers in Glasgow.
We then met Sir Hugh and his management team to explore further the possibilities of these arrangements. From this it emerged that it was not physically possible for him to print the two Express papers in Albion Street and at the same time print there the two Glasgow papers for which he is responsible—a view with which the Beaverbrook group concurred.
We then looked at further possibilities, including that of the Fraser Group printing the two Scottish Express papers at Albion Street while retaining its own two papers at Buchanan Street and the proposal made by Sir Hugh to buy the two Scottish Express papers. Sir Hugh informed me that the latter proposal had been rejected by Beaverbrooks. So far as the first proposal was concerned, he expressed willingness to consider this carefully but doubted whether a contract could be made that would be economic for both parties.
We saw the Beaverbrook management again yesterday to press it further to consider both these possibilities. Late last

469
night, after further contact between the two groups, Sir Max Aitken informed me that neither of these possibilities was practical.
As the House will see, throughout these discussions we have been concerned with two objectives; first, to explore all possibilities of avoiding the grievous loss of jobs in hard-pressed Glasgow and, second, to try to find an alternative solution based upon a Scottish newspaper group. It is with profound regret that we have been forced to the conclusion that no solution could be found.
Many factors, over many years, have contributed to the situation. But it is clear to me that Beaverbrook's decision is based upon a serious concern about the future of its group as a whole and that the immediacy of its action, with all its deplorable consequences for unemployment, is greatly influenced by the financial need to defend the group as a whole and the need to find substantial funds to meet its redundancy commitments to the workers involved.
As to the future, I can only say this. First, a substantial printing capacity remains in being in Albion Street; and we shall certainly be ready to discuss any serious proposal that may still emerge. Second, the whole unhappy sequence of events re-emphasises the point made by my right hon. Friend the Prime Minister last Thursday when he said that he was urgently considering the possibility of some form of inquiry into the newspaper industry.
Mr. Buchanan-Smith: The right hon. Gentleman has made a sad statement which marks a black day for the Scottish Press. I appreciate the personal efforts that the right hon. Gentleman has made to try to seek a solution. The Opposition are sorry that nothing constructive has emerged from the discussions which he undertook. Will the right hon. Gentleman say precisely how many jobs are involved and how many Express staff are likely to be retained by the Express group in Scotland? How many staff are likely to be transferred to the Fraser group as a result of the merger?
The right hon. Gentleman referred to the economic and financial pressures that are involved. Does he realise that his right hon. Friend's Budget yesterday can only add to those pressures in Scotland?
Mr. Shore: The hon. Gentleman's last point is irrelevant to the situation in which the Express group found itself in Scotland we we came to power at the beginning of March, when it had already made the application for the merger.
I have little to say of comfort about jobs. The job loss situation is obviously a major factor. The extent of the need of the Fraser Group to take staff from the Albion works is minimal because the two papers are not merging in the sense that the old paper will continue to be printed. In fact, the Fraser Group's existing paper is to be expanded. That kind of operation clearly does not necessarily lead to any great increase of staff.
The Beaverbrook Press has clearly stated that it intends to maintain an editorial office in Glasgow which will employ between 40 and 50 journalists. I believe that there will be some increase in the number of journalistic staff who will be transferred to Manchester. These matters are subject to the more detailed arrangements that no doubt Beaverbrook Press will announce.
Mr. Harry Ewing: Is my right hon. Friend aware that during his statement he made an astonishing revelation—namely, that the Fraser Group had offered to buy the Scottish Daily Express and the Scottish Sunday Express? Does the fact that the Express Group refused to sell confirm the suspicion that many of us have held over the past weeks, that, come what may, the Daily Express was determined to close down its operations in Glasgow?
I must press my right hon. Friend on the alternatives which are available. I ask him to consider seriously the proposition which was put forward in last night's Adjournment debate—namely, the employee enterprise that was mentioned by my hon. Friend the Member for West Lothian (Mr. Dalyell). I urge that that enterprise should receive every encouragement so that it can get going. Does he accept the assurance that if that enterprise gets going the Scottish readers will decide whether they will buy a paper printed in Glasgow or one that is printed in Manchester?
Mr. Shore: I assure my hon. Friend that I shall consider any proposal that comes forward for establishing a new newspaper enterprise which will make use

471
of the facilities in Albion Street. I am later this afternoon, following what my hon. Friend the Under-Secretary of State for Trade said last night, meeting representatives of the Scottish trade unions. My hon. Friend referred to the decision of Beaverbrook's to refuse an offer of purchase by the Fraser Group of Beaver-brook's two Express newspapers. That was one of the matters that I discussed yesterday with Sir Max Aitken and his colleagues. They made the point that if they were to transfer these two important papers to another group the general effect on their combined advertising revenue and the printing of their Express newspapers would be serious and would have grievous consequences on the total operation of the Express Group.
Mr. Teddy Taylor: Are the Government washing their hands of this catastrophe? Is not this a let-down compared with the extraordinary efforts which we made to save Upper Clyde Shipbuilders, which is now a thriving organisation? I make the specific suggestion that if the Government were prepared to announce a general newsprint subsidy to all the Press, many parts of which are facing identical problems, that would transform the economic situation of Beaverbrook newspapers and make it possible for the Minister to refuse permission under the Fair Trading Act for the merger to take place?
Mr. Shore: I repudiate the hon. Gentleman's suggestion that I am washing my hands of this matter. The analogy that he drew with the UCS group does not stand up. In that case there was a substantial number of orders for that shipyard and there was the basis on which a reconstruction and a rescue operation could be made. The fact that the Beaver-brook Press retains the title, the wish and the intention to go on printing the two Scottish Express editions in Manchester is clearly a different situation and must be considered in the light of the real world with which we are dealing.
A newsprint subsidy is worth thinking about, although it does not easily square with the philosophy of the Opposition. The short-term problem of the newspaper industry is much more concerned with the tardiness of price adjustments, when it has gone to the Price Commission dur-
472
ing the past year and sought to obtain a price increase to cover newspaper costs.
Mr. Hugh D. Brown: Will my right hon. Friend not pay too much attention to the apologists for the Beaverbrook Press from Cathcart? I am sure that the majority of hon. Members will appreciate the efforts which have been made by my right hon. Friend and his colleagues since there has been a locus within which the Government could operate. We recognise that. Surely it should be obvious that it is the intransigence and stubborn indifference of the Beaverbrook management that is responsible for this situation? Will my right hon. Friend consider, even though it requires imaginative action and even legislation, giving the greatest sympathy to what seems to be the last remaining proposal which is likely to be put before us?
Mr. Shore: I have promised to study all proposals, and I reaffirm that promise. I am grateful for the first part of the comments that my hon. Friend made. The impression that I formed of the Beaverbrook Press in general was that perhaps the major factor here was that the management was seriously at fault in its judgment about the deterioration in the group's affairs. In other words, I do not think that the management realised until very recently just how grievous the situation was and how immediate and urgent it was that remedies were taken.
Mr. Steel: Does the right hon. Gentleman accept that we on this bench recognise what he and the Secretary of State for Scotland have tried to do in this impossible situation and that, though we do not consider this group of newspapers to have been exactly purveyors of Liberalism, it is a serious loss to the media and to lively journalism in Scotland?
Will the right hon. Gentleman say a little more about the Government's determination to set up an inquiry into the Press? Will it specifically look at the cost of newsprint and the nature of restrictive practices in the Press? Will the right hon. Gentleman confer with the Secretary of State for Employment to ensure that in the new Bill to replace the Industrial Relations Act there will be rights of consultation for employees as well as shareholders before decisions such as these are taken?
Mr. Shore: I absolutely welcome what the hon. Gentleman said about making it almost a statutory right for employees to be consulted before decisions of this kind are taken. For me the most intolerable feature of this whole affair was that the matter should have been dealt with so summarily.
I will consider further what the hon. Gentleman said about an inquiry into the Press. I am not in a position at the moment to go further than what my right hon. Friend the Prime Minister said only last week.
Mr. Stonehouse: May I add to the congratulations which have been offered to my right hon. Friend on what he has tried to do to save this situation, which has effects not only in Scotland but in the rest of the United Kingdom?
Is not one of the fundamental problems in the newspaper industry the very serious restrictive practices referred to in the supplementary question of the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel)? What do the Government intend to do about these restrictive practices, about which we do not read very much in the Press, for obvious reasons?
Mr. Shore: Nobody who has studied or followed the affairs of the newspaper industry in the past 10 years can deny that there are major problems within the industry. I have a feeling that these are increasingly coming to be recognised by both management and unions. I wholly agree with the point made by my right hon. Friend and, indeed, by the right hon. Gentleman the former Leader of the Liberal Party, that, apart from anything that the Government might do in this matter, there is a need for a much more searching introspection into its own affairs by the newspaper industry.
Mr. MacArthur: In the light of this catastrophe, why are the Government putting further financial penalties on industry in Scotland, as the Budget will do; and how many more newspapers will be closed and how many more jobs will be lost in consequence?
Mr. Shore: That is a rather surprising statement following the announcement yesterday by my right hon. Friend the Chancellor of the Exchequer that the regional employment premium would be
474
continued with its particular benefit—£40 million a year—for Scotland.
Mr. Dalyell: Since there is now a serious head of steam behind the employees' enterprise, could my right hon. Friend look favourably on a proposed 50 per cent. bridging loan at a 10 per cent. interest rate, which is being asked for by representatives of the employees?
Mr. Shore: I promise my hon. Friend that I will look at proposals that are put forward, but all matters that might involve the use of the Industry Act I would have to deal with in consultation with my right hon. Friend the Secretary of State for Industry.
Mr. Reid: Will the Secretary of State say whether in his negotiations he gave serious consideration to a holding operation as called for from the Labour benches last night involving, possibly, a subvention on a short-term basis—say, three months—until matters could be seriously sorted out? Secondly, does the right hon. Gentleman appreciate the monopoly situation which may be created in the popular Press in Scotland? Lastly, will he state, given redundancy, what alternative employment is available for these 2,000 men and women?
Mr. Shore: I pressed very hard for precisely that breathing space which I thought would be helpful so that the Government and others concerned might look in a more leisurely way, and perhaps even more thoroughly than we have been able to, at possible alternatives, but I regret to say that it was the strong view of the management, in spite of all that we said, that it could not hold the position and that it had to come to a rapid decision.
Mr. Heath: We all greatly regret the change which the Secretary of State has had to announce, and we recognise what he has done to try to help solve the problem. The Prime Minister, in answer to my question last Thursday, to which the right hon. Gentleman has referred, said that the proposal was an inquiry into the ownership of the Press. If there is to be such an inquiry, will the right hon. Gentleman impress upon the Prime Minister the need for an inquiry into the aspects with which he himself has been dealing this afternoon, which are really the economics of the Press?

475
Will the right hon. Gentleman also resist the attempts made by some of his back benchers to get him to force a change of ownership upon the Press? After all, this runs entirely contrary to what the Labour Party has stood for in the past, that there should be a wider range of ownership of the Press and there should be no forcing of ownership of the Press into a smaller number of hands.
Lastly, it is the economics of the Press which are reducing the range of ownership of the Press. I therefore very much agree with what the right hon. Member for Wednesbury (Mr. Stonehouse) said. When will the industry and those who work in it recognise that at a comparatively fast rate they are putting their own industry out of business? Until that is recognised, we shall not be able to maintain the freedom of the Press in this country.
Mr. Shore: I do not agree with the right hon. Gentleman that my hon. Friends were pressing for changes in ownership per se. What they are concerned with, as I think that the whole House is, is that ownership does not lead to increasing concentration, because that is one aspect, quite apart from the economics of the Press, about which we must be deeply concerned, and that was a point which was made in a previous supplementary question—a point to which I did not reply.
On the question of the economics of the Press, it is absolutely clear that the industry is facing major changes. All parts of it are under pressure. Therefore, that must be at least the other half of any serious new inquiry into the Press.

BUDGET STATEMENT (PROCEDURE)
Mr. Emery: On a point of order, of which I gave you notice last night, Mr. Speaker. This concerns the rights of back benchers.
Yesterday Mr. Deputy Speaker gave this ruling:
"It is a long-standing convention that the Chancellor of the Exchequer is not interrupted during the Budget Statement."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 304.]
I am certain that everybody accepts that the Budget Statement is an often long,
476
usually arduous, and always gruelling occasion for a Chancellor of the Exchequer. I think that the whole House would wish to pay tribute to the Chancellor for the way in which he performed his task yesterday. I am certain that the Chancellor would want the Statement to come across clearly, and the House would not want the occasion to be a running debate.
May I refer you, Mr. Speaker, to a list of a number of precedents for Chancellors of the Exchequer giving way to interruptions in the past. Sir Stafford Cripps gave way on 18th April 1946—HANSARD, column 69. Mr. Hugh Dalton gave way on 12th April 1947—HANSARD, column 1085. I can bore the House with all the references if it wishes. They include references to Mr. Gaitskell, Mr. Butler, Mr. Macmillan, my right hon. Friend the Member for Barnet (Mr. Maudling), the right hon. Member for Cardiff, South-East (Mr. Callaghan), and the right hon. Member for Birmingham, Stechford (Mr. Jenkins).
The occasion of their giving way fell into two categories. The first was where the Chancellor gave way to the Opposition Front Bench. However, there are also instances—I refer to HANSARD, column 283, of 6th April 1965—where a Chancellor of the Exchequer gave way to Sir Douglas Glover and where the right hon. Member for Cardiff, South-East, gave way to Mr. Bellenger and Mr. Arthur Tiley—I refer to HANSARD, columns 1033 and 1041, of 11th April 1965.
There are other examples. Mr. Harold Davies, Sir Gerald Nabarro and even Sir Waldron Smithers—who can hardly be described as a Front Bench spokesman on economics—were all given way to by the Chancellor of the Exchequer. The last instance I will mention, bearing in mind the ruling given by the right hon. Member for Cardiff, West (Mr. George Thomas), is that of 17th April 1956 in column 885 where there is an interruption, which could not have been from a sedentary position, by the right hon. Member for Cardiff, West.
I ask you to rule, Mr. Speaker, that, irrespective of the occasion, it must be a matter for the hon. or right hon. Member himself whether he gives way. Secondly, there are several examples,

477
which I have listed, of successive Chancellors of the Exchequer having given way. Thirdy, there is no tradition—and traditions are not always listed but some times appear in footnotes in Erskine May—and there is no rule of the House that the Chancellor of the Exchequer be not interrupted during his Budget Statement.
I should be glad, Mr. Speaker, if you would clear up this point because it has been referred to in the Press. If it is not cleared up a precedent might be established which is not in accord with what has happened in the past.
Mr. Speaker: The hon. Member for Honiton (Mr. Emery) has made a perfectly legitimate point of order, of which he has given me notice. I congratulate him on his researches and on his erudition. I did discuss the matter with the Deputy Speaker. I fully support him and consider him to have been quite right.
The convention is not an absolute rule. It is not in the Standing Orders but in my view it is a custom. I can claim some personal experience. I made only two Budget speeches myself, owing to circumstances not altogether within my control, but I have listened to very many. The custom is only rarely to interrupt the Chancellor of the Exchequer. Interrup-
478
tions in the Chancellor's Budget Statement, which as I have said are customarily rare, are usually made only by the Leader of the Opposition or the spokesman on finance for the Opposition. The fact that the Deputy Speaker made an interruption a long time ago and that it was he who restrained the hon. Member yesterday seems to prove the advantage of a poacher turning gamekeeper.
There are three simple reasons for the custom. The Budget speech is a test of endurance for the Chancellor and also for the House. It should not, therefore, be unduly prolonged. Secondly, if the right hon. Gentleman gives way to one hon. Member, is he to give way to another? It would be intolerable to have hon. Members rising all over the place and other hon. Members shouting, "Give way, give way". Thirdly, there are three full days' debate on the Budget Statement which gives ample opportunity for asking questions, interrupting Ministers, seeking to make points and asking for information.
Therefore, the custom is not an order of the House. It is not a convention that occupants of the Chair always enforce. I nevertheless maintain that it is a custom of the House, and, until I am otherwise directed, I shall continue to support it as a custom of the House.

ORDERS OF THE DAY
  WAYS AND MEANS
  Order read for resuming adjourned debate on Question [26th March],
  WAYS AND MEANS

    AMENDMENT OF THE LAW
    Motion made, and Question proposed.
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of amendment with respect to value added tax so as to provide—

    (a) for zero-rating or exempting any supply;

    (b) for refunding any amount of tax;

    (c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

    (d) for any relief other than relief applicable to goods of whatever description or services of whatever description.

    BUDGET RESOLUTIONS AND ECONOMIC SITUATION
    Question again proposed.
    4.23 p.m.
    Mr. Robert Carr: May I first add my personal congratulations to the Chancellor of the Exchequer to those that he has already received from both sides of the House on the way in which he presented his Budget yesterday? In any circumstances it is a daunting effort in terms of mental concentration and physical strain, and it is quite outstanding when achieved, as the Chancellor achieved it, after a bare three weeks' preparation. I hope that the right hon. Gentleman will feel that the congratulations he has received from all quarters are sincere and in no way just a matter of form.
    Having said that, and meaning it, I must also say to him that we may feel that he has so well proved his powers of sustained, clear and moderate exposition that there is no need for him to have to do so again on a second occasion this year or in any other year. We noticed, Mr. Speaker, your latter remarks and, although I am not referring in any way to your case, I hope that circumstances beyond the right hon. Gentleman's control will prevent him from having to sub-
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    ject himself and us to another occasion such as yesterday.
    I am afraid that I cannot be quite so complimentary about the substance of the right hon. Gentleman's Budget. Before coming to that, may I thank him for the nice remarks he made about me and the good wishes he expressed to me on my new occupation of the much less arduous shadow Chancellorship.
    I had better confess to the House before it becomes too painfully obvious that I am not an economist. I understand that the right hon. Gentleman went to Cambridge to learn economics and that the right hon. Gentleman the Foreign and Commonwealth Secretary went to Oxford. I am not sure where I had better go or whether I had better go anywhere. I want to be able to listen to and understand the conflicting views of various economists, but one of the main characteristics of economists is the extent to which their views conflict with each other. I certainly do not want my thinking to be dominated by any one economic school of thought, even from such an august place as Cambridge. It is important to listen just as closely to the voice of practical experience and common sense. There is often a great difference between what practical experience and common sense tell one and the views expressed by economists. When I look back over my 24 years in the House it is not altogether self-evident that the theoretical views of the economic pundits have always been right compared with common sense and practical experience.
    If there is a single lesson that I have learned from my experience in politics in the House and in industry at various levels which is more fundamental than any other, it is the absolute importance to this country of a steady, substantial rate of growth in our economy. I see no other way of overcoming Britain's economic problems, no other way of finding the resources to meet the social needs of our society as a whole and no other way of giving our people the chance to satisfy their legitimate expectations and ambitions for a higher standard and quality of life for themselves and their families.
    I cannot agree too strongly with my right hon. Friend the Leader of the Opposition when he said yesterday:
    "I believe that we cannot get a united nation and solve our social problems unless

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    there is an expanding economy from which people can benefit. That is the only way in which it can be done. In my political life many other ways have been tried. I have now come firmly to the conclusion that there is no other way of trying to solve social problems except by a reasonable increase in total output which can be shared amongst the people."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 337.]
    That was my right hon. Friend's immediate response to the Chancellor's speech, and I cannot agree with it too strongly.
    That is the attitude by which I judge the Budget and by which I hope that I shall always judge any future Budget from whichever side of the House it may come. That attitude towards the overriding importance of economic expansion does not mean that in every year we can drive our economy at an accelerating rate of growth. There will inevitably be some years—and perhaps this may be one of them—when we have to have a lower rate of growth than the average that we need and wish to sustain. But that attitude means that we should have growth as our main economic objective. Even in the years when we have to slow down, we should not take action that would damage our long-term growth prospects; and in a year when we may have to suffer relatively slow growth we should be positively and consciously trying to provide the basis for the earliest possible resumption of faster growth.
    It is when I apply these tests that I find that I have growing fears about the overall effect of the Chancellor's Budget. His judgment is that he had to bring in a Budget which, in demand terms, was neutral—or slightly on the deflationary side of neutral. My concern, and indeed my chief criticism, is that the methods chosen by the right hon. Gentleman to achieve that short-term effect of neutrality underestimate the danger of recession and rising unemployment in the medium and longer term and weaken, rather than strengthen, our capacity to resume growth at a higher rate at the earliest possible moment. That is the argument I wish to develop.
    Mr. William Baxter: In speaking of growth in the economy, does the right hon. Gentleman agree with my right hon. Friend the Chancellor of the Exchequer and his Conservative predecessor in that office
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    that the proper way to get growth in a business is to put the highest rates of corporation tax on retained profits against a lower amount of tax on distributed profits?
    Mr. Carr: The hon. Gentleman raises a technical matter on which I do not propose to enter this afternoon; it relates to a matter of balance. I draw on my own industrial experience in these matters, and I know that it is important to retain in business a high proportion of profits for reinvestment. But I also know that, particularly in the medium-sized and expanding companies of which I have personal experience, it is important to have an active capital market to which growing businesses can go for new money. To meet that second requirement it is important to distribute a fair amount of the profits. There is a difficult balance to strike between the need for retention and the need for distribution, but it is much too easy an assumption to make that it is always right to retain more and distribute less.
    Mr. Baxter: But it is extremely important to keep the fine balance correct if we are to have expansion in the economy, which is desired by my right hon. Friend the present Chancellor of the Exchequer and obviously also by the right hon. Member for Carshalton (Mr. Carr). Therefore, will the right hon. Gentleman elaborate on how he proposes to achieve that objective if he does not retain profits in a business for the purpose of expansion? If in a small business the profits are distributed, how is it possible for the business to expand?
    Mr. Carr: This is a separate argument into which one could be drawn, but it would tend to get away from yesterday's Budget. One of the problems that must be faced is that a particular policy must be in operation for some time without change before one can judge its effect, but in my view my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) got the balance about right. I appreciate that some, people would not agree with that view, but in my view, based on my own past experience, I thought that my right hon. Friend got the balance about right.
    Before I come to my main criticism of the Budget—namely that whatever may

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    be the question of balance in the short run, I do not like the way in which the Chancellor of the Exchequer has sought to achieve it—I want to make two points about omissions from the right hon. Gentleman's proposals. Those omissions make it difficult to assess the rightness of his judgment as to the short-term effects, let alone the longer-term effects.
    My first complaint is that neither in his speech nor in the red book which was available as soon as the Chancellor had completed his Budget remarks has the Chancellor given any estimate of gross domestic product for the first half of 1975. Surely such an estimate is essential if we are to form any sound judgment or opinion about the targets which he has tried to achieve for the economy as a result of his Budget. The right hon. Gentleman knows that last year, the equivalent forecast for the first half of the following year was included, and indeed has now been included for some years past. This is a serious omission from the present Budget and is a strange and unwelcome backward step in an era, of open government to which the right hon. Gentleman and his colleagues have already said that they attach so much importance at present.
    The Chancellor of the Exchequer (Mr. Denis Healey): Will the right hon. Gentleman not agree that the estimate made by the Conservative Government last year was wildly and absurdly inaccurate because in the first quarter of this year, owing to the unnecessary three-day week, there has been a fall in manufactured products of over 20 per cent.?
    Mr. Carr: That is nonsense, if I may say so, with respect to the right hon. Gentleman. He keeps on going on about the unnecessary three-day week—so much so that one day we shall have to have this out with him in more detail than I intend to go into today. The National Union of Mineworkers could easily have obtained a settlement of the order they have now achieved without ever going on strike and putting the nation to the disastrous loss which it has suffered. That remains a fact and always will.
    Mr. Healey: Will the right hon. Gentleman agree that if the Government had been prepared to offer a settlement of
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    anything like that which emerged from the considerations of the relativities report, the whole dispute could have been settled last November and the nation could have been saved a loss of output amounting to more than £2,000 million, which is the heavy weight of inheritance handed over to me by the right hon. Gentleman and his right hon. Friends?
    Mr. Carr: No, I do not agree, because if we had done what the right hon. Gentleman suggests, 9 million other trade unionists would not have accepted pay settlements within the terms of stage Sand where would the economy have been then? The proper course was the one we proposed long before Christmas before the relativities proposals were known. We said to the NUM, "Come and discuss your future, including the need for a new pay structure and pay levels, to meet the needs of the coal industry for the future. We shall start those talks immediately." Then later, when the relativities report was available, we offered that as an alternative and gave an undertaking that that recommendation would be back-dated to 1st March, the date of their new pay negotiating year. Therefore, what the Chancellor said does not hold water.
    I return to my question, which the right hon. Gentleman has not attempted to answer. We all know—and presumably the right hon. Gentleman the present Home Secretary when he occupied the office of Chancellor of the Exchequer came to realise it to his discomfort—that, however hard one tries, forecasts may prove to be wrong. But the value of forecasts is that they at least show the target to which the Chancellor of the Exchequer is directing his policies and which he is seeking to achieve. It may be that a Chancellor does not achieve the targets because he has his policies wrong, or because in the course of the year external event; and all sorts of other things may intervene to prevent those targets being achieved. But at least what we need to know when we are examining a Budget statement is the target which the Chancellor believes the country should set itself and which his policies are seeking to achieve.
    The right hon. Gentleman has not told us that. It is true that 10 years ago we did not set a target, and this also applies

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    to a period of even five or six years ago, but when the present Home Secretary was Chancellor he took much credit for starting the practice of having targets. When we were in power we continued the practice, and now the right hon. Gentleman the present Chancellor of the Exchequer is going back on it at a most serious time in the affairs of the country. This amounts to a serious renegeing. I must press him either to ask one of his right hon. Friends who will be speaking later today, tomorrow or on Monday or, if it is not possible before, when he winds up the Budget debate on Monday evening, to put this omission right. That is essential if we are to form a proper judgment of what he is trying to do.
    My second complaint is that, as my right hon. Friend the Leader of the Opposition said yesterday, the Chancellor of the Exchequer gives us no indication of what he believes the scale and pattern of income increases ought to be over the coming year. This is vital to a judgment of the rate at which we can run the economy.
    As I stressed in the debate on the Address last week, to the extent that we have an effective incomes policy we can run our economy at a higher rate with a lower level of unemployment and a faster increase in national wealth and real wages. To the extent that we do not have an effective incomes policy we have to run our economy at a slower rate with higher unemployment and a slower rise in living standards.
    We all want such a policy to be a voluntary one if we can achieve it. But whether it be voluntary or statutory does not alter the importance of what I have said. Unless we have some idea about the scale and pattern of increases which the right hon. Gentleman believes that the country needs, we cannot form a judgment about his proposals. It is vital to the speed at which we can run our economy and, therefore, to the level of employment that we can have.
    Having made those two complaints, I return to my basic criticism about the likely medium and longer-term consequences of the way in which the right hon. Gentleman has sought to achieve a neutral balance in his Budget, which he tells us is what is required.
    Whatever else we had to do this year, we should be doing everything possible
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    to encourage further investment in industry and to strengthen the upsurge in industrial investment which was at last beginning to appear in 1973. Instead of encouraging it, the Chancellor has discouraged it.
    The main source of new industrial investment must be profits. It is right as part of an overall counter-inflationary policy to keep a restraint on profit margins and on the distribution of dividends. It is the present Government's declared intention to make those profit restraints more and not less intensive.
    As the right hon. Gentleman must realise, his Budget proposals have added a further substantial burden on industry's costs by way of the very large increase in the employer's contribution to national insurance. I do not complain about that in isolation, but the right hon. Gentleman must realise that that big increase in labour costs through this big increase in the employer's contribution will either provide an extra squeeze on profits or be passed on in prices. Presumably none of us wants the latter if we can help it. Therefore it is bound to result in an extra squeeze on profits.
    In these conditions, where profits are to be squeezed through that measure in the Budget and where they are to be squeezed by the counter-inflationary policy on prices, it is wholly damaging to the future of our economy to take away a higher proportion of those squeezed profits which individual companies are allowed to earn.
    In present conditions, if a company is to invest even as much as it has been doing, let alone more, it needs higher and not lower profits left in its hands—at least when expressed in money terms. It is not only our individual cost of living which has gone up. A company's cost of living has gone up, too. New machinery and new factories cost more than they did a few years ago. A company needs more profits left in order to buy the same amount of new machinery and plant. Stocks of raw materials have to be replaced at higher prices. The actual reported profits of companies are artificially inflated by the upward valuation of stocks which, although they produce a higher profit on paper, contribute nothing to the money which a firm has available to spend on new plant and machinery.

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    When we take account of the element in profits recently announced in terms of stock appreciation, real profits in 1973 did not increase at all and, as the right hon. Gentleman said, the three-day week has of course also put a very serious squeeze on companies' profits. There is no dispute about that, although there may be a dispute about the cause and rightness of it. But that strengthens my argument.
    If companies are to need more money profit to do more investment, or even to do the same, it makes no sense both to squeeze the profits and then to take from them a higher proportion of those squeezed profits. That can only lead in one direction, and it is to lower investment at a time when the country cries out for higher investment.
    This is one area where, since the war and probably for a long time before the war, British industry has not compared well with that of other countries, and it is one reason why our capacity for sustained growth is inferior to that of other countries.
    Whatever may be the need this year to have a neutral Budget or not to allow demand to be expanded, it is all the more important to do all that we can to get as much investment as we can of a modern kind in order to increase our productive capacity for the future and to allow the country to get back on to soundly based growth as soon as possible which will not be cut short by bottlenecks in capital capacity, skilled manpower and the like.
    Moreover, whatever may be the arguments in redistributive terms, it is only right to recognise that higher taxation on the rich will reduce savings. No one can dispute that. What is more, that sort of taxation, again whatever its merits in redistributive and social justice terms, is likely to have an effect on the capital market for some time which will make it more difficult for industry to raise new capital.
    If we add to that, although it has nothing to do with the Budget, the uncertainty that British industry has about our continued membership of the European Community we see without doubt that the policy of the Government, especially that contained in the Budget, is
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    bound to have a depressive effect on industrial investment in British industry which would be bad at any time but which is especially bad at a time when it is most important in the national interest to stimulate it and not to depress it.
    When we add to those disincentives to new investment the distinct possibility that the Chancellor of the Exchequer may have underestimated the deflationary pressures already at work on demand in the economy, it becomes clear that we could easily find ourselves sliding into a recession and a rising level of unemployment which the right hon. Gentleman says clearly that he does not want and which I do not believe that he intends. But I must warn him that I believe that his measures put us in risk of that.
    Mr. Frank Hooley: Does it not occur to the right hon. Gentleman that it ill becomes him to lecture my right hon. Friend the Chancellor of the Exchequer about investment since the record of his own administration in this respect was deplorable, despite the enormous profits made by some companies during that period? Does not he agree that the simple money equation—more profit equals more investment—has proved to be a non sequitur?
    Mr. Carr: That is nonsense. First, investment was depressed, and cycles of investment take a long time to reverse, as the hon. Gentleman will know. Investment was depressed at the end of six years of Labour Government from 1964–1970—nobody can deny that—partly because there had been continuing stagnation and lack of growth in our economy and partly because—this reflected itself a few years afterwards—the percentage of profit in terms of the national income had been substantially reduced by the last period of Labour rule. The effect of the last period of Labour rule on the availability of profit for new investment, coupled with economic stagnation, was one of the chief causes that led to the investment slump from which it was very difficult to rouse industry.
    When we were in power my right hon. Friend the Leader of the Opposition, then Prime Minister, was often getting into trouble with industry and the City because he said, "You are not responding quickly enough to the incentives that we are giving

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    you to start investment." We understood that, because of the state of inertia and depression into which they had got, they had no faith that growth would take place. But by last year there were at last strong concrete signs of a new boom in investment.
    This precious growing plant of new investment needs nurturing. It is that plant on which the Chancellor of the Exchequer is pouring weedkiller, not fertiliser. It is the weedkiller in his Budget as it affects investment that forms my first fundamental and serious criticism of the Budget.
    My second fundamental and serious criticism of the Budget is that, incredibly, its direct effect will be to increase the cost of living index. True, food subsidies will reduce it, but this reduction created by the food subsidies is more than offset by the increases in VAT and in excise duties on many things which, although not so absolutely the necessities of life as basic food, nevertheless form an integral part of the spending of lower income families—perhaps even more of lower income families than of some of the higher income families.
    Yesterday in his Budget Statement the Chancellor specifically admitted this point about the overall effect on the cost of living, because he said:
    "In terms of retail prices, the action we are taking on food subsidies will lower the index by about 1½ per cent., and this will largely offset the increases in the excise duties and the changes in VAT."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 327.]
    I ask the House to notice the word "largely".
    Mr. Healey: More than largely.
    Mr. Carr: If the right hon. Gentleman made a factual error in his Budget Statement yesterday no doubt he will correct it. But, according to his Budget Statement, he said, by implication, that the food subsidy reductions would largely but not completely offset the increases caused by VAT and excise duties.
    The increases in VAT and excise duties are not the whole story. On top of these increases in VAT and excise duties come the increases in prices of electricity, coal, fares, postal services, petrol, and some foods. I apologise. The latter are included in the VAT figure.
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    Are not these also part of the necessities of life in the 1970s? It may be said that it is sound and right to increase the prices for the products of the nationalised industries. That is a strong point and I take it. But, if it is right and sound to do that, it is folly and wrong at the same time to put up indirect taxes, VAT and excise duties, as the Chancellor has done.
    Mr. Healey: It would help the debate if the right hon. Gentleman would tell the House whether the Conservative Opposition approve the Government's decision to reduce by £900 million what would otherwise have been the nationalised industries' subsidy bill. It would be helpful to all of us if he would let us know whether the Opposition approve of that decision.
    Mr. Carr: I certainly accept that some action had to be taken in that area.
    Mr. Healey: Answer the question.
    Mr. Carr: I will in just one moment. In December last year my right hon. Friend the Member for Altrincham and Sale specifically said—if I remember correctly, he was criticised by the right hon. Gentleman for saying it—that something would have to be done in that area. I shall not take the responsibility for the particular quantum of change that has been made—I do not think that any Opposition could—but I accept that there was a case, which we admitted, for a movement upwards in these prices.
    Mr. Healey: The Conservative Government did not do it.
    Mr. Carr: We said that we were going to do it, and we would have done so. I do not know whether we would have done as much as the right hon. Gentleman. However, it is still folly at the same time to do what he has done in putting up the cost of living through indirect taxes—VAT and excise duties—because the two together are not tenable in our present situation.
    The strange thing is that at one stage in his speech yesterday the Chancellor actually grumbled that the Conservative Government's introduction of threshold agreements meant that he had had to approach indirect taxation with one hand tied behind his back. If he

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    managed to increase indirect taxation to the extent that he has with one hand tied behind his back, I dread to think what would have happened if he had had both hands free. Perhaps it is a pity that his right hon. Friend the Chancellor of the Duchy of Lancaster in Downing Street had not got a long enough arm to take hold of the one free hand that the Chancellor evidently had, because we might all have been better off today.
    Could anyone voting Labour last month—this is a political point, but one that I think the Chancellor must take—have imagined for a moment from what the right hon. Gentleman and his colleagues had been saying before and during the election that only four weeks later a Labour Government would introduce a Budget which, far from reducing prices, would, by direct action, increase the cost of living for every ordinary family in this country?
    As reported in the BBC's news bulletin at lunchtime today, the Treasury has, I understand, admitted that the direct effect of the Chancellor's measures announced in his Budget yesterday on their own will add 2½ per cent. to the retail price index by Christmas. If those are not the right figures, will the right hon. Gentleman please see that the correct figures are given, and will he please inquire how it was that the BBC news was quoting them as correct? If the right hon. Gentleman knows that they are wrong, presumably he knows what are the right figures. Will he, therefore, give us the right figures? I will willingly give way to him to allow him to do so.
    It is clear that the House and the country must assume that the BBC report at lunchtime was correct. Certainly there has been no denial. It is clear, too, that, although the Chancellor may say that they are wrong, he does not know what is right.
    Mr. Healey: I do.
    Mr. Carr: The Chancellor says that he does. Let him tell the House. Is it more than 2½ per cent.?
    Mr. Healey: I shall tell the House.
    Mr. Carr: Let us know now. What about open government?
    Mr. Healey: The right hon. Gentleman will recall that "open government" was the slogan of the Government that deceived the House about the cost of the Concorde project.
    Mr. Carr: That may sound a "smartie" sort of remark, but it is wholly irrelevant to the question about which we are talking.
    Who, for that matter, deceived the House about other costs from 1964–70? We could go back to our previous incarnations, when I was shadow Minister for Aviation and the right hon. Gentleman was Secretary of State for Defence. We might have some interesting debates on that. I do not believe, however, that the House or the country wants us to get into that sort of argument.
    Mr. Healey: The right hon. Gentleman started it.
    Mr. Carr: No, I did not. What I asked for was information, which the Chancellor admits he has, about the effect of his Budget proposals yesterday. That is what he is refusing to give the House. Why cannot we have that information now? I am willing to give way to the right hon. Gentleman. It is intolerable that he does not tell us.
    The right hon. Gentleman and his party fought the last election on prices, prices, prices all the way. They said that that was the most important topic. He is putting them up "at a stroke", all right. Prices were the great issue. Now the right hon. Gentleman brings in a Budget that has an effect on prices, some of it, admittedly, a downwards effect.
    He has told us what the "down" side is, namely, 1½ per cent. because of his food subsidies. But there is a big "up" side. He says that he knows what the "up" side is, but he will not tell us. How do we proceed in a responsible manner if that is the attitude of the right hon. Gentleman? The country will draw only one conclusion: it is that the 2½ per cent. mentioned by the BBC today as being the Treasury view is an understatement and not an overstatement. All I can say, therefore, is that it is bound to have an extremely bad effect on what we have agreed to be the most important issue before the country.
    I should have thought that the right hon. Gentleman would have known that this increase in the cost of living would

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    hasten the day when those threshold agreements to which he apparently objected yesterday will be triggered, and that will not make easier the problems of wage bargaining in the near future. If that is so, that will be the direct effect of the totality of the Chancellor's proposals for the prices of goods and services which are bought not just by the rich, but by every family of this country, including those with the lowest incomes.
    Finally, I want to spend a few moments talking about who in personal terms will get the benefits of the Budget and who will bear its burdens. First, the benefits. We have the substantial increases in pensions and related benefits, which are good and universally welcomed. I am sure that most people are only too prepared to pay what has to be paid in order to bring them about.
    Good, too, is the Chancellor's decision to raise the level at which families start to pay income tax. That change removes 1½ million people, temporarily at least, from having to pay income tax at all, and reduces the amount that many others have to pay at the lower end of the income scale.
    My right hon. Friend the Member for Altrincham and Sale made a similar move two years ago, and it needed doing again this year. The trouble is that this time the benefits in income tax terms for the lower-paid families will be more than wiped out by the Budget's effects on the cost of living.
    The Chancellor gave examples yesterday. It is not easy to be accurate, even with all the Treasury facilities available to one, but, as far as I can work out from the Family Expenditure Survey figures, a family, with two children, earning £38 a week—that is less than average industrial earnings—will save £40 a year on income tax and national insurance contribution, while savings because of subsidies will be about £9 a year, making a total saving of £49 a year.
    On the other hand, on the basis of the latest edition of the Family Expenditure Survey, the increase in indirect taxes for such a family will be about £34 a year, while the increase in prices of the nationalised industries and postal services will add £20 a year, making a total extra cost of £54 a year. Therefore, that family will be £5 net worse off a year—not better
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    off—and that is assuming there is no inflation during this period. If there is, it will make matters worse.
    Thus, the benefits spoken of by the Chancellor are mythical. What the right hon. Gentleman was saying to the country—maybe it had to be said, but if so it should have been said more openly and honestly—was that we all have to accept a reduction in our standard of living in the current year. I believe that that will happen. It certainly will in the case that I have taken on the basis of the Budget proposals.
    It is no use encouraging people to believe that they will have a real improvement in their standard of living, if, in fact, they will have to suffer a loss. To mislead on that subject, as I am sure the Chancellor realises, is to increase expectations and frustrations, and does not promote the unity for which the right hon. Gentleman made an appeal both in the House and on television last night.
    Mr. Tom King: How does my right hon. Friend think that family feels if, on top of those increases, they face an enormous increase in rates—as much as 80 per cent. for many of my constituents and others in the country?
    Mr. Carr: Very strongly indeed, I guess.
    After discussing who is receiving the benefits, and admitting that pensioners and others are indeed receiving them, at least for the moment, provided we can keep inflation under control, and having, I am afraid, rather poured cold water on the other benefits which people are supposed to be receiving, other than pensioners, I ask the next question: who is supposed to be bearing the main burden? Who are the people whom the Chancellor sees as having the broadest backs? I think that that is the present Government's current terminology.
    The Chancellor has fulfilled his promise to tax the rich, but he has also demonstrated how little is obtained by doing so. The great weight of the burden will fall—the Chancellor will probably say that there is no alternative, but it is a pity that he did not say so earlier—on the middle income groups. It will fall on the middle level of executives and technicians, on professional men and women, on the

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    higher-paid productive workers in industry, including the miners and many workers in the building, printing and other industries.
    Many of those people have already had to accept less than average percentage pay increases for the last 18 months or so under an incomes policy biased deliberately in favour of the lower paid, and many are those younger house purchasers, either actual or prospective, who are most heavily hit by the present mortgage interest rates.
    During and before the election campaign, the Chancellor and his colleagues had plenty to say about the hardship of the house purchaser, actual and prospective, yet in a Budget speech of more than two hours yesterday the right hon. Gentleman devoted less than 30 seconds to their problems, and then not to offer help, only to say that there was no short cut to the solution of them. It is a pity that he did not admit that when he was in opposition and during the election.
    Mr. Healey: I said it in every speech during the election.
    Mr. Carr: The right hon. Gentleman was remarkably successful in not getting that part of his speeches reported.
    Later in the debate my right hon. and hon. Friends will deal with the Chancellor's proposals on such matters as the taxation of capital, the hard effects of the surtax levy and the increased taxes on unearned incomes of minority groins such as widows on fixed-investment incomes. They are important matters, but I do not want to detain the House too long and they can be discussed later.
    All that I say about capital taxes is that while there may be a case in principle for an annual wealth tax and a gift tax, if the Chancellor is determined to bring them in he should take the utmost care—and it will be difficult—to make sure that, in practice, serious damage is not done to small businesses in manufacturing industry, commerce, retailing and agriculture. These small businesses make a substantial contribution to our economy and national wealth, and, incidentally, to our overall level of employment. One sometimes forgets that about one-third of workers in industry are employed by companies which are not quoted on the Stock Exchange. In other words, they are basically small companies. We
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    ignore at our peril the danger to our level of employment and national wealth if we take taxation measures which damage the small company, very often the privately-owned company.
    To sum up, it seems to the Opposition that the Budget runs true to Labour form. Labour Governments put up taxes, Conservative Governments reduce them. It is not just the rich who suffer from the increases or benefit from the decreases; it is all our people. This is one of the fundamental choices which have to be made in political decisions.
    If I had to give a name to this Budget, I should call it the "high-rise Budget"; a high rise in taxes; a high rise in prices and, I fear, eventually a high rise in unemployment, because it will discourage the investment that is needed if we are to increase our productive capacity and thus ensure that we maintain a high employment level.
    Finally, the people in this country should not imagine that our economic difficulties made any other sort of Budget impossible, because they did not. It may be true that the economic conditions of this country—and, indeed, of the world as a whole—meant that this year's Budget had to be neutral—if the Chancellor is right—thus making it impossible for him or any other Chancellor to make great tax concessions. But if we had forgone large expenditures on general subsidies and, in their place, had brought in smaller but more selective expenditure to meet the most urgent social needs, and if we had had a firm and fair incomes policy, we could still have had our pension increases and avoided the increases in indirect taxation which, by their effect on the cost of living, will wipe out for many of the lower-paid families the benefit of expensive general subsidies.
    That would—or could—have been a neutral Budget, too. I believe that it would have been a much better Budget. It would have met our immediate needs fully and fairly, and it would have avoided the damage which the Chancellor is doing to the future level of productive capacity and employment in this country.
    5.15 p.m.
    The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore): The House will have heard the right hon. Member for Carshalton (Mr. Carr) make his debut as

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    Shadow Chancellor with considerable interest and, perhaps, even with pleasure. The House will probably have listened with some sympathy, not because he confessed that he was not an economist—I assure him that there are many right hon. and hon. Members on both sides who talk good sense on economic affairs and who are not encumbered with the specialist knowledge of the economist—but because, now that he has taken on the rôle of Shadow Chancellor, he has to cast his shield around the vulnerable bodies of his right hon. Friends, the ex-Chancellor of the Exchequer, the ex-Secretary of State for Trade and Industry and the ex-Prime Minister, who brought this country to the brink of, probably, the worst economic misfortune which any of us can remember or, indeed, of which we have record.
    The right hon. Gentleman showed persistence in questioning and considerable talent in debating skill, but I thought the quality of the arguments he put forward a little thin. First, he overstressed the possible damage to industrial investment this year. He ought to take a little encouragement from and a little pride in the investment incentives which his right hon. Friend took such pains to construct, at enormous cost to the Treasury, during the past three years. We had a system of investment incentives extremely difficult to rival.
    In addition, as the right hon. Gentleman well knows, this past year has been one in which there has been a high level of profits. My right hon. Friend the Chancellor of the Exchequer stressed yesterday that he will continue to keep a close watch on the whole economy, and there is no reason at this stage to draw gloomy conclusions about the outlook for investment in this country this year.
    Second, I found the right hon. Gentleman's remarks about the cost of living and the increase in charges by the nationalised industries rather surprising. Unless charges were raised the revenue cost to the Exchequer this year would be £1,400 million. My right hon. Friend intends to save £900 million of that. If the Shadow Chancellor accepts that, where would he have raised the extra £900 million? The right hon. Gentleman said that he would not put it on indirect taxes because that would have an adverse affect on the cost of living. We are
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    driven back, therefore, to the logical, inevitable conclusion that the right hon. Gentleman would have imposed the largest increases on direct taxation to have taken place for the past 10 years. He may disagree with that—there are, of course, many variables—but he cannot escape the conclusion that the consequences of what he proposed would have had to have been borne on direct taxes.
    Mr. Carr: In my closing sentences I said something about our having to forgo the large extra expenditure on general subsidies. The right hon. Gentleman cannot accuse me of dishonesty on that point.
    Mr. Shore: No, but if the right hon. Gentleman had done nothing about food subsidies the rise in the cost of living would have been considerably greater. We shall have an opportunity to discuss these matters during this Budget debate. If I fail to answer any of the right hon. Gentleman's comments, I have no doubt that my right hon. Friend the Paymaster-General will say something when he winds up today's debate. There will be a further opportunity to deal with comments on the final day of the debate on Monday. As Secretary of State and President of the Board of Trade, I think it right to turn my attention to the whole question of trade and to fulfil my first duty by putting to the House and the country the facts about our present trading situation.
    To those who have followed developments closely in recent months, the totals that I shall cite will come as no surprise, although their impact on the public has in the past been muffled both by competing events and to some extent by past ministerial pronouncements.
    Our total trade deficit for last year was £2,375 million. Of this, probably £300 million was due to increased oil prices. To put the 1973 total in perspective I should remind the House that in the previous three years our trade balance was: in 1970, a deficit of £9 million; in 1971, a surplus of £285 million; in 1972, a deficit of £677 million.
    It will be seen how massive and rapid the change over from surplus to deficit has been. This is not all. The total figure for 1973, the £2,375 million, itself conceals rather than reveals the trend in our trading position. In the first quarter

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    of 1973 we were running a trade deficit at the rate of £1,400 million per annum; in the second quarter, we were running a deficit at the rate of £1,600 million a year; in the third quarter of 1973 the trade deficit had reached £2,400 million a year; and in the last quarter of 1973 it rose to a truly horrific figure of over £4,000 million a year.
    The House will be aware from the announcement yesterday that the latest trade figures show little improvement in our non-oil trade deficit and—a major new factor—an increase in last month alone of no less than £84 million in the cost of our oil imports in a single month.
    Of course, along with the trade deficit figures we have to take account of our position on invisible earnings. It is only when we take together visible and invisible trade that we get the current account of the United Kingdom. As the House well knows, invisibles have contributed positively to our current account for many years, and in the last few years there has been a particularly helpful increase, reflecting a wide variety of factors, in which the improvement in our insurance and tourist earnings deserves particular mention. When we set the invisible surplus against the visible balance or non-balance, the current account last year was reduced to £1,468 million. However, when we take account of the accelerating deterioration of our visible trade during the second half of 1973 in particular, and the fairly modest increases in our invisible earnings, no one is entitled to draw any satisfaction about the size of our current deficit in the period ahead.
    As Secretary of State for Trade and President of the Board of Trade I can safely affirm that no incoming trade Minister in the whole history of these islands has ever been bequeathed so massive a deficit on the external account.
    Mr. Julian Ridsdale: I am interested in the pattern given by the right hon. Gentleman, but will he not admit that in similar trading nations, such as Japan, the trend he has described has taken place, too?
    Mr. Shore: It is always dangerous to cite external experience in these matters. What I want to do for the moment—I
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    shall develop my argument—is to present this country's position. I have not yet dealt with the oil deficit as such. I shall not mention it until later. Naturally, the oil deficit is among the factors, apart from the swing round in their own trade, which has particularly affected Japan and other countries.
    I noted what the right hon. Member for Worcester (Mr. Walker) said during the debate on the Queen's Speech about the new organisation of Government Departments, and in particular his regrets at the dismembering of the DTI and the re-emergence of the Board of Trade as a separate major Department of State. I have always felt that a certain agnosticism in the matter of deciding "who does what" among Government Departments is the only sensible stance to adopt—at least, in the light of the experience of departmental changes in the last 10 years.
    However, it will not have escaped the attention of the House that the almost unbelievable deterioration in our current trade account, the transformation in a matter of less than three years from a record surplus to a still larger record deficit, involving a turnround of some £2,500 million, has taken place during the only period in our history when no separate trade Ministry has been allowed to exist. It is clear to me that, whatever else may be said about the advantages of a combined industry and trade Ministry—and I am not sure what else can be said the trade balance and trade policy generally have not been given anything like the priority that they needed in the unlamented DTI.
    It is right at this moment not only to rehearse the facts of our present trade situation, but to look at the factors that have contributed to the present position. I shall say something later about oil, but I must stress that the vast and unwelcome increase in oil prices has played only a small part in the trade deterioration up to the end of 1973 which I have just described.
    What, then, have been the main factors? It is here that I must take issue with the analysis and explanation repeatedly offered by the Leader of the Opposition and former Ministers on the many occasions when we have debated these matters during the past two years. It is, of course, true as they repeatedly

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    affirmed, that world prices, particularly in the last year, have placed a heavy burden on our import bill.
    Since the beginning of 1972, just before the sterling float, there has been a 50 per cent. increase in our import prices, and about two thirds is the result of the escalation of commodity prices per se. But the rest—and that is about a third—is the result of the depreciation of the floating pound. We know by how much. Since June 1972, when the pound began to float, the depreciation against other currencies has reached some 19 per cent. So the average cost of our imports has had to reflect a price increase broadly equal to the extent of our currency depreciation. This has given not only a most unwelcome further boost to price inflation in the United Kingdom but has contributed greatly to our trade deficit.
    This fact has scarcely been alluded to in the speeches made by Ministers of the last Government. They have sought instead to stress first the real increase in world prices, and second to justify the deterioration in our trade balance as a necessary corollary of the growth policy to which they were suddenly converted in the autumn of 1971 when unemployment was heading fast towards the million mark. So throughout the second half of 1972 and 1973 our growing trade deficit has been again and again summarily dismissed as no more than the necessary stocking up of materials and the necessary importation of capital goods which were destined to precede a great and counterbalancing export boom.
    Once again the explanation that we have been given is only a partial one and omits factors which must also be taken into account. I do not deny that there has been a very considerable increase in imported capital goods. Indeed, they rose in value by some £1,000 million between 1971 and 1973. But this in turn reflects on the appalling failure of the last administration to avoid an investment slump, and in particular the expansion of our own capital goods industries that marked the conduct of affairs in recent years. The House will hear the figures again.
    Investment by manufacturing industry in real terms in Britain amounted in 1970 to £2,129 million. It fell to £1,968 million in 1971. It slumped still further to £1,775 million in 1972, and it rose
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    only marginally in 1973 to £1,881 million. It stands at £247 million below the levels attained in 1970. No wonder the growth programme embarked upon 18 months to two years ago involved so heavy an increase in imported capital goods.
    But what about consumer goods? These were hardly mentioned by Ministers in our debates last year. But the truth is that the consumer boom which the budgets of 1972 and 1973 unleashed led to a vast and unchecked increase in imports of consumer goods of all kinds. Of the trade deterioration in the past two years, no less than £1,000 million was contributed by the increase in consumer goods. As the House will well remember, every conceivable restraint on consumer expenditure was flung away, all controls over borrowing were abolished and the whole policy of the then Government was summed up in the credit card slogan "Access takes the waiting out of wanting". It was not until December of last year that the then Chancellor of the Exchequer decided to bring consumer credit and hire purchase under direct control.
    Mr. Christopher Tugendhat: Would the right hon. Gentleman tell us which measures in the Budget will increase the level of industrial investment beyond the depressed levels which he described, and which measures will decrease the level of imports for consumer spending?
    Mr. Shore: I am not in this part of my speech dealing with the question of investment. I dealt with that at the beginning of my speech in answer to the right hon. Gentleman. On the question of imports, my understanding is that the general tailing off now of consumer demand—that is reflected towards the end of last year—together with the measures announced, in my view far too late, in December by the previous Chancellor, and the combined effect of my right hon. Friend's measures will have an effect on checking the import of consumer goods which has been an unwelcome feature in such quantities in the past two years. After all, £1,000 million of our deterioration is due to imported consumer goods. The House and the country will want to face the fact that this cannot continue, certainly not unless there are counterbalancing exports in the other direction

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    It is against this background that the House can judge the assertion of the right hon. Member for Worcester in his speech on 13th March. He said that
    "the true reality of the deficit on our trade"
    results
    "from a massive increase in the importation of new machinery, vital raw materials and, the biggest factor, the enormous increase in world prices."—[OFFICIAL REPORT, 13th March 1974; Vol. 870, c. 206.]
    That is what he said—not a word about consumer goods, not a word about depreciation of the pound.
    Mr. Nicholas Ridley: Since the right hon. Gentleman has not answered my hon. Friend's question when he asked what the right hon. Gentleman intends to do about reducing consumer imports, is he now suggesting that the separation of the Department into Departments for trade and industry is what the Government are relying upon?
    Mr. Shore: The hon. Gentleman knows better than that. He knows that the combined effect of the measures taken in my right hon. Friend's Budget and the December measures, particularly as they affect consumer goods and hire purchase, are expected to have, and will almost certainly have, a significant effect on imported consumer goods.
    Mr. Norman Lamont rose—
    Mr. Shore: I will not give way again.
    Before I leave this part of my speech, I want to say something about our trade with the Common Market, which the right hon. Member for Worcester singled out in his speech as a special cause for satisfaction. He remarked that our exports to the Common Market had risen from £2,355 million in 1970 to over £4,000 million last year. He said that they comprised nearly a third of our total exports and that our exports there were rising more sharply than to other markets in the world. What he omitted then to point out was what our imports from the Common Market had been. I will tell him. Whereas our imports in 1970 from the Common Market were £2,440 million, last year they amounted to £5,197 million. As the House will see, our trade balance with the countries of the Common Market has deteriorated by
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    no less than £1,100 million in the past three years.
    This is particularly worrying for a number of reasons. First, our main purchases from the Common Market countries are not of raw materials, which have been particularly rapid in their price movement in the last two years. Secondly, we have imported large quantities of consumer durable goods—far more than we ourselves have been able to export to them. Indeed, it was in our first year of membership of the EEC that we became for the first time in our history a net importer of motor cars—and much of that has come from EEC countries.
    Now our trade performance with the EEC matters very much indeed, because the economic case of the former Government for joining the EEC was that the benefits of a large domestic market of 250 million consumers, as they then put it, would be so great that they would outweigh or at least cancel out the known and heavy disadvantages that would follow from higher imported food prices, the growing weight of our contribution to the EEC budget, and the expected net outflow of capital from Britain to Europe.
    In fact what has happened is this. We have had higher food prices—although from the world even more than EEC; we have started to make our budgetary contributions; we have seen a growing outflow of capital; and on top of it all we have a very heavy trade deficit.
    My right hon. Friend announced yesterday some proposals for curtailing British investment in the EEC. It should surprise no one. The truth is that, as the former Government so quickly discovered, the realities of our economic situation and the obligations entered into with the EEC do not easily co-exist. The last Chancellor discovered this himself when, having so lightly agreed to the "snake in the tunnel" arrangements in May 1972, he was forced ten weeks later and at the cost of £1,000 million to abandon the agreement and to let the pound float. The former Government discovered it again when in seeking to freeze prices in the first stage of their counter-inflation policy, they could not exempt the steel industry whose prices affect so widely costs throughout the engineering industries. They had, therefore, to write embarrassed letters to the Brussels Commission and to retain, at

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    least for a few months, the power of price control which under the treaty they had already abandoned.
    Now, as my right hon. Friend the Chancellor announced yesterday, the arrangements made in the Budget Statement of 1972, relating to Article 124 of the Treaty of Accession, which allowed up to £1 million per project per year for direct investment by British firms in other EEC countries, has had to be suspended. Up to the end of September 1973, 3,178 applications for permission to use official exchange by British firms for direct investment in the EEC were given exchange control consent. £154 million of official exchange had to be so utilised.
    Following the Budget, most new investment will have to be financed with foreign currency borrowings and, as my right hon. Friend made clear, he hoped to produce a saving of £150 million to £200 million in a full year from this change alone. As the House will recall, my right hon. Friend announced other measures tightening up the rules for financing both direct and portfolio investment on a world-wide basis. These he expects will yield £50 million from direct investment in the overseas sterling area and some $400 million from portfolio investments as well.
    Mr. J. Bruce-Gardyne: Now that the right hon. Gentleman has got that bit of EEC off his bile, could he tell us—now that he has re-established the Board of Trade to look after the trade statistics—to what extent the attempt to hold down the level of steel prices in this country, way below those prevailing in other European centres within the Community, has contributed directly to the trade deficit by leading to the export of steel which then subsequently has to be reimported?
    Mr. Shore: I do not intend to answer for the previous Government's steel pricing policy, but if he presses this point on my right hon. Friend the Secretary of State for Industry, I have no doubt that the hon. Gentleman will get a satisfactory reply.
    What the country has lacked in the past three years is a coherent and consistent economic policy. What the Budget's strategy has set out to do is to ensure that there will be a progressive shift of productive resources into the
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    balance of payments and a continued increase in the volume of our exports.
    The important and overriding first priority is to deal with the part of our balance of payments problem which does not arise directly from the oil price increases. We cannot expect to achieve that overnight for the orders of magnitude are much too large. The scale of the problem is such as to demand a reasonable and orderly approach to the necesary shift in resources from domestic consumption into exports and against the background, of course, of a changing international trading environment. It is not simply a question of making room available within the economy at the macro-economic level, although that is essential. Industrialists and Government together have also to re-analyse and identify the new and growing trade opportunities abroad, and sell the goods against sharpening export competition.
    In this, of course, we have to take account of the aftermath of three-day working and the process of industrial recovery from the recent miners' strike. Throughout the strike, industrial output was maintained at about 75 to 80 per cent. and steel deliveries by the British Steel Corporation averaged some 87 per cent. of normal. Moreover, the dangers of serious liquidity problems and bankruptcies did not materialise. This is a considerable tribute to the skill and cooperation of both sides of industry. I should also like to thank all those companies and organisations whose efforts helped us so much in the monitoring of industrial performance during the emergency, notably the CBI, ABCC, the trade associations and, indeed, the banking system.
    As far as the recovery is concerned, all reports indicate a swift return to normal. Coal production is, of course, over 90 per cent. what it was; full power to industry has been restored; the number of workers laid off has fallen dramatically; and the banks still appear to be coping with firms' liquidity problems. Of course, the running down of stocks will have helped to mask underlying shortages and unbalanced output. Problems could therefore arise if stocks are exhausted before output is fully restored. In any event, the industrial pipeline will have to be refilled. The

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    recovery situation will thus need continued watching.
    But an encouraging feature on the external side is that most firms appear to have given priority to their export markets in view of the higher prices prevailing and the fact that export customers lost may not easily be regained. Our export performance may not, therefore, be badly affected. Indeed, last month's exports—as I think the House will have noticed in the figures released yesterday—were surprisingly good, and the CBI reports that export orders are still coming forward at a satisfactory rate.
    I wish to say a further word about export orders. One example is the mechanical engineering sector, though this is true of virtually all the separate indices for the engineering industries. The volume of orders on hand at the end of November last year—on an index base of 100 at December 1963—stood at 251, having climbed from 145 in the course of the year, and that is an increase of 78 per cent. That is indicative and significant of the demand at present for our exports from our engineering industries.
    Our exports are very competitive today. This, as it were, is the one counterbalancing advantage that we have against the serious disadvantages that we suffered because of the fall in the sterling rate during the past two years. There are reasons to believe that in many markets our goods are significantly under-priced and that, with advantage to ourselves, we could raise our export prices, gaining larger foreign currency returns and still be effectively competitive. I hope, therefore, that all companies will pay close attention to their export pricing policy in the period ahead.
    Mr. Baxter: My right hon. Friend has mentioned a theme that I was most anxious to elaborate. I think that our export prices have been far too low, keeping in mind the basic price of the raw materials that we have to buy.
    Mr. Shore: I think that there is a good deal of evidence for that assertion, and I hope that what I have to say on this point will be widely disseminated in industry. Certainly it is the same point that the British Overseas Trade Board has been
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    making to the organisations with which it is in touch.
    It is against that background that I urge all our exporting industries to take full advantage of the wide range of export promotional facilities available from my Department, whether it is to identify market opportunities abroad or to exploit them by the use of ECGD credit facilities.
    The British Overseas Trade Board, working closely with British diplomatic missions, is at the very moment reviewing its choice of major markets and looking again to see which product sectors within them offer most opportunity for British exporters. The suggestions from overseas are being widely distributed to British firms.
    We shall be looking closely at the oil-rich developing countries which have a substantial capacity to absorb goods of all kinds. That does not mean all of the oil States, because many have only a small or, indeed, a tiny population. We must maximise our opportunities in these markets. Our ability to improve our export performance must be set in the international context. I want to comment on that and, in particular, on the world trade prospect.
    The year 1973 saw a world-wide upswing in economic activity from the generally depressed levels of 1971–72. In real terms the aggregate gross domestic product of the developed world increased by nearly 7 per cent., as against an annual average of only 5 per cent, over the previous decade. There was a still sharper increase in the volume of world trade, which rose by over 12 per cent. as against an annual average of under 9 per cent. over the previous decade. But also associated with this recovery has been a world-wide acceleration of price inflation; and within the general picture of the price increases, a violent swing in the terms of trade in favour of primary products vis-à-vis manufactures—most recently and extremely, of course, in favour of oil.
    By the latter part of 1973—and this is a very serious point—the pace of expansion in industrial countries was beginning to slacken off. A number of major countries had already adopted restrictive fiscal and financial policies to restrain price inflation; and these

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    measures, coupled with the effect of higher oil prices, seem likely to restrain the growth of industrial countries' output well below normal during 1974 and the early part of 1975.
    In global terms the market for manufactured exports in developed countries is thus not likely to expand as fast as before. The great increase last year in the purchasing power of many primary producing countries leas been largely wiped out by the rise of oil prices over the last six months.
    All in all, it seems unlikely that the growth of world trade in manufactures will average more than 7 per cent. or 7½ per cent. per annum over the next two years, which is well down on the 10 per cent. which we have had in recent years, and all exporters of manufactures face a continuation of terms of trade significantly worse than we have had since the Korean War.
    This is the world trade background against which we have to solve our balance of payments problems, bearing in mind that the steep increase in oil prices can be expected in itself to impose an additional burden of at least £2,000 million on the United Kingdom balance of payments in 1974. This is on top of the current account deficit to which I have already referred.
    Of course, the oil problem in our balance of payments is not peculiar to the United Kingdom, and we have undertaken with our major international partners that we will co-operate in trying to handle the potentially disruptive consequences of the oil problem for international trade and payments. This means that we shall expect to deal with our oil deficit by international borrowing rather than beggar-my-neighbour policies.
    Looking further ahead, I see no cause for despondency. By the 1980s the development of North Sea gas and oil resources could well revolutionise our balance of payments and create a strong and secure energy base for our industry. In the period up to then we clearly have a long haul, both in financing the oil deficit and in rectifying the serious disequilibrium in our present non-oil balance of payments. But I have no doubt that the resources of the nation are equal to the task if they can be harnessed in an orderly and progressive way. In the inter-
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    national arena this means full cooperation with our trading partners to seek reasoned solutions to joint problems and within a framework of multilateral and increasing liberalisation of trade which has been at the heart of our prosperity in the past and will best serve our requirements in the future.
    5.50 p.m.
    Mr. Jeremy Thorpe: I begin by adding my congratulations to the right hon. Gentleman the Chancellor of the Exchequer on the speed with which he prepared his Budget and the stamina with which he delivered it I hope that if electoral timing and his continued tenure of office allow him to introduce another one he will have longer to prepare it and a shorter period in which to introduce it. I am certain that if he was more exhausted than his interested and intent listeners he must have been a very tired man indeed last night. It was a formidable performance.
    As the right hon. Member for Carshalton (Mr. Carr), the Shadow Chancellor, has likewise been making what for him was a Treasury maiden, may I congratulate him? Both speeches put me in mind of the dictum of Sir Winston Churchill who after hearing a maiden speech, turned to his colleagues and said, "That was no maiden. It was a brazen hussy of a speech".
    It is very odd when the Secretary of State talks about the necessity for the liberalisation of trade and then complains that the liberalisation of trade, which is precisely what has happened as a result of joining the European Economic Community, happens to undercut it and cause competition in this country. No one assumed that there would be an automatic benefit by joining the EEC. Everyone knew—indeed, the present Prime Minister was careful to say so—that it gave opportunities—if we took them up. It is true that there are far more cars imported into this country than we export to Europe. We must face the fact that on price, delivery and service it so happens that British consumers appear to be giving increasing preference to cars from Europe rather than to those from our home market. I regret that, but I hope that we can learn a lesson. Certainly we cannot revert to a form of protectionism, which I am sure

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    that the right hon Gentleman would not like to see in this country.
    The four criteria which the right hon. Gentleman set himself in his Budget are, I think, correct criteria. In fairness to him one can try to judge the Budget on the basis of the criteria which he set himself.
    The first was that we must make the fullest use of manpower and resources in this country—with which I wholeheartedly agree. We on the Liberal bench welcome the retention of the regional employment premium—which is an important decision—but if the Chancellor is to get that degree of growth in the regions which he wants, I think that in the next few months he will find that he will need to do more than retain the REP. I hope that, rather in the same way in which the Secretary of State wound up his speech, the Chancellor will keep a very close eye on investment, on production and on employment in those regions.
    The Chancellor of the Exchequer indicated his intention to raise the upper limits on a graduated national insurance contribution basis, and with that degree of flexibility I find myself fully in favour. I hope that we may be able to go further still and have a graduated social security tax which can be varied regionally to replace the present national insurance contribution system. This is one way in which we could give a real incentive for growth in our regions, if we have a variable payroll tax or a variable national insurance contribution. I hope that the Government will be flexible enough to consider that.
    The unemployment figure for March was about 590,000. The National Institute for Economic and Social Research has made a qualified prophesy—and there are others—that even with a neutral Budget we could find the figure of unemployed rising to 750,000 or to 1 million. Therefore, it is desperately important that every aspect of the Budget should be examined to see what effect it will have on employment.
    There is no doubt that the Budget imposes new and increased costs, some of which are unavoidable, on small and medium-sized firms in particular. There is little or nothing to encourage those
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    firms to invest or to step up exports. The Chancellor's only suggestion in this regard was that the costing of many of our exports was too low. He may be right in certain cases, but this is not exactly the clarion call to be expected from a new Government trying to boost exports, and something more is needed.
    I agree with the Chancellor that we must make the fullest use of, and stop wasting, our resources. I hope to hear what proposals the Government have in mind on this point.
    The manpower situation is a dangerous one. Unless the Government can get growth in the regions there will be falling investment, particularly in the remoter regions, and unemployment will be the consequence. I represent a constituency which has had an unemployment rate of between 9 per cent. and 12 per cent. in the winter months—admittedly this is seasonal—and therefore I have some experience of the different techniques of different Governments regarding unemployment. Unfortunately none of these techniques has yet met with success.
    The second criterion in the Chancellor's statement related to the balance of payments. I concede that the Government have inherited an appalling situation. The deficit of £429 million in February was the worst on record. Unfortunately, in this respect, far from encouraging investment the Budget has certain positive disincentives to investment. There is the surcharge on investment income of £1,000 and over, which will affect a fair amount of small investment in industry. I am all in favour of high tax on inherited wealth and on investment income from inherited wealth, but we do not want this impost on those people who in their working lives try to save to provide themselves with an investment income at the end of the day. The Chancellor's proposals make no difference between these two categories. I appreciate that a differential can be extremely difficult to define, but I hope that the Government will consider making a differential. I also regret the proposal regarding the Save-as-You-Earn scheme.
    I welcome the proposals regarding overdrafts in precisely the same way as I welcomed those made in 1969. I do not believe that the Chancellor should subsidise overdrafts for the private citizen. I speak from the experience of having an overdraft and so I do so in a

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    totally disinterested way. However, it must be realised that many small businesses depend on overdraft facilities to carry on business. This is particularly the case in the farming community. In the South-West, 90 per cent. of farmers have overdrafts at present. Therefore, overdrafts are, in a sense, a form of investment. When the Chancellor draws up the qualifying factors for cases in which it will be possible to continue to write off overdraft interest payments I hope he will include those people whose overdrafts have been incurred exclusively for the purpose of running businesses. I appreciate that to do this may be difficult, but I hope that the Chancellor will be able to take this action.
    Perhaps the most dangerous aspect of the Budget is that it contains little or nothing for industry. The Secretary of State spoke of the gloom and horror which he had inherited, and I thought that we were back in the time of the General Election. Indeed, it seemed that the right hon. Gentleman thought that we were in the pre-28th February period, not the pre-28th March period.
    I appreciate the argument that British industry is now facing the results of the three-day week. It was totally unnecessary, as, I believe, the Tory Front Bench, in retrospect, must think that the last General Election was unnecessary. We are now faced with increases in prices of steel, coal, electricity, oil, the postal services, and most imported raw materials, as well as increases in national insurance contributions, corporation tax—some of it to be paid in advance—and there is the certainty of a major pay claim by the engineers. Against this pattern there is the necessity to return to normal and to get growth and investment, but there is not much in the Budget to achieve these objectives. The right hon. Gentleman was questioned on these points and I hope that in the concluding speech there will be more detailed replies.
    The third criterion concerns confidence. I appreciate that the Chancellor probably had in mind the value of people's incomes internally—which they do not wish to see depreciated—but there is also the matter of foreign confidence. I congratulate the Government on negotiating the $2,500 million loan. This is a considerable achievement. I do not wish to
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    be too controversial, but the negotiating of this loan blows sky high the argument sometimes heard from the Tory benches that any Government other than a Conservative Government will face a total lack of confidence abroad and therefore it is the divine right of one party to rule because that party alone can maintain confidence.
    However, I should like to know more about the cost of the loan which, I understand, is to be for 10 years with a rate of interest alleged to be about 9 per cent. I understand that it is to be repayable in dollars and that the rate of interest may be variable. This information comes from the newspapers and may be wholly inaccurate, but we should like to know the position, because this is an important factor in the balance of payments. Do the Government consider that this loan is a sufficient standby credit, or is it the first move before turning to the IMF for a further tranche?
    The fourth and final criterion relates to whether the Budget will produce a measure of social unity. The Chancellor was probably right in thinking that this point was fundamental to the entire success of the Budget. I do not believe that we shall have a successful prices and incomes policy, statutory or voluntary, unless people believe that the economy is being run fairly. I believe that the £500 million food subsidy is a blanket subsidy which will help many people who do not have any need of it. Because of the expense of the food subsidy those large families who are below the tax threshold will, apart from the benefit of food subsidies, get nothing out of the Budget. Much more could have been done to help those people. Family allowances could have been put up and an allowance paid for the first child.
    I would have liked to have seen guaranteed minimum earnings and I hope that the Government will get round to this. I was pleased that the Chancellor was not wholly hostile to the concept of credit income tax. I know that he is in favour of the Minority Report of the Select Committee on Tax-Credit and at least there is something to be said for that. I hope that he will realise that the credit income tax system can be used as a means of providing a guaranteed minimum income for every household. That

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    is the way in which I would attack poverty, rather than by blanket food subsidies.
    I welcome enormously the increase in pensions, although it is not without significance that the present figures for a married couple and a single person have been put forward by the Labour Party for some time.
    Mr. Neville Sandelson: The right hon. Gentleman criticised the indiscriminate nature of food subsidies, but then went on to talk in terms of his own preference for a family allowance for the first child. Would that not be a much greater and more widespread feature of indiscriminately giving away a public subsidy?
    Mr. Thorpe: I do not think so—for this reason, that food subsidies are indiscriminate in that they are for every man, woman and child in the country. The family allowance, by very definition, is paid to the family with one child, if it is for the first child; and, of course, there is the element of clawback in the tax recovery which one does not get from food subsidies.
    What I hope that the Government will consider doing, which will be enormously valuable, is linking pensions clearly and openly to a percentage of average industrial earnings—
    Mr. Russell Kerr: That is what the Secretary of State said.
    Mr. Thorpe: It is at the moment about 24 to 25 per cent. I am not certain whether that was being put forward by the right hon. Lady as the present percentage, which is a factual statement, or as a commitment that they will remain at that figure as a permanent feature in the economy. If I have misunderstood, and it is to be a permanent feature of the economy, then I warmly welcome it, because it is a real economic linkage which the pensioners will have for the first time. If that is the case, I say no more: I am delighted.
    I welcome the Chancellor's conversion to VAT. He has rightly put VAT on luxury goods. There are others that I could suggest, starting with advertising, and with some of the glossy magazines;
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    no doubt he will want to raise more money on another occasion.
    I am worried about VAT on fuel, not because I am not delighted that we are using the VAT fiscal weapon to prevent the costs from being passed on to industry, nor because I do not think it right that we should pay the fuller economic costs of petrol, but because I think that it will have a particularly hard effect in rural areas, where little public transport is available. We shall have to consider this matter.
    I welcome the gifts tax, but if the objective of such a tax and of death duties is to spread wealth—that, after all, is why a Liberal Government originally introduced death duties—surely it is not only the rate but the extent to which the money in question is distributed and diffused which should be considered. I am not certain why it should always be thought right that the donor or the testator, whichever it is, should pay the tax and not the recipient. If the recipient pays the tax, and if one starts from the proposition that the higher the sum that the recipient receives, either by gift or by inheritance, the higher the rate of tax, the greater is the incentive for the donor or testator to spread it more widely among more hands. We shall want to come back to that.
    I turn, finally, to housing. The local authorities will have a great responsibility placed on them if they are to buy up privately-owned houses. If they are to have to develop the development land which has been acquired, a great burden will be placed on their rates. The subsidy of £50 million will be totally inadequate, and I should have liked some measure of site value taxation instead, to return to the community the value which it has created, and also to persuade people to release land by financial means.
    I hope that we shall hear more about these 30,000 houses. My information is that many of them are not up to Parker Morris standards, and I think that we shall find ourselves using a great deal of public money to buy a lot of sub-standard private houses and to turn them into council houses. If it is merely to get people to buy them and get the market moving, psychologically it may work, but it seems an expensive way of doing it.
    If the Government really wanted to tackle the problem of housing, as I

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    believe they do, they might have considered a reduction in the interest rate on the existing loans from the Public Works Loan Board to local authorities. I am told that, for example, in the city of Leeds, if there were a reduction in the interest charges of only 1 per cent., that would pump about £2·4 million into the kitty there.
    I hope that the Government will carry on inquiries to see whether the banks and pension funds might not be persuaded to put a percentage of their holdings, of their profts, into the building societies. In some countries I believe that the proportion is as high as 8 per cent. and I hope that this will be investigated.
    The Government's main difficulties, apart from those that they have inherited—but no Government have failed to complain that they have inherited the most appalling problems from their predecessors—arise from the fact that they are prepared to subsidise prices but are hoping that wage inflation will be contained by purely voluntary means. They are doing so in a situation in which little is done for exports, savings or investment. If the Government overcome that problem, they will have produced the economic miracle, and I shall be the first to congratulate them. But we shall test it not by paper agreements which the Prime Minister can wave on the steps of Downing Street but by the actual settlements that we see, and those settlements will likewise be affected by the success or failure of the Government in holding down prices.
    The Government have probably satisfied their supporters by waving all the totem poles of taxing the rich, clawback, hitting the companies and the rest, and they have concentrated on these things so much that my main criticism is that they have not done enough for the people who are really at the bottom of the scale, like those on wages below the national average. Those are the people who should be looked after.
    The right hon. Gentleman described this as a high-rise Budget. I would call it a sprinkler Budget. It has aimed a few well-directed economic jets in the right direction, like the increase in pensions about which I am delighted, but it has not squirted enough water to put out the fire which at the moment is about to burst into flame again, nor to nourish
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    some of the roots which will have to be watered if the economy is to flourish. If anyone can mix more metaphors than I have in the last 30 seconds, I will salute him, but at least I hope that I have made known what I am trying to say.
    6.13 p.m.
    Mr. Robert Kilroy-Silk: It gives me great pleasure in making my maiden speech to follow the three distinguished previous speakers. I feel honoured to represent a constituency, Ormskirk, which has unfortunately been unrepresented by a Labour Member for the last 24 years. I must pay tribute to my predecessor in a large chunk of what is now my constituency—the present Prime Minister. Unfortunately, in the conscientious way in which he conducted his constituency matters and held his surgeries, as Prime Minister in the last Labour Government and as Leader of the Opposition, he has left me with a great burden as an example to emulate.
    My constituency has a large number of problems, of unemployment and high rents. I know from my experience in the last two weeks that my constituents in Kirby have warmly welcomed the fulfilment of the Government's pledge on the freezing of council house rents. The pensioners too in the rest of the constituency are greatly heartened by my right hon. Friend the Secretary of State's fulfilment of the Government's pledge on pensions.
    The major problem—it is a problem that has bedevilled the constituency and the new town of Kirkby for the past five years—has been the high level of unemployment. It is an area that is bedevilled especially by juvenile unemployment. My constituents expect from this Government the fulfilment of their public ownership programme.
    It is an intolerable disgrace that the jobs of men can be destroyed by the caprice, the whim or the irresponsible decision of one man and that the lives of men, and the livelihoods of their families, can be sacrificed on the altar of private profit. That a factory can close down for no other reason than that higher profits are to be sought elsewhere, and often beyond the borders of the United Kingdom, is a matter which we cannot and will not tolerate. We expect to see the Government fulfilling their public ownership

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    programme to ensure that work is directed to where people need it, so that industry serves people and people are not made to serve industry.
    There are many problems within the constituency, but it has much to commend to the rest of the country. In the new West Lancashire District Council, which encompasses a large part of the northern end of my constituency, a series of policies have been implemented which show what Socialism in practice can achieve. We already have as a fact free television licences for old-age pensioners. We already have free school milk for the 7 to 11-year-olds. We have a 24-hour warden-operated system of sheltered housing for the elderly that is the envy of the rest of the country. These are not theories or ideas but facts which we shall extend to the rest of the constituency and which we commend to the country.
    I ask the indulgence of the House to raise a matter that is only tangential to the debate but which raises important questions on priorities and resources. My right hon. Friend the Chancellor of the Exchequer made great play about an attack upon waste. I bring the attention of the House to the enormous waste of human lives, of lives that are blighted because of the gross and intolerable inadequacies of the services for children with congenital heart disorders. The deficiencies are most marked in the large conurbations such as Liverpool, Manchester and Birmingham. The deficiencies arise primarily from the fact that, although there has been rapid development in surgery techniques for the correction of the malformations of the heart in the past 10 years, central and local authorities have not been willing to provide the financial resources to back up the services that are now available to benefit the lives and the health of the children concerned.
    This debate is about priorities and the allocation of resources. I believe that when people are made aware of the facts there will be no one, in the House or in the country, who will not support a demand for a massive injection of cash into the treatment of children with congenital heart disorders.
    The facts tell their own story. The incidence of congenital heart disorders is estimated to be approximately six chil-
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    dren per thousand live births a year. For example in 1972 when there were 685,000 live births, there were approximately 4,500 children born with congenital heart disorders. Some people estimate that the number is as high as 8,000. How many there are as an accumulated total is difficult to tell. They can be divided into three categories. One-third are so seriously affected that they died within several days of birth. Another one-third need an operation as soon as is practicable. If it is done quickly they can lead normal and healthy lives. The final third have far less serious defects and, therefore, there is more flexibility in the timing of the operation.
    There are thousands of children who stand in a long queue for surgery. Recent inquiries have shown that in at least 12 centres providing services for children with congenital heart disorders the services are regarded by the cardiologists or paediatricians in charge as being seriously inadequate. For example, in Liverpool there are now 170 children waiting for cardiac catheterisation. Those children can wait for up to two years. There are a further 100-plus children who have already had that exploratory operation who are awaiting major surgery and will have to wait for up to a year. A child with a serious and important heart defect can wait in Liverpool up to three years before it is corrected by surgery.
    In Birmingham there are approximately 250 children who are waiting for major surgery. Unfortunately more are being added to the waiting list than are being operated upon each week. The waiting list is growing rather than diminishing. If the problem is acute now, as I believe it to be, I hesitate to think what it will be like in a few years' time if immediate and effective action is not taken. The longer the children have to wait for operations the more dangerous such operations become, the more likelihood there is of there being irreversible changes in their heart or in their lungs and the less likely they are to be able to lead a normal life. As a result they will be more likely to suffer permanent disability.
    Even more scandalous is that on the authority of Professor Hay, professor of child health at Liverpool University and consultant paeditrician to the Royal Liverpool Children's Hospital, occasionally patients die while on the waiting list.

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    They die for no other reason than that services are not available in sufficient quantity to enable operations to be performed in time. Others are not put on the waiting list for the reason that the surgeons know that they will never be reached and they do not wish to arouse far more anxiety and anguish amongst the parents.
    For those on the waiting list who do not die while waiting, the situation is paradoxically worsened by the fact that the advance of surgical technology and techniques in general makes treatment available for new-born babies, who are naturally treated immediately. The result is that those who are already on the waiting list get left even further back. That is a terrible problem that causes great distress and anxiety to the thousands of parents of children with congenital heart disorders. It is a problem that should not be allowed to continue.
    I hope that my right hon. Friend the Secretary of State for Social Services will seriously consider allocating far more funds to this specialty. We need a boost now. Further plans for future investment, however necessary they may be and however grandiose their conception, will do nothing to alleviate the problems of those who are now on the waiting list, which grows longer every day. Each day that a child is on that list the more likely it is to suffer permanent disability.
    We need an immediate injection of cash into this service. There is a need for more cardiologists and for more surgical time to be allocated in theatres. There is a need for far more trained nurses. The shortage of nurses appears to be the major bottleneck in the Birmingham area. The problem is not necessarily the lack of cardiologists or of theatre time but a lack of nurses who are trained in heart surgery. There need to be more posts for medical and surgical trainees.
    I should also like to ask my right hon. Friend the Secretary of State for Social Services to consider the setting up of larger heart units. At present the tendency—frequently for very good reasons—is to try to locate hospitals and various services near to where the children live. This is counter-productive in this service. What is needed is a concentration of re-
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    sources at a few large centres where the staff can specialise completely on this aspect of medical care.
    As I said at the beginning, it is a question of priorities. I believe that this should be a top priority. We know that our resources are severely limited and that there is not much room for either manoeuvre or flexibility in the allocation of resources. However, this is an overriding problem the solution of which is of paramount importance and should be accorded the priority that it deserves.
    What I do not want, however, is for there to be competition between the sick for available resources. I am not suggesting, nor would I support anyone who suggested, that resources should be redirected or reallocated from the disabled or the elderly to help the children with congenital heart disorders. I do not want, and I do not expect to see, a competition for resources between the sick.
    A larger slice of the defence budget than the derisory sum which was offered yesterday would perhaps be far more appropriate and desirable. A greater rate of tax on the wealthy than that which was suggested by my right hon. Friend the Chancellor of the Exchequer yesterday would be yet another means of raising the very necessary and crucial funds and resources for this service.
    Perhaps even more important in many ways is a much more vigorous and dynamic attack upon private practice in the hospital service. We are talking about priorities and a situation in which the lives of these children are being lost or, if they remain alive, they are obliged to compete for resources. We should not allow a situation to exist where private practice within the National Health Service can slough off the resources which are necessary for this area.
    The previous administration said that this problem was not of national importance. It is a problem of national importance and, as a start, perhaps the Secretary of State could help Liverpool by giving the £25,000 that was refused by the previous administration. The Governors of the Royal Liverpool Children's Hospital have already allocated £100,000 to provide facilities. What is needed now from the Exchequer is direct financial support to maintain the services that those facilities will require.
    6.23 p.m.
    Mr. Giles Shaw: May I thank you, Mr. Speaker, for allowing me to catch your eye and to make my maiden speech in the debate on the Budget Statement.
    I want next, even if it is not a tradition of the House, to congratulate the hon. Member for Ormskirk (Mr. Kilroy-Silk) on his maiden speech. I will endeavour to follow the eloquence and deep sincerity with which he made his case.
    May I also—through you, Mr. Speaker—not just for myself but probably for all new Members, thank other Members of the House and the staff of the House for their kindness and courtesy. To anyone coming here from outside this is a baffling and somewhat difficult place, but the friendliness, courtesy and help which I and other new Members have received have been deeply appreciated.
    I represent the constituency of Pudsey. I have to confess that this is not high on the list of major tourist attractions in Britain. We have, regrettably, no Pudsey plage. It is not a holiday centre where the sun-worshipper could find real solace on the Costa de Guiseley. It is a constituency on the lower but somewhat polluted waters of the River Aire between the two massive conurbations of Leeds and Bradford. It contains upward of 65.000 people who are engaged in a wide variety of employments.
    The interesting thing about it is that Pudsey is an area which has a great history, a great pride and a great independence of mind. It is composed of the borough of Pudsey at one end. I am told that this was the last creation as a borough of the great Queen Victoria. The effort was clearly too much. It also includes the urban districts of Horsforth and Aireborough.
    I regard it as a tragedy, as I am sure many hon. Members do, that so many boroughs and other local authority units are disappearing with the reorganisation of local government. I should at this very time be attending the obsequies for one of the local authorities which is going out of existence. However, I fancy that it is somehow typical and appropriate that a Member of Parliament for an area like mine should be here making a maiden speech to emphasise that the area continues, that life goes on and that there
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    is a future, however sad it is to see many of the traditions disappear.
    The previous Member for the constituency of Pudsey was Mr. Joe Hiley who, I know, was extremely well liked and popular here during the 15 years for which he represented the constituency. There are many tales told about Joe Hiley, who used to call himself "the yarn spinner from Yeadon," and all of them bear witness to the fact that he was a most kindly and lovable man who is now enjoying a well-earned retirement in the constituency. He will be sadly missed by hon. Members.
    It is traditional that the virtues of the West Riding of Yorkshire lie in the people. Although they may be people who would call a spade a spade or a bag of coal "a beg of coil", they are people who have a strong sense of community spirit and who, indeed, are in a sense interdependent. There are many mills in my constituency and in others around the conurbations of Leeds and Bradford where workers still live near their place of employment and where the relationship between management and men is very close indeed. It was proved in the period of the three-day working week that there was a tremendous resurgence of effort and spirit in many factories in my constituency, and this produced enormous results in terms of very high levels of production. I should like to think that this resourcefulness and capacity for effort is a tradition of the West Riding which will be maintained.
    I suspect that this spirit of interdependence was, at least in part, at the back of the Chancellor's mind when he appealed on television for national unity. Nowadays it is all too easy for people to try to divide employer from employee. It is high time that we recognised just how important it is that a spirit of interdependence should be cultivated. But in his Budget provisions the Chancellor of the Exchequer has made it extremely difficult for all those, as many of my constituents are, employed in small companies to bear the loads which they have to carry. They have the load of maintaining investment, full production and. above all, full employment. In addition they have to bear the recent massive increases in rates, described by the Secretary of State for the Environment as "rough justice".

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    Now employers must bear the massive problems of the increase in employers' contributions—the 44p on the stamp—the increased electricity, coal and oil charges and the increased telephone and postal charges. With corporation tax now to be at a higher level of 52 per cent. and with provision for advance payment of the tax, the problem of the smaller companies which are so typical of the Pudsey constituency is serious indeed. All these moves affect the liquidity and livelihood not only of management but of the community as a whole.
    There is little chance from what we read in the Budget speech of much solace for the future. There is little chance of reductions in interest rates. There is little chance that mortgage rates might come down for the many people who are thinking of buying their own homes. Indeed, the opposite may occur as National Savings compete more effectively with building societies, once more putting pressure on the availability of funds. All these are pressures with which communities must endeavour to grapple. Those pressures are onerous upon the smaller companies and smaller businesses in constituencies such as mine.
    The Chancellor proposes to tax food to the tune of £125 million per annum. Here I am proud to disclose a special interest. For 19 years I have been employed in Rowntree Mackintosh, one of the most successful major confectionery companies in the country. My knowledge, interest and livelihood have been involved with the products of the industry. I regard the imposition of VAT on confectionery as extremely bad both in principle and in practice. I find the decision odd, especially when an assurance to the contrary was given as recently as last Thursday by the Paymaster-General in reply to a supplementary question asked by the hon. Member for Wolverhampton, North-East (Mrs. Short) with reference to VAT. The hon. Lady said:
    "I hope my hon. Friend will give an undertaking that it will not be introduced on food",
    to which the Paymaster-General replied:
    "I do not think that my hon. Friend need have any doubt about that."—[OFFICIAL REPORT, 21st March 1974; Vol. 870, c. 1315.]
    I am therefore surprised that, despite that assurance, a tax is to be imposed not
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    only on products of the confectionary industry but also on other products which are part of the nation's food consumption.
    It is also odd that the Chancellor should seek to differentiate between one kind of food and another, "the essentials", as he called them, and the less essential. It is even odder that tinned caviare should be exempt when a block of chocolate should be taxed. That is an interesting description by the Labour Party of what is essential and what is less essential.
    The main criterion of what is essential and what is less essential should surely be what the public consume. It is the widespread and frequent consumption by the public of products of this kind that leads them to be classified, correctly, as part of the total food budget of the average household. The lower income groups account for about half of the total expenditure on such products. Confectionery is the fourth largest contributor to the food price index. The tax on confectionery and on the other products that the Chancellor has seen fit to tax will add about 1·5 per cent. to the food price index at a time when the Government are anxious to reduce the price of food and to seek subsidies for that purpose.
    We have the interesting situation where the lovable potato is essential and may even justify protection, but if it is made edible in the form of potato crisps it becomes less essential and must be taxed. We have the humble bag of sugar, clearly essential, possibly deserving of subsidy, and we have the boiled sweet, clearly inessential and taxable. We have the lovely groundnut in its shell from the developing countries which Government supporters wish to develop further. That of course is acceptable, but the nut, according to the Financial Statement,
    "when packaged for human consumption"
    is inessential and must be taxed. On behalf of many millions of unfranchised consumers I wish to register my protest.
    I thank the House for its patience in listening to me. I know that the Budget has been introduced, as the Chancellor said, at a time of great difficulty when life is far from easy. It may be that life will become more in line with the words of the seventeenth century philosopher Thomas Hobbes and that it will be "nasty, brutish, and short". It

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    is just possible that that might be the epitaph of the Government opposite.
    6.40 p.m.
    Mr. John Stonehouse: We have just listened to two attractive and fluent maiden speeches, and I am sure that the House will wish to congratulate both speakers. The hon. Member for Pudsey (Mr. Shaw) spoke forcefully and attractively, and his constituents, particularly the children, will welcome what he said. We hope that he will bring to the House in future more controversy than he gave us today. Perhaps we shall hear about commodity dealing in cocoa futures, as he comes from a company that has, regrettably, had great experience of this.
    Mr. Giles Shaw: The record might also contain a reference to its massive success in recovering its position.
    Mr. Stonehouse: Yes, indeed. Those who enjoy a bar of Rowntree's chocolate will be glad that that is so. We look forward to hearing from the hon. Gentleman in future.
    My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) brought an interesting case to the House's attention. I congratulate him on the amount of research he has done, and I hope that my right hon. Friend the Secretary of State for Social Services will read his speech carefully before she makes her speech tomorrow. We look forward to hearing also from my hon. Friend in future debates.
    My right hon. Friend the Chancellor of the Exchequer deserves to be congratulated for concentrating on the essential priorities with which the Government have to deal following their accession to power. First, the Government have halted the frightening rise in the cost of food and rents, and have been able to put forward measures to halt the inflationary spiral. I hope that the Government will be able to prevent further price rises reaching the threshold, thus bringing automatic wage increases which will add to the inflationary spiral. My right hon. Friend may have acted fast enough to prevent that.
    Secondly, the Chancellor has raised pensions to £10 for a single person and £16 for a married couple, and that I welcome. In a debate some time ago
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    on television licence concessions I recommended those figures, and I am glad that they have been accepted. Incidentally, I am glad that the pensioners are to have a fair pension rather than payment in kind, which tends to relegate pensioners to second-class citizenship and to distort demand. It is much better for pensioners to get a fair pension which they can decide for themselves how to spend.
    Thirdly, the Chancellor of the Exchequer, by exempting 1½ million taxpayers from paying tax and spreading the tax burden fairly, has reduced the demand factor in the domestic economy by placing the tax burden on those who can best bear it. Reduction in demand is essential to reduce inflationary pressure and to reduce demand for luxury imports and make more home-produced goods available for export. It is on that export performance that we shall partly depend in meeting the enormous deficit of £4,000 million on our balance of payments this year.
    Half this gap is due to increased oil prices and will be covered by a recycling of oil countries' funds which they are not yet in a position to spend, but we must make efforts to reduce the other half of the deficit, otherwise we shall slip further into international debt, with all that that implies. It stands to reason that with those burdens the country cannot enjoy higher real standards this year, and I am glad that my right hon. Friend the Chancellor, both in his speech and by his actions, recognised that point—however unpopular it may be in the country.
    Fourthly, the Chancellor has begun the painful process of bringing sense to public sector pricing policy. It has long been nonsense that public industries have been subsidised by the taxpayer to provide cheap services and cheap products for the private sector. United Kingdom firms have had the advantage over their competitors of cheaper fuel, cheaper steel, cheaper transport and cheaper Post Office services—all at the expense of the taxpayer. These subsidies have tended to distort demand, and also have led to a grotesque waste of scarce resources. They have also made it more difficult for public industry to pay realistic wages, since the industry always had to go cap in hand to the Treasury rather than rely on its own ability to secure the means to pay the wages required.

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    The recent problems over miners' wages is a case in point, but so are the deplorably low wage rates in the postal services. The postal service is so badly remunerated that many postmen have to undertake two or even three jobs to make ends meet. In many areas, such as the West Midlands, it is impossible to recruit men to the postal service, which is now seriously undermanned, so much so that in the recent election many election addresses in the West Midlands area were not delivered until polling day. The postal service is continuing to deteriorate because of the complete failure of the Post Office to recruit the men it requires. The only way in which this can be done is by paying a decent wage for this essential job.
    The continuation of public subsidy makes it extremely difficult to achieve rationalisation and greater efficiency in these industries. For some boards the subsidy at the end of the financial period is a soft option, and if workers are underpaid they are unlikely to co-operate in removing the restrictive practices which undoubtedly exist in many undertakings, including the Post Office.
    Mr. Arthur Lewis: When my right hon. Friend was responsible for the Post Office did he not do away with that organisation as we once knew it and remove from hon. Members an opportunity to ask Questions on the Post Office? Has this not now been replaced by a reactionary board?
    Mr. Stonehouse: No. I do not agree with my hon. Friend that it is a reactionary board. The Post Office Corporation can be a vehicle for greater efficiency, which would not have been possible if the Post Office had continued to be run as a Department of State. When I was responsible for the Post Office I argued strongly for the business of the Post Office to be put on a rational basis, and I am glad that we made considerable progress in that direction. I believe that if the Labour Government can continue this process we shall be able to maintain a proper service in the Post Office and also afford to pay the men who work in it the sort of wages they are entitled to receive.
    Mr. Lewis: Will my right hon. Friend allow me to follow up that point? Does he not remember my arguing with him in this House that if the Post Office were
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    made independent hon. Members would lose day-to-day control on Post Office matters and any opportunity to argue their case in this House? Does he not agree that this is exactly what has happened—in other words, that we cannot argue on day-to-day matters affecting the Post Office?
    Mr. Stonehouse: No, but we can encourage the Chancellor in the direction in which he is going—namely, removing subsidies and enabling these corporations to stand on their own feet. However, I note that the subsidies in public authorities, despite the great reductions which have been achieved, will still stand at the high figure of £470 million for 1974–75. I hope that action will be possible in future years to reduce that figure.
    Having congratulated my right hon. Friend the Chancellor of the Exchequer on his excellent performance, I should like now to make two points of criticism. First, I wish to stress that no action has yet been taken to reduce the crippling interest rates for house purchase and to keep the building societies supplied with funds. Today we have seen a disturbing report that the Building Societies Association may increase the rate for house mortgages tomorrow to 13 per cent. This must not be allowed to happen, for its effect on hundreds of thousands of owner-occupiers would be disastrous. It would strike a severe blow at the hopes of young married couples who want to buy their own homes. For many mortgagees this new rate would mean an increase of about 3 per cent. On a £5,000 mortgage this would amount to an extra £3 per week. In some parts of the country it is impossibile to buy a house at under £10,000 and a mortgage at that rate would cost an additional £6 per week. What ordinary family can afford that amount?
    Action should be taken urgently to recycle the funds in the joint stock banks to building societies and municipalities. Banks for many years have given preferential rates of interest to exporters. In the special circumstances of high domestic interest rates caused by the need to attract funds from the international market these high rates provide windfall profits to the joint stock banks, and there is no reason why the banks should not give preferential rates of interest to house purchasers through the

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    building societies. It would be relatively simple for the Chancellor of the Exchequer to direct that a proportion of bank funds be transferred to building societies and municipalities at, say, 8 per cent. during this exceptional period of excessive interest rates.
    Finally, I regret that my right hon. Friend has not yet fixed a rate for sterling and has continued the floating of the pound. The Financial Statement contains disturbing figures which confirm what my right hon. Friend the Secretary of State for Trade outlined this afternoon about the floating downwards of the pound. This matter is set out in paragraph 23 on page 6 of the Financial Statement, and shows that the rate of devaluation in the first half of last year was fairly static at a range of 10 to 12 per cent., but that in June and July last there was a rapid fall and since July the effect of depreciation has remained in the range of 17 to 20 per cent. This rate of depreciation of the value of the pound in international markets is extremely frightening as it continues to increase the price of the raw materials that we must buy from abroad, including half our food.
    The $2,500 million that my right hon. Friend has borrowed—and I congratulate him on the way in which this has been arranged—plus the $3,500 million already borrowed by the municipalities and public authorities since the last Budget, and the other vast sums that we must borrow to bridge the deficit that we shall suffer this year and possibly next year, must all be repaid in foreign currencies. If the pound continues to float downwards because we have failed to take effective action to protect its value, and if it devalues by another 10 per cent. in the next year, this will greatly increase the burden that we shall bear as a country in repaying those loans, in addition to the interest that we have to pay on them.
    I believe that we are in a stronger position than we realise. My right hon. Friend the Secretary of State for Trade made the point that our export prices are too low. He is recommending to exporters that they should increase their prices. It would be much easier if we up-valued the pound. That would be a way of increasing our prices.
    Therefore we have the first point, if our prices are competitive. Second, we
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    have the point that the rate of inflation in other countries is as high as ours and might possibly be higher during the next year. Third, we can recognise as other countries do that the devaluation of the pound has gone too far and that the pound is now under-valued. Fourth, there is the point that in a few years' time the pound will be strengthened by the value of North Sea Oil which will begin to flow into our economy. For all those reasons, I think that it would be appropriate for my right hon. Friend the Chancellor of the Exchequer to take action to up-value the pound and to fix its parity, and so prevent the appalling drift that we have all seen in the past two years.
    Yesterday, my right hon. Friend made some reference to the Concorde. It is a subject which obviously will be returned to in debates in this House. But before we can return to it again we are to have my right hon. Friend the Secretary of State for Industry conducting very serious negotiations with French Ministers on Friday. For that reason, it might be appropriate if I were to say a word or two about it now.
    My right hon. Friend the Chancellor said that expenditure on the Concorde was now to be frozen. I welcome that statement. It must be recognised by the industry that there is not a bottomless purse. There is no possibility of infinite expenditure. But I hope that we shall not cancel the Concorde before it has gone into airline service. It must be possible without too much expenditure to put this great aircraft into supersonic civil service at least across the North Atlantic and to give it a fair chance of being evaluated before it is cancelled.
    The economics of the Concorde are a mystery. It is all very well for us to say that it will not pay its way. No one knows yet whether it will not be so attractive to travellers, especially those on long routes and possibly on the North Atlantic route, that they will not be prepared to pay an additional premium on the first-class fare and thus make it economic for airlines, despite their increased fuel costs, to pay an extra price for Concorde so enabling us at least to get back the production cost if not the development cost.
    Before we can make a judgment about the long-term value of the Concorde, it

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    is necessary for it to be in airline service for at least six or nine months. I hope that, without necessarily incurring a great deal of additional expenditure to that which has been permitted already, it may be possible for the Concorde to be put into airline service by BOAC and Air France so that we can see whether all the predictions of the aviation experts are correct. They have argued from within the companies concerned that when the air time on the North Atlantic is cut by half as against existing subsonic aircraft, there will be a tremendous additional demand for seats on supersonic aircraft which will be paid for in higher fares. If those predictions prove to be correct, there could still be a chance for the Concorde to be an economic project for France and for this country.
    7.0 p.m.
    Mr. Christopher Tugendhat: One of the pleasures of being in one's second Parliament is that it gives one the opportunity to hear maiden speakers and to compliment them on their contributions to our debates. I join the right hon. Member for Walsall, North (Mr. Stone-house) in complimenting sincerely the two maiden speakers who have spoken today. I thought that my hon. Friend the Member for Pudsey (Mr. Shaw) spoke with the elegance of that most distinguished son of his borough, Sir Leonard Hutton, when batting for England. The hon. Member for Ormskirk (Mr. Kilroy-Silk) introduced to our debate a subject with which many of us were unfamiliar but the importance of which none of us can doubt after listening to him. I am sure that the House will look forward to hearing both hon. Members on many future occasions.
    I shall not deal in any detailed way with the speech of the right hon. Member for Walsall, North, although I shall touch on a number of his points during my brief remarks.
    I want first to add my congratulations to those of many other hon. Members to the Chancellor of the Exchequer on his formidable speech yesterday, though I think that he was a trifle modest. He said at the beginning that he faced unusual difficulties, having been in office for only three weeks and with the economy in such a difficult state. I understand the right hon. Gentleman's position on both
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    counts. However, he faces other difficulties. One is the problem of his own Left wing and of others of his supporters in the Labour Party. Another is the problem of the TUC.
    Since coming to office, the Government have been clear and open about the TUC. Basically, what the TUC says, this Government do. We have seen that with its plans for the Industrial Relations Act, the Housing Finance Act, the subsidies, the tax changes and so forth. The Government have been very open, and we understand the position.
    What we are beginning to ask, however, is what the country is to get in return. By that I do not just mean what the leaders of the TUC will give—and I understand that they have been in Downing Street today. I mean also what the members of trade unions will provide. The Government have fulfilled massively all their pledges towards the social con tract. The time is rapidly approaching when the country will want to see what the trade unions will provide in return, and here a difficulty may arise.
    The Government have fulfilled to the letter, or are in the process of fulfilling, their side of the social contract. But all is not what it seems to be. When the TUC put forward its suggestions for food subsidies and so on, naturally it expected the Government to reduce the cost of living. In its recommendations to the Chancellor of the Exchequer, I do not believe that the TUC envisaged that one of the main results of the first Labour Budget would be to push up the retail price index.
    It is regrettable that the Chancellor of the Exchequer was not able to be a little more frank on the subject yesterday. It is a pity that the fact that the Budget will push prices up by some 2½ per cent. should have come out only on the second day of the Budget debate and without the explanation of the whys and wherefores which the right hon. Gentleman could have given when making his speech. I have no doubt that he will provide them and explain that the impact of the subsidies to reduce prices will take effect before the impact of the other measures to increase prices, although that may lead some suspicious people to suppose that in the interval between the depressing effect on the retail

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    price index of the subsidies and the upward effect on prices of the other measures, a General Election may intervene.
    Be that as it may, the country will not be fooled by glossing over the salient facts in the situation. I hope that the Government, when they have bad as well as good news, will make an effort to take the country into their confidence from the outset so that facts of the kind that have come to light today come out not after a Minister has made his speech but at the time that he makes it.
    There are a number of other factors on which the House will want more information. My right hon. Friend the Member for Carshalton (Mr. Carr), the Shadow Chancellor of the Exchequer, referred to the lack of information about the Government's forecasts for both economic growth and earnings. There are also some other points.
    Yesterday the Chancellor told us about the loan, but we have not heard much, as yet, about the terms and conditions and, above all, the cost. Nor have we been told about the precise purpose of the loan. It is a substantial loan. Presumably, given the level of our balance of payments deficit, the loan will not cover everything up until the time that the North Sea begins to yield its riches. No doubt the Government will seek further financial assistance during the year by turning to the International Monetary Fund, the Euro-markets and ultimately the Arabs. All this is vital and germane to the way that the economy is managed. Therefore, the House is entitled to ask what the implications will be for interest rates and, of course, for the exchange rate.
    The comments made by the right hon. Member for Walsall, North about the exchange rate were most interesting. I do not know whether they reflect the Government's views. Given the enormous weight of borrowing that the Government will have to undertake, it is important that the House be given rather more information than it has yet received on how the Government see interest rates moving and on their intentions towards the exchange rate.
    I want to deal with only one other aspect of the Chancellor's speech—
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    namely, the impact of the Budget on the corporate sector. I cannot stress too strongly that there are grave grounds for concern about the level of investment in British industry and the future prospects of employment.
    It is no answer for Ministers, when these matters are raised, to pour scorn on the last Government's record. The figures are there for all to see. I agree that the previous Government's record on industrial investment was far from good. Now that the new Ministers are in their places perhaps they will tell us what they propose to do to get investment up. What they have started doing is most unlikely to achieve the result that we all desire. They have already increased taxes on the corporate sector, they are accelerating the rate at which companies must pay their taxes, and they have imposed on companies the additional burden of higher national insurance contributions.
    Yesterday the Chancellor seemed to suggest that the corporate sector was doing very well, that companies had very high profits, and that they could afford to give up a bit for the general good. But, looking at the Financial Statement and Budget Report produced yesterday by the Financial Secretary to the Treasury, whom I congratulate on assuming his great office, we see that the position of the corporate sector is by no means as strikingly good as the Chancellor would have us believe. The Financial Statement shows that, deducting stock appreciation, the rate of increase in profits during the last calendar year was about the same as wages. Although the rate of increase in wages was quite high in terms of percentages, hon. Members on both sides of the House will know that high percentage figures at a time of rapid inflation do not necessarily mean that we are better off. What is true for wage earners is also true for companies.
    Since the end of the last calendar year the corporate sector has suffered two major blows—the three-day week, of which we have heard a great deal, and the very tight price control that the Government have introduced.
    Without going into the particular merits of either the three-day week or the very tight price control, I believe that hon. Members on both sides of the House will agree that the combination of those two factors must have a depressing effect

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    on corporate profits. Indeed, during the last calendar year we see that profits, as a share of the GNP, fell from 11·5 per cent. in the first quarter to 9·2 per cent. in the final quarter. Therefore, before these two hammer blows to which I have referred, the rate of increase in profits was falling, and profits, as a share of the gross national product, were also falling. The danger, even before the Chancellor's statement yesterday, was not of industrial profits rising too much, not of investment outstripping our expectations, but of the private sector running into a liquidity crisis.
    I think it would be agreed by hon. Members on both sides of the House and by all Governments that have been in power since the war that it is vital for the British economy to achieve a more rapid rate of growth and for British industry to achieve a greater degree of investment. This is important if we are to secure all the various political and social objectives that we all wish to see. It is also necessary if we are to get Britain's economy back on to a sound footing and to ensure that we have full employment. When investment falls, in the end employment is damaged. There is no escape from that situation, and there is no easy answer either.
    The Government have made it clear that they will pursue a tight credit policy and will not allow the money supply to run riot. They propose to adopt a reasonably stringent credit policy so that there will be no chance of the corporate sector going to the banks to be bailed out or going to the Government for financial assistance. Therefore, I hope that the Government will make clear what precise measures they believe are necessary to keep industrial investment up and to get a better rate of industrial investment in the next few years than we have had in the past. If they believe that no measures are necessary, I should like Ministers to explain how the measures introduced in this Budget will prevent the kind of decline in industrial development which could ruin the Government's plans in other areas.
    7.14 p.m.
    Mr. William Baxter: I get the impression from listening to the debate, reading the newspapers, listening to the wireless or watching tele-
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    vision, that there is not the sense of urgency or seriousness that should be given to the general public concerning our economic situation. An impression is created that this is just another Budget in the scheme of things, fundamentally changing very little—a Budget typical of Budgets in the past, without much in the way of ideas or new concepts of where this country will go, not in the far distant future but in the near future.
    We have heard two ex-Ministers, the previous Chancellor of the Exchequer and his Shadow from the opposite Front Bench. The Chancellor of the Exchequer spoke at great length. When one boils down the content of his speech, however, it can be summarised as "cald Kale het again". That, to use a Scottish phrase, is something that has been done before and is being boiled up again. The Shadow Chancellor made much the same type of speech that one would have expected had he and my right hon. Friend reversed positions.
    My right hon. Friend's Budget has been described in various ways, but I say categorically that I look upon this as a Budget of lost opportunities at a time when we cannot afford to lose any honest opportunities that present themselves. A concession has been given to old-age pensioners, and everybody welcomes this. But, as I have said on previous occasions in this House, it is a calamity that old-age pensions and old-age pensioners should be the playthings of party politics. I should have thought that we could at least have had common agreement on both sides of the House that a scheme should be devised whereby old-age pensions would be based on a different concept from that of the past, upon factors mentioned by the Leader of the Liberal Party earlier this evening, and attached either to the cost of living or to a new basic wage concept.
    Unfortunately, we have not done this. We have to review the old-age pension every year. The Conservative Government said that they would review it every six months. I do not know whether they would have given more or less, but I think it is a shame that we cannot get this simple question out of the ambit of party politics. If we were to adopt the scheme which I am submitting for consideration, whereby proper pensions became the right of the individual, based

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    upon either a basic minimum wage or a cost-of-living basis, we should be making progress.
    Mr. Arthur Lewis: I agree entirely with what my hon. Friend is saying. Unfortunately, it is the Treasury and the Treasury knights who dictate terms, Irrespective of who occupies the Government Front Bench. He should know as well as anyone, because he, with all Members of Parliament, is very shabbily treated with respect to pensions because both Front Benches are scared to stand up to the Treasury knights.
    Mr. Baxter: I do not know the workings of the Treasury. I have never been given the opportunity to stand up to the Treasury knights, and it is unlikely that I shall get the opportunity to do so in the immediate future. But I agree with my hon. Friend in that respect, because I believe that no greater opportunity presents itself to a politician than to be a Minister of the Crown and make his mark upon the future well-being of his country. No greater honour can befall a man.
    I regret, however, that the past achievements of the Chancellor of the Exchequer and of the hon. Member for Carshalton (Mr. Carr) are not very inspiring and do not cause me to feel that they are well able to devise a proper Budget for this country in the future. The mistakes they have made in the past are many and varied. But I will not rake over the dead past tonight in that respect.
    I come now to the idea of subsidies. This seems to be a popular craze in this country. Everything should be subsidised. This is the cure-all of our diseases. I think it is the worst method that can be adopted to try to solve our problems. I say that quite categorically. If we were sensible, we should endeavour to devise a new scheme, a new approach, that would obviate the necessity for those able to pay a high and competitive price to obtain any subsidy.
    The Chancellor should have considered arranging for the subsidy to go to the people who need it, not also to those who do not require it. I can think of only one method, and I respectfully suggest it for consideration.
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    There must be a minimum income based on research into the requirements of each man, woman and child and having regard to all subsidies now being paid. That minimum wage, irrespective of the amount, should be paid to individuals at their places of their employment—at the factories and workshops. That is where any necessary subsidy should be paid.
    If an industry had to pay higher wages to meet current requirements without a subsidy, because of circumstances out-with the employer's control, the Government might have to pay a temporary subsidy until the employer was able to adjust prices and profit margins. A minimum wage would wipe out once and for all the need for subsidy, whether on bread, milk, rents for council houses, or anything else. All those items should be catered for in the minimum wage, and thence we could progress.
    How are we to overcome the extra tax that has been imposed upon industry—corporation tax at the new rate of 52 per cent.? I interjected this afternoon to point out that the previous Chancellor of the Exchequer in his first Budget made a fundamental mistake. I do not know the details of the Finance Bill, but it appears that the present Chancellor will perpetuate that mistake. Anyone in business, as I am, knows that it is fundamentally wrong to impose a lower tax on distributed profits than on retained profits. That is exactly the position now.
    If one retains profits in one's business for the purpose of re-equipping it, rebuilding or expansion, more tax is paid than if the profits are passed to the shareholders. That is wrong. We need to reequip our industries, so that we may compete with Germany, France, Italy, Japan and America where there is a different concept of industrial activity and a different basis for equipping industry. This is due to the circumstances following the destruction during the last war.
    Many of our industries have been left behind, because they do not have the best possible machine tools that are required to produce goods to compete against those countries. There are other factors, too, which militate against our competing with those countries—for instance, the different trade union set-up in Germany, and the different family concept of business activities in Japan. We should bear

    541
    that in mind, and also the fact that many of our businesses are ill equipped to meet present-day requirements.
    The Chancellor of the Exchequer yesterday introduced another measure which will be detrimental to the expansion of business in this country, namely, the increase of rail freight charges by 15 per cent. This is a State-owned enterprise. It is the only enterprise that I know of that was subsidised after the General Agreement on Tariffs and Trade came into force, although that agreement prohibits the subsidisation of industries that had not been subsidised before its introduction.
    If the Government want to help British industry, instead of increasing freight charges by 15 per cent. they should reduce them almost to nil. In that way they would not violate the terms of the General Agreement on Tariffs and Trade. The previous Labour Government, thinking that they could evade the terms of the General Agreement on Tariffs and Trade, introduced selective employment tax. It was not a success, and now the Government are adding to the already considerable problems of industry by increasing freight charges.
    So far as Scotland is concerned, the Government are doing another rather foolish thing by increasing the tax on whisky. The tax burden on the whisky industry is already extremely high. By further increasing this tax, whisky will be put at a disadvantage in competing with other beverages such as brandy, vodka, rum and so on, in world markets in the not-too-far-distant future. Let us not underestimate the value of our whisky exports. Without them, we should be in considerable difficulty.
    I have argued that when speaking in the House one has a duty to make suggestions. I have tried to make one or two, but there is another suggestion that is worthy of consideration. The Chancellor should have stated quite clearly that he will set up a Royal Commission, composed principally of Members of Parliament from either side, together with representatives of the trade union movement and the Confederation of British Industries, in order to try to get general agreement on the vexed question of prices and incomes. It could be asked to produce a plan of differentials in trades and professions on a broad basis. Considera-
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    tion should be given to ways whereby management and directors could be placed into various categories depending upon the size and turnover of their businesses. The commission could be asked to find ways and means of encouraging investment on a broader basis of share ownership.
    It is imperative—not a popular thing to be said from this side of the House—that every business, be it private or nationalised, should maximise profits as a first duty. It is from those profits that the social services to which we all pay lip service flow. There is no doubt about that, and if we do not realise that the goose that lays the golden egg is industry we shall head for a complete breakdown.
    The Royal Commission should consider not only the matters that I have suggested, but four others. First, it should consider how the profits of industry should be shared out. It is not sufficient to leave it to the directors of businesses to decide. The first share of any profit should go to industry itself, to enable it to expand or provide more jobs, and to help the export industry. The next portion of profits should go to the Government, to meet the requirement of the social services and other such matters.
    The third part should go to the employees, not only the men on the shop floor, but management and directors. All should receive a share of the profits. The fourth part should go to the investor. He is an important factor in industry. People must be encouraged to save and, if at all possible, to put their savings into industry.
    Many of my hon. Friends believe that industry is owned solely by small or large private investors. In fact, they are the least of the investors in industry. Insurance companies, pension funds and various other organisations are the major shareholders in industry, and if we do not recognise that we shall make a fundamental mistake. We shall not progress, but shall speedily go down the hill as a great industrial nation.
    We talk about the control of prices in the shops. I do not believe that we have the right method for controlling prices. The hon. Member for Pudsey (Mr. Shaw), who made his maiden speech a few minutes ago, struck the nail on the

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    head when he talked about the commodity market with regard to cocoa. The Government should this week have declared that their first aim and object was to try to bring about a greater degree of control in the commodity markets of this country.
    I believe that the present arrangement is very much a gambler's paradise. Rowntree's is a good example of where one can lose, but there are other examples of where one can win. One only has to look at the price of copper, lead, tin, cocoa, wheat and various other items to appreciate the fluctuations in the commodity markets. Many fortunes are being made there.
    As an example of how to proceed, one could look at Russia or America—the two extremes. What did Russia do last year? Last year the Russians had a commodity buying commission that went to America and bought the surplus wheat there at a very low price. That had a considerable indirect effect on the increased price of bread in this country. If we had had a commodity buying commission, we could have done exactly the same thing.
    In their metal market, the American Government keep considerable stocks of copper and other commodities. They release those on to the market as and when they find it suitable to their own requirements to do so. It is my opinion that the way to control prices in the shops or factories in this country is by having more control through a commission or several commissions looking after the whole commodity market. I should have thought that the Government might at least have looked at this matter and introduced a scheme in the not-far-distant future.
    We do not fertilise or cull a tree by clipping off the branches: we get at the root. The control of prices does not lie in the branches, that is, the shops, but at the roots, namely, in our commodity markets. I suggest that that matter needs looking into, because commodity market activities have been going on in the same way for, I believe, the past 200 years, or so. I submit that the method that I have suggested would be a way of controlling prices.
    Over the years, we have spent a considerable sum of money in various ways
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    to help industry to expand. But the great calamity of that is that as a Parliament we have not asked for any balance sheet covering that expenditure. We have spent millions upon millions of pounds subdising Scotland, the North-East, Wales and other parts of the country, but never once has Parliament asked for a balance sheet. Was that money well spent in the industries concerned?
    I make bold to say that if the Government were doing their job properly, irrespective of their political complexion, they would have asked for a three-year production of each factory to see whether a factory was profitable. If the factories were not profitable after the money that Parliament had spent on them, it would be our responsibility to ask why. If the reasons were not satisfactory, after so much public money had been put into them, we should take action to see that new management was installed to bring them up to profitability.
    The future does not look bright to me, because there have been no fundamental suggestions about how we are to get over our balance of payments deficit, excluding oil. We can forget about oil for the time being. No suggestions have been put before us to rectify this wrong. All that has been done is that a greater problem and a greater responsibility have been placed upon industry, and industry will find it difficult to carry. That may have a detrimental effect on the country's future well being.
    I know that the Chancellor said that once the oil that will flow from the North Sea starts coming in, everything in the garden will be more or less lovely.
    The Financial Secretary to the Treasury (Dr. John Gilbert): Where did he say that?
    Mr. Baxter: I quote what he said:
    "We have at least one advantage to look forward to. Before too long, we shall have our own oil supplies from the North and Celtic Seas. We must not imagine that this oil will be the answer to all our problems."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 288–9.]
    But my right hon. Friend seems to imply that he can depend upon it considerably to help solve our problems. I should not have looked at it in that light at all. It should be a bonus to any Government or any country, not a way to

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    bolster up maladministration or bad husbandry. That is what has been going on since the end of the last war, and unless it is rectified in the not far distant future, we shall leave a terrible heritage to our people.
    The oil found in the North Sea was put there not by a Scotsman or an Englishman. It was put there millions of years ago, and I presume to suggest that a Labour Government ought not to advocate that that oil should be used entirely for the benefit of Scotland, England or Great Britain. It should be regarded as the responsibility of the United Nations, along with other minerals throughout the world, to be used not for the benefit of one nation or group but for the benefit of the human race as a whole.
    What I condemn the Chancellor for in this Budget is that there is no imagination or plan in it that will give to this country hope that in the future we shall become what we should be able to become if only we had the will to do it—one of the great industrial nations of the world.
    7.42 p.m.
    Mr. Nick Budgen: I am most grateful to you, Mr. Deputy Speaker, for giving me this opportunity to catch your eye, and I appreciate that it is, most of all, a compliment to my distinguished predecessor at Wolverhampton, South-West, Mr. Enoch Powell. It is, indeed, appropriate that I should be able to pay tribute to him on the occasion of the Budget debate.
    I have had a unique relationship with Mr. Enoch Powell. I start by being the grandson of the person who baptised John Enoch Powell. I began my political career, and underwent my most formative experiences, as the Conservative candidate at Birmingham, Small Heath, in the period before the 1970 General Election. I am sure that hon. Members will remember that the party of which I am proud to be a member was somewhat divided in its views about immigration and race relations, and Mr. Powell put forward views which were certainly extremely popular in the West Midlands in those years before the 1970 General Election.
    I adhered to the views of the majority of my party. I believed those views to be
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    right, honourable and civilised, and I spent a great deal of my time over two and a half years in trying to persuade the people of Birmingham, Small Heath that the views of the majority of my party should be preferred to those of Mr. Powell.
    Again, I had a unique relationship with Mr. Powell at the recent General Election. There was I, a Tory, taking over from a Tory in what I had understood was a safe Tory seat, and I naturally assumed that he would give me his support. But no; he voted for my Labour opponent and, indeed, invited his former constituents to do the same.
    But now is not the moment for me to comment upon Mr. Powell's recent actions. Let me say that nothing gives me greater pleasure than to pay a tribute to Mr. Enoch Powell in the House that he loved, and still loves, so passionately. When historians write about the 1960s and 1970s, I am sure they will point to Mr. Powell as one of the great Tory philosophers of our time. I am sure all hon. Members will agree with me that his going is a real loss to the whole House, and I know that he will be recognised as one of the great parliamentarians of our time.
    Hon. Members will recognise Mr. Powell also as a man of compassion. They will remember his great speech on the Hola camp. They will remember his practical compassion when, as Minister of Health, he struggled to make the National Health Service more responsive to the needs and the wishes of the people as a whole. We remember his great courage in resigning in 1958. Let it never be forgotten that that was not an easy resignation, and it brought great sacrifices upon him.
    But most of all, I suppose, we shall remember him as the great back bencher. Many of us who come into this House for the first time look round and see the great machines. Partly we regard them as machines to help us, but we regard them also as machines which may envelop us. We wonder what contribution we can make to this great Parliament. The example of Mr. Enoch Powell must be an inspiration to us all. By his courage, passion, industry and eloquence he was so often the David who took on the Goliaths of the great machines and won.

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    It did not stop there. Everybody I have met in Wolverhampton has told me of the work that Mr. Powell did as a constituency Member. He brought industry, compassion and understanding to ordinary people's problems. Perhaps I can best illustrate what a splendid constituency Member he was by referring to the way in which his tiny majority was built up to bigger and bigger majorities with each successive General Election throughout the 24 years in which he represented Wolverhampton, South-West.
    I turn now to my constituency of Wolverhampton, South-West. Wolverhampton is not a large town, and it is fortunate in that there are no great areas of monotonous one-class housing. It is an area of small businesses. It is an area which has enjoyed considerable prosperity, and for me the most exciting characteristic of Wolverhampton is that the Tories draw their support from no one section of the community. To go to Wolverhampton, South-West is to be constantly reminded that the Tory Party is a national party or it is nothing.
    The great characteristic of the people of Wolverhampton, South-West is their independence. They do not expect to agree with their Member of Parliament in everything. Indeed, sometimes they hardly expect to agree with him at all. They ask only that he should say what he believes, and that he should say it as well as he can. Wolverhampton, South-West is a constituency of which Burke would have been proud.
    I turn now to the Budget. In general, I am grateful that the Chancellor has reduced the Budget deficit. I wish that he had reduced it more. The vast Budget deficits of 1972 and 1973 were at least a major cause, if not the only cause, of the inflation which has occurred in recent years and which, so unhappily, cost us the last General Election.
    I was disappointed by some of the Chancellor's statements in his Budget speech. When I looked at some of the statements that he made before the General Election, I believed that he had rejected the theory that one could make yet another dash for growth. But when I look at what he describes as the four crucial principles upon which he relies,
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    it is with real disappointment that I see that the first is described—this is col. 290 of the OFFICIAL REPORT—as the need to make the fullest possible use of all resources available.
    I accept that such a principle is an important objective in the management of the economy, but I do not agree that it should be the primary objective in the management of the economy. The lesson of the 1970 General Election, when the Tories obtained power by complaining against a 5 per cent. inflation, and the lesson of the 1974 General Election, when the Tories lost power because of a 10 per cent. inflation, is that above all else this country, this nation, is saying "Do nothing else but contain inflation".
    That is the crucial issue today, and almost nothing else matters so much. I reject making that the primary principle, most of all because I believe that, stated in a moderate way, that was the principle behind the dash for growth which, as I indicated earlier, I believed was so disastrous to the former administration.
    Why do I have this obsession about inflation? I have it because I regard it as the very canker that is not merely killing our economy but crushing our way of life. Inflation is not merely an economic disaster; it is a social disaster. The tragedy of inflation is that it redistributes wealth, not as Labour Members would wish to redistribute wealth, in a democratic way by taxation, which can be constantly argued against, but in an arbitrary way. Inflation redistributes wealth in favour of the rich and against the poor. It redistributes wealth in favour of those who are well organised in their work and against those who are ill organised. It does it most of all against the poor and the underprivileged.
    It is my firm belief that the message which came out of the General Elections of 1970 and 1974 was not that this nation rejected capitalism, although I accept that the capitalist system may be marginally unfair. What the nation did in 1970 and 1974 was to reject inflation as being the thing that is most grossly unfair above all else in our community.
    If the Labour Party does not have the courage to become the party of sound money, it will lose a great opportunity and a great advantage. I hope that that opportunity will eventually be taken up

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    by my party and I believe that when we return to our traditional role as the party of sound money a great electoral prize will be ours.
    In the meantime I criticise the Chancellor's speech because he said so little about his view of inflation. What does he believe to be the cause of inflation? What rôle does he believe that a prices and incomes policy has? What are his plans for public expenditure? How much does lie believe that the supply of money should rise? None of these questions has been fully or properly answered. The nation, which has voted against inflation more than anything else, is entitled to know.
    I believe that already the nation knows that it is inflation which will kill not merely our economy but, most of all, our national characteristics. We already have almost Latin-American rates of inflation. If these rates of inflation accelerate into Weimar rates of inflation, our whole national character will be at risk. Our character will change as the German character changed. Where there was once compassion and cohesion, there will be wild desperation and there will be horrible envy.
    7.55 p.m.
    Mr. John Lee: It is a particular pleasure, for two reasons, to follow the hon. Member for Wolverhampton, South-West (Mr. Budgen). The first is that I am now a fellow Midland Member, my constituency being only a few miles away from his. The second is that he is a professional colleague of mine. I have known him over a number of years when we have been against each other, or, let us say, sometimes in the same court in the performance of other duties. If the hon. Member felt any qualms about stepping into the capacious shoes of his illustrious predecessor, he certainly showed a measure of eloquence of which his predecessor would undoubtedly have approved.
    The hon. Member also expressed a number of sentiments about the right hon. Gentleman who has since departed the House—perhaps temporarily—with some of which, I think, we on this side would also agree. Certainly Mr. Enoch Powell must be rated as one of the ablest parliamentarians of this century.
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    To do what he did—I know that it is easy for people on this side to say so—took a remarkable measure of courage. Perhaps I may, more tendentiously, say that what he did in the General Election was to make some of his supporters make a choice between greed and patriotism. What they chose is a matter, perhaps, on which I will not further comment. It would be surprising, however, if it did not have some effect upon the outcome of the General Election.
    Most hon. Members have poured praise upon my right hon. Friend the Chancellor of the Exchequer for the intellectual stamina of the action he has taken. Those praises are none the less appropriate for being repetitive. Indeed my right hon. Friend has a formidable task to undertake, and if he had been told on 1st February that he would find himself coping with this situation on 26th March he probably would not have believed it, such was the speed at which events took place. If, therefore, I make any criticisms of the Budget, and I shall make some, they will not be in a churlish spirit but in a spirit of no more than gentle admonition.
    There are, of course, a number of admirable aspects of the Budget. We have already had references to the pension increase. There has been no reference, surprisingly, to the relaxation of the earnings rule—a minor attribute of social justice long overdue—or to the fact that mortgage interest relief is to be confined to one house only, thereby stopping a particular type of racket. I remember hearing the Plaid Cymru hon. Member for Caernarvon (Mr. Wigley) whooping with joy yesterday. I think that his pleasure was echoed on this side of the House. The fact that there is a relief of a very large number of taxpayers also commends itself to this side too.
    I take issue with my hon. Friend the Member for West Stirlingshire (Mr. Baxter) on his reference to the subsidies. I should have thought there was a case for a much larger measure of subsidies, even at the cost of a much tougher rate of taxation.
    At the opposite end of the spectrum from myself, Mr. Enoch Powell, with his usual robustness, referred to the need for heavy taxation. There is a strong,

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    arguable case for that, certainly if that were needed to provide subsidies on a scale that could make a dramatic reversal in the inflationary situation, to which the hon. Member for Wolverhampton, South-West has referred.
    In a minor key the Chancellor is to be commended for conceding that sometimes the Inland Revenue gets its sums wrong and over-claims, and he is providing for some measure of compensation for people who find themselves the victims of over-assessment. It is a minor matter, but I was in the House a few years ago and some of us have had to take up the cudgels from time to time on behalf of rightly outraged taxpayers who found that their local inspectors had gone wrong at their expense.
    Having said a number of things in praise, I turn now to one or two criticisms. The right hon. Member for Devon, North (Mr. Thorpe) referred to the borrowing situation. I am afraid that the prospect of a very large borrowing disturbs me. With disagreeable memories of some of the things which happened attendant upon borrowings in the period 1966–70, some of us would like to know what strings are attached. The last time it was deemed necessary that there should be a large measure of borrowing, certainly the bankers demanded their price in deflation. I hope that that will not be repeated this time.
    I heard no reference in the Chancellor's speech to the second- and third-line reserves. I hope that it will strengthen the hand of Treasury Ministers if they are reminded that, in spite of all the difficulties through which the country has gone over the last few years—indeed, all the years since the war—the overseas assets of this country are very considerable, that the overseas portfolio investrnents, for example, still stand at £7,800 million, and that the total identifiable assets, according to the latest figures which I have computed, run to a grand total of £27,000 million, which is a very considerable measure indeed.
    I hope, therefore, that when Ministers have been negotiating on the terms of loans they have not approached their bankers in too abject a spirit, because our assets are still considerable and our bargaining power is not as bad as it may
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    sometimes be supposed. If it should transpire that the terms of the loans are to be oppressive in any way, there will be some rumbles of discontent from the Left of the party, just as there were between 1966 and 1970, and I shall be among those who will do some of the rumbling.
    Another aspect is that the defence economies are minimal. It is no good anyone saying that defence is an overriding consideration and that ordinary economic rules must be waived because defence is important. If that argument were ever tenable—it has not been so for many years—it had already been conceded in any event by the concessions made by the Conservative Party. I find it ironical that the economies made by the outgoing administration in this matter despite their military lobby, exceed considerably the economies that are now proposed. I should like to see a total figure of not less than £500 million and not £228 million plus £50 million, which is what we have at present.
    The right hon. Member for Devon, North thought that the property tax proposals were inadequate. Indeed they are, and I wish to see something much more drastic. Perhaps my hon. Friend the Chief Secretary will tell me whether I have got it wrong but, as I understand it, taking the notorious case of Centre Point, if only a few lettings were made of some of that very large structure—that monument to the unacceptable face of capitalism, if ever there was one—that would be sufficient in itself to exempt that property from the taxes which are proposed. If I am right about that, clearly they are not adequate. If it is so, in this instance I would gladly adopt the Liberal Party's proposal of a site value tax, at any rate as a holding measure before we can get down to the real job of nationalising land.
    My right hon. Friend the Chancellor referred to the anomalies that had existed with regard to the portfolio investment and the payment of 25 per cent., and he saw no justification for distinguishing between sterling and non-sterling areas. That was right. But what I cannot understand is why the figure of 25 per cent. is considered to be immutable. It has stood for a number of years. I should have thought that there was a case for increasing the amount which has to

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    be paid in as a result of disinvestment. One would have thought that 33⅓ per cent. would be appropriate and that possibly there might be a case for increasing it to as much as 50 per cent.
    I want to refer to something else of a rather technical nature. Referring to the now notorious Lonrho business, the Chancellor made a number of proposals to change the basis of the taxation of income arising from abroad. He was right to do so. As I understand it—I hope I have got it right—90 per cent. of income arising from overseas employment becomes liable to be taxed, in the case of persons who are resident in this country. Is there to be a tightening up of the concept of residence? As the law stands, it seems, the Treasury has considerable discretion, which it is not loth to exercise, to waive the conditions of residence.
    As a normal rule, the situation is that if one is physically present in this country for a period of six months in any one fiscal year, prima facie one is resident for the purposes of taxation. But the Treasury grants concessions of one kind or another. Are those concessions to be more carefully examined? It would certainly stultify the change in some measure if that were not to be done.
    As a concomitant factor, Section 181 of the Finance Act 1970 as I understand it does not empower Ministers to inquire into income gained from employment wholly carried out abroad by a United Kingdom resident. If that is still the situation, it will not be very easy for the tax inspectors to find out exactly how much income is available and, therefore, how much is the total from which a 90 per cent. assessment ought to be made. Perhaps this is a fairly simple matter which can be put right, and it may be that my right hon. Friend has that in mind for an appropriate amendment to the Finance Bill when this is produced. It is certainly something that he should bear in mind.
    My final question with regard to this aspect of the Budget is this. Have we really dealt with the Cayman Islands situation anyway? As I understand it, the sort of payments made wholly abroad to some tax haven in respect of United Kingdom residents are in themselves illegal in any case. One of the things
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    which I can never understand about the whole Lonhro scandal is why no one was ever prosecuted in this matter.
    Mr. Arthur Lewis: They were probably Tories.
    Mr. Lee: The Inland Revenue has its own legal department. What was it doing when this matter blew up? I hope that such a situation will not be repeated. If necessary, the law should be changed to prevent such scandals.
    I regret that the emergency powers have been rescinded. One advantage which the Government acquired—in contrast with the situation in October 1964 but in parallel with what happened in 1945, when the wartime Supplies and Services Acts were in force and a system of non-convertibility of sterling was extant—was that we could use the emergency powers. I appreciate that they were brought in for other reasons, because the previous Government had made a terrible mess of the industrial situation and were unable to govern without emergency powers. But the fact that the powers were being used for other purposes does not mean that we should not have taken advantage of the situation and applied the powers for our own use.
    Since the Government took office, the City has so far behaved quite well. This is in contrast with the disgraceful happenings of November 1964, when the City went bear on sterling. We wondered whether the Government of the fourteenth Earl of Home had been taken over by the third Earl of Cromer. This time there has so far been no repetition of that. However, one cannot be sure that, if the going becomes hard, there will not be a repetition. If there is, I hope that the Government will not hesitate to use emergency powers to block convertibility of sterling.
    I turn to another matter which has not so far been referred to in the debate. It is probably the view of both sides of the House that there has been a lamentable growth in corruption in public life, mainly in local government and principally confined to the North of England. Some of the matters involved are awaiting the outcome of criminal trials and therefore it would not be right to refer to them in detail. I hope, however, that we shall have much greater stringency regarding

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    financial transactions in that curious twilight situation in which Government Departments and contractors meet. One tended to assume in the past—perhaps a little too complacently—that the British Civil Service was above corruption. Unhappily, in one or two instances at least, that has not proved to be so and in local government it has proved to be a long way from being so. I hope that there will be a tightening up of standards.
    The Guardian, which is not notorious for complete accuracy in all matters, has reported that there has been a loss through tax evasion—another facet of the declining standards in public life—of something like £1,000 million. I believe that that is an over-estimate. Indeed, I suspect it is a considerable over-estimate. But I suspect that the total figure, if it could be assessed—by the nature of the matter one cannot easily, if at all, establish it—is considerable.
    I do not want the Inland Revenue to behave like a pack of McCarthyites, but I want to see a tightening up in these matters. It is not only a question of the recovery of much-needed revenue, but, as my right hon. Friend the Chancellor said in another context yesterday, nothing can be more offensive to people who are taxed on the pay-as-you-earn basis—with no chance of evasion or even negotiation or delay in payment of tax—to suspect, possibly with good foundation, that there are other people, not always necessarily better off, though in many instances that would be so, who are able to get away with it on, possibly, a considerable scale. If that situation were put right it would help promote a better industrial climate, because unless we can redeem the appalling industrial situation inherited by the Government, no economic policy can hope to succeed.
    8.16 p.m.
    Mr. Ian Stewart: I am grateful for being called to speak in the debate. I come to the House as the first Conservative Member for the Hitchin division for 10 years. I have a considerable sense of responsibility, for two principal reasons. The first is that my immediate predecessor set such a high standard of service to her constituency. She is now the right hon. Member for Hertford and
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    Stevenage (Mrs. Williams), but over the previous 10 years she achieved a great reputation, quite rightly, for the attention she gave to the affairs of her constituency and the problems of individual constituents.
    I shall do my best to maintain the high standard which she set and which had, in turn, been set before her by the late Member for Hove who previously represented my division.
    Secondly, I am concerned with the great diversity of my constituency. As well as the town of Hitchin, which gives the name, for historical reasons, to the division, it includes two other market towns, Baldock and Royston, the first garden city in the world, Letchworth, and 150 square miles of beautiful agricultural land in the north of Hertfordshire.
    I thought for a few days after 1st March, on the evidence of my postbag, that the towns of North Hertfordshire were populated solely by Government scientists and that the population of the rural areas consisted entirely of pig farmers and horticulturists. I know from other experience that this is not completely so.
    However, it would have been difficult for the Chancellor of the Exchequer, in framing the Budget, not to have profoundly affected at least some of my constituents, because of the diversity of my constituency. Yet it is not the fiscal aspects of the Budget over which my constituents have most anxiety. The Chancellor said—as had already been announced by his right hon. Friend the Secretary of State for Trade—that the future of the Maplin project was under review and that no financial provision would be made in the public expenditure plans for further work on this project during the period of the review.
    It is a matter for great anxiety that with, on one side. the adjacent airport of Luton and, on the other side, the massively expanded new town of Stevenage, the possibility of cancellation of a project of Maplin's magnitude would both raise serious problems in planning the extension of regional airports, including Luton, and also create a need for a large amount of further housing land in this part of the South-East, from which I doubt whether Harlow or Stevenage could escape. On this point, therefore, my

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    services on behalf of my constituents may be needed sooner than on any of the fisal aspects in the Budget.
    One matter that I should mention with the greatest possible approval, however, is the proposal that essential aids for the disabled, including invalid chairs, should be zero-rated for VAT. This is a measure which will have widespread approval in the House and the country and I warmly congratulate the Chancellor on having introduced it. I have in my postbag a letter written before the Budget relating to this point but also extending it. If I had sufficient knowledge already to master the procedures of asking parliamentary Questions of the right Minister on the right occasion, I should probably have saved it, but since it is a matter of urgency, I hope that the House will give me its indulgence if I raise this ancillary point now.
    The point is that, because many invalid aids, particularly chairs, are necessarily complicated contraptions, the cost of repairs can sometimes be very great. I have not had time, I regret, since the Budget speech, to do sufficient research to establish whether it is administratively possible to zero-rate or exempt the repair costs of invalid chairs and similar articles, but if so, this would be a further step in a direction which would also have the universal approval of the House.
    The main contents of the Budget have been fully debated by previous speakers. I should like to comment on two points that have been raised today while I have been in the Chamber. The hon. Member for West Stirlingshire (Mr. Baxter) mentioned the provisions of the present tax system for companies, whereby distributions to shareholders were encouraged as against retentions by the companies for investment. He could perhaps have given the Chancellor some credit for having made it somewhat more expensive for companies which wished to make distributions in that they will now have to pay an extra 50 per cent. of the advance corporation tax at the time of making the dividend distribution. Although this is not an increase in the tax bill, it is an extra cost on the company in that it has to part with its money sooner than it would otherwise have to do.
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    I am not clear—other hon. Members may be clearer—about the prospects for the continuation of statutory control of incomes, including dividends, but when the counter-inflation policy was introduced, it was right and proper for the previous Chancellor and his right hon. Friends—this was supported by my hon. Friends—to say that dividends should be included in the restraint of incomes. They have in fact been included and controlled at a rate lower than that permitted for the general increase in incomes over the last two or three years.
    Should the Government decide that statutory controls on incomes are needed for a longer rather than a shorter period, there is a case for removing a restraint at a time when it is no longer needed. The point is that companies, as we have heard in the last two days in this Chamber, will be facing considerable problems of cash flow and liquidity in the coming year. It is likely that they will pay much greater attention to preserving their liquidity than to distributing dividends. But over a period, if there is to be any differentiation between successful and unsuccessful companies, and if we are to have a capital market on which progressive and growing companies can raise new money, then at some stage the universal limitation on dividends will have to be relieved.
    I therefore ask that, should the Government find that limitation of incomes is to be maintained, they should consider some adjustment of the restraints, if not their complete abandonment, so as to allow the relative situation of one company against another to be redressed. This point has particular importance at this time, because many of the more successful companies in the years ahead will be those concentrating on exports and overseas markets. If they are not allowed to raise the necessary capital for expansion in the coming years, it will do undoubted damage to our economy and to employment.
    As to a point raised by the right hon. Member for Walsall, North (Mr. Stonehouse), I am in considerable sympathy with Government spokesmen for not having made an early statement about their intentions over the exchange rate. In the last 18 months, all the rules of foreign

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    exchange have been turned upside down. I speak with some professional knowledge of this market. Although the rate of exchange between sterling and the dollar is now—or was this morning—about $2.37 to the pound, it is only a few years since it was fixed at $2.40, and there have been considerable changes between one currency and another. Before the Government made any decision about re-fixing the parity of sterling, they would have to decide to what they would fix it.
    With the Swiss franc, the French franc, the Italian lira and sterling all floating, and the dollar now no longer the automatic international currency and measure of value that it was in the 'sixties, we shall have collectively in international monetary matters to rethink the basis on which relative exchange rates are fixed when they are fixed. There will undoubtedly be times when exchange rates cannot be fixed. The cost of supporting a rate which might for the time being be unrealistic would prevent this.
    The Government would be well advised, although I realise that a serious undervaluation of sterling for a long period may bring its disadvantages, to accept nevertheless that in today's highly unstable conditions we should be putting an unnecessary constraint on ourselves if we were to fix the value of our currency to that of any other one currency in the world.
    The point is strengthened in that since the autumn of last year and the advent of the energy crisis the economic prospects of all the countries whose currencies form part of the major trading medium in the world have changed in their internal and external relationships. The markets of the world have hardly begun to make an effective reassessment of the relative prospects of the economies of those countries or to form any lasting view of the underlying value as opposed to the daily rate at which their currencies should be quoted. It would be wrong for the United Kingdom, which is a country living above all else upon its international trade, to inhibit its freedom of action by making an early choice when the uncertainties are so great.
    I apologise for keeping the House so long on this first occasion, especially as it has given me the special indulgence of
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    not interrupting me. But I feel that the points which have arisen this afternoon should be given some attention.
    8.29 p.m.
    Mr. John Roper: It is a great pleasure to congratulate the hon. Member for Hitchin (Mr. Stewart) on his eloquent and effective maiden speech. He will not expect me to take up all the points he made, and certainly not those on the future of airports in the South-East or in other regions.
    I hope that my right hon. and hon. Friends on the Treasury Bench will give a good deal of sympathy to his appeal for the zero-rating of repairs to vehicles and other aids for the disabled. That seems a most useful extension of the proposals which were made yesterday by my right hon. Friend in his Budget Statement.
    I am sure that we all appreciate the expert knowledge which the hon. Gentleman brings to the House on currency matters. We look forward to his further contributions on that extremely difficult and complex subject. It is a subject on which there are not necessarily strict party lines. For example, my right hon. Friend the Chancellor of the Duchy of Lancaster has been known to hold different views from his ministerial colleagues when in Opposition, if not in Government.
    I welcome in broad terms the Budget which my right hon. Friend has introduced. If I have to question some of the details of what he has done, or what he proposes to do, I do so only on matters of detail. I do not question the broad strategy which he has announced. As that strategy implements many of the policies on which we fought the election only four weeks ago tomorrow, it would be difficult for us to object to his proposals. We are delighted to see the speedy way in which he is implementing so many of them.
    I understand, in the current economic situation, the agnosticism which my right hon. Friend has applied to the Budget judgment. It is the case that it has never been so difficult to assess the future outlook for the economy. The whole of the Press comment has supported my right hon. Friend in his announce that he will return with a second Budget when things are a good deal

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    clearer. I suspect that he will find that he has been a little too cautious and that he will need to do more to expand demand. The statistics will indicate whether that is right.
    I regret that as a result of the general uncertainty my right hon. Friend has had to restrict to only nine months ahead the economic forecast which has appeared in the Financial Statement.
    That is an unfortunate restriction in the information which is provided for the House. It cannot be called a medium-term economic assessment if we have information for only nine months ahead. I hope that when my right hon. Friend comes to the House with his second Budget and his second Finance Bill in the autumn he will bring with him a second Financial Statement so that we can have some indication of the Treasury's economic assessment for a longer period.
    At first sight one of the most alarming figures in the economic outlook is that for private investment, which is shown to fall by 1 per cent. between the second half of 1973 and the second half of 1974. To some extent that is the alarming inheritance of the present Government from their predecessors, in that almost all of the investment decisions which will be put into effect in the second half of 1974 were made in the period in office of the previous Government. It is true that the text which accompanies the figures on page 10 of the Financial Statement makes it clear that investment in manufacturing industry, unlike investment as a whole, is likely to rise during the second half of 1974, thus compensating for the falls in house building and in other forms of private investment which lead to a 1 per cent. fall in the figures. None the less, I believe that further action should be taken to stimulate investment. I hope that my right hon. Friend will consider what action he could take to increase investment in the second half of 1974.
    I believe that the announcement that the regional employment premium is to be continued will assist investment in the regions. For that reason, apart from any others, I welcome the decision. There is still some uncertainty hanging over REP because, although we have been told that it will be continued, we have not as yet been given any indication of for how long it will be continued. In the
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    case of REP, as in the case of almost any other instrument to encourage economic activity in the regions, it is important not only to say that it will exist, it is also important to give certainty to manufacturing industry about the period of time into the future that REP will continue. I hope that the Minister tonight, or the Chancellor when he winds up on Monday, will be able to give some indication of how far into the future he intends to continue with REP.
    The Budget as a whole will play a central part in developing a sound basis for rebuilding our economy. The talks which my right hon. Friends have been having today with the Trades Union Congress will be one of the tests of the Budget and will show the strength of the social contract on which Britain's economic future will be based.
    I wish to comment on three aspects of the proposals which my right hon. Friend laid before the House yesterday. First, in the area of capital taxation, I welcome the immediate imposition of a gifts tax; because, although we do not yet know the details of the gifts tax the Chancellor made it quite clear that it would take effect from yesterday. I hope that tomorrow night my hon. Friend the Chief Secretary will be able to give us a good deal of detail of this tax, because a tax which is de facto in effect should be known to the country as soon as posible.
    I am, however, sorry that in the long list of my right hon. Friend's proposals he failed to mention the reintroduction of capital gains tax on transfers at death and on discretionary trusts. Presumably, transfers in the form of gifts will still be subject to capital gains tax as well as the new gifts tax and there will, therefore, be an asymmetry if my right hon. Friend fails to restore the capital gains tax on transfers at the time of death. I therefore trust that, even though it is not implemented in this coming Finance Bill, my right hon. Friend will remember the pledges which were given by the then Opposition on 20th May 1971 that we would reintroduce the capital gains tax on transfers at time of death and will, if not in this coming Finance Bill then in his next, ensure that this important part of capital tax is restored.
    Turning from the gifts tax I look forward to the Green Paper on the wealth tax. This is going to be a document, not

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    about whether we should have a tax, but about how we should implement that tax. I believe that, because of the central importance and the long life of such a tax, it is important that there should be the fullest discussion and that we should get the tax right when it is introduced. I hope that my right hon. and hon. Friends will consider it appropriate that a Select Committee should consider the Green Paper when it is introduced, following the precedent set by the Conservative Government in the case of the reform of corporation tax some time ago.
    Turning to the income taxes, I was heartened by my right hon. Friend's remarks on the tax credit scheme. I am aware of the reservations of my right hon. Friend the Secretary of State for Social Services and my hon. Friends the Chief Secretary and the Minister of State, Civil Service Department, who signed Minority Reports of the Select Committee on the Conservative Government's tax credit scheme. I trust that careful consideration will be given to modifications to that scheme and to the eventual introduction of some form of tax credit scheme. As my right hon. Friend knows, I have examined ways in which the scheme could be developed and used as a sophisticated instrument for social policy, in particular in identifying those on whom we should concentrate extra help.
    I noticed with some pleasure and a certain amusement that the increase in the single person's allowance to £625 has a value, taxed at the new rate of 33 per cent., of only 3p a week lower, at £3·97 a week, than the £4 proposed in the tax credit Green Paper. That similarity will be convenient if and when my right hon. Friends bring forward proposals for a tax credit scheme.
    Before commenting on the Chancellor's insurance proposals I should declare a non-financial interest in that I am a director of the Co-operative Insurance Society. I am glad that the Chancellor has taken action to deal with the exploitation of certain tax avoidance opportunities with life assurance. The misuse of life assurance in that way does the insurance industry as a whole no good, and the removal of those opportunities is in the interests not only of the mass of taxpayers but of the mass of assur-
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    ance policy holders. I was glad to hear from my right hon. Friend that there had been close co-operation between the Inland Revenue and the Life Offices' Association on this matter.
    The patching-up operation we had yesterday, and which we have every two or three years to deal with insurance abuses, is not the right way of dealing with them. It does not go to the root of the problem, and I hope that in a subsequent Budget my right hon. Friend will consider a more radical attack on the problem.
    The central point of the major problem remaining is that the higher rate taxpayer is subject to income tax on investment income at rates up to 98 per cent. if he invests directly. On the other hand, if he invests through a life assurance policy, through a life fund, whether or not it is a qualifying policy, his investment income, instead of being taxed at 98 per cent., is taxed only at the composite rate of 37½ per cent. That, of course, is a considerable advantage to him. That sort of tax avoidance and the problem as a whole could in part be dealt with if my right hon. Friend did for the life assurance relief what he did yesterday for mortgage interest relief and set an upper limit to the premium payments above which payments would no longer rank for tax relief. That would not completely solve the problem but would go a long way towards dealing with it.
    Unlike Opposition Members I have no ideological objection to subsidies, but we need to examine with care their incidence and whom they will benefit. I am not convinced, for example, that reducing coal subsidies and increasing milk subsidies is necessarily, in the technical sense, a progressive move, given the relative expenditure of the poor and rich on those two commodities. When my right hon. Friends are considering future candidates for subsidy I hope that they will look carefully at the evidence from the Family Expenditure Survey before deciding what commodities it is appropriate to subsidise.
    Referring particularly to the question of the coal subsidy which has been removed and which will lead to substantial increases in the cost of coal. I hope that my right hon Friend the Secretary

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    of State for Social Services will consider the possibility of increasing the heating supplement on supplementary benefit and supplementary pensions now that the cost of fuel to pensioners will be significantly increased by the Government's decision on nationalised industry fuel prices.
    This has been a good Budget, particularly when we bear in mind the circumstances in which it was prepared. I support it with enthusiasm and look forward to hearing many other Budgets presented by my right hon. Friend the Chancellor of the Exchequer.
    8.45 p.m.
    Mr. Julian Ridsdale: It is a little frustrating for older hon. Members to be scattered among so many maiden speakers. Nevertheless, it is a great pleasure for me to congratulate, first, my hon. Friend the Member for Hitchin (Mr. Stewart) on an excellent maiden speech, made confidently and without notes. However, as a Member of Parliament for an Essex constituency, I must say that since, unlike my hon. Friend, I am opposed to the Maplin project, I was delighted to hear the Government's views on that subject.
    Secondly, it is a great pleasure for me to congratulate the new Member for Wolverhampton, South-West (Mr. Budgen). Like my hon. Friend, I have a unique relationship with the former Member for Wolverhampton, South-West, Mr. Enoch Powell, through the Church. The former Member of that constituency is godfather to one of my grandsons—who, incidentally, this morning slapped the Chancellor's photograph and said "Naughty man! He has put up the price of sweets." I respect the ex-Member for Wolverhampton, South-West, particularly as a catalyst for thought. I have disagreed with him on major policies in relation both to Europe and to prices and incomes, but I repeat that as a catalyst for thought and in underlining the soundness of money he has no equal. It is good to know that Enoch Powell is to be followed by somebody who obviously will match his eloquence and remind the Conservative Front Bench that they should not go for growth at any price. The soundness of the currency is a matter which many Conservatives put before growth at any price.
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    I wish to congratulate the right hon. Gentleman the Chief Secretary on his appointment, since I sat with him on the Public Accounts Committee.
    The Paymaster-General (Mr. Edmund Dell): I am grateful for what the hon. Gentleman said, but I would point out that he has given my designation incorrectly. I am Paymaster-General.
    Mr. Ridsdale: I apologise to the right hon. Gentleman.
    I also wish to pay a slight compliment to the right hon. Gentleman the Chancellor of the Exchequer for taking out of the economy £700 million. This at least errs in the right direction, especially in the present inflationary situation. However, I feel that this was a Budget of lost opportunities since it did not face up to one of the most serious problems that faces the country—namely, the investment situation.
    The Chancellor of the Exchequer has appealed for national unity and for the wartime spirit of national co-operation to return, and I fully support that sentiment. However, it did not help the situation when the right hon. Gentleman appeared on television last night and said that the economy was like a coach out of control. Let us be honest and realistic about the present situation. The chief danger is an outside one affecting just as seriously other countries as well as our own—for example, Japan, the United States and many European nations.
    It is vital to find the correct solution in terms of international co-operation as well as to make sure that we have national unity. For that reason I congratulate the Government on having negotiated successfully the present international loan, although I am most anxious to hear the terms upon which it has been secured.
    The national danger facing us is obvious to us all. It is what to do on the wages front and how to deal with the TUC. Already I am receiving complaints about relativities on the wages front from constituents of mine who crew the pilot boats for Trinity House, from hospital orderlies who feel that their pay relativity is not right with that of the nurses, from plain clothes detectives who think that their relativity is not right with uniformed constables, and from members of ASLEF. All these matters are causes for anxiety,

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    and we shall watch the Government closely to see how they deal with them.
    That is why this is so much a TUC Budget and why, according to the headlines in tonight's Evening Standard, the Prime Minister said today, "Now is the time for the TUC to stand and deliver." For the country's sake, I hope that he succeeds. But, bearing in mind the record of successive Governments in the past, I have my doubts.
    If the Government's policies do not succeed, the only course before the country will be to have a broadly based Government made up of those right hon. and hon. Members who support a prices and incomes policy. For that reason, any policy trying to make party political capital out of our present difficulties is doomed to failure. A number of times, listening to the debate today, I have felt that we were back in the last Parliament. Successive speakers have made party political points at a time when the country is sick and tired of party politics and wants to hear us address our minds to the national problems.
    Given the seriousness of the prospects facing us, I think that in time a national Government will arise out of necessity. But the time is not now. It was not two weeks ago, and it was not directly after the election, either. But this must be the basis of our approach to the serious problems facing us. We must choose the time right and address our minds nationally to the problems and not think and speak in a party political way.
    I welcome the increase in pensions, but I ask the Paymaster-General when the next review is to take place in view of the anxiety which the pensioners have about the increasing rate of inflation. Will it be in April 1975 or in October 1975?
    My fear is that the Government are giving with the left hand and taking back very skilfully with the right hand. That applies especially to certain aspects of this Budget. I have in mind especially the retirement pensioner who lives on investment income. If such a person has an income of £2,000 a year, is it right in a time of inflation, when already £150 a year has been lost to him, for the Government to claw back £100? I hope that the Chancellor of the Exchequer will look again at this situation. I think that it is unfair and unjust. The obvious
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    illustrations of the claw-back effect of the Budget can be seen in the increases in coal costs, electricity charges, rail fares, postal charges and so on. It is essential to realise their importance to pensioners.
    Is it right to freeze the rents of small landlords? Last weekend, three constituents of mine in this position came to my advice bureau. One of them has to live on a frozen rent of 57p a week. That is not right. It is a matter into which the Chancellor should look. Is it right that a small landlord, who has just had to spend £595 on repairs to his house, should bear the expense of his tenant living in a boarding house at £17 a week so that he can comply with the law?
    Is it right that another small landlord in my constituency, who owes £4,000 in income tax and cannot raise the money other than by selling a not very valuable second house, should be unable to obtain possession of and to sell it? That is the kind of injustice into which I am sure the Chancellor and the Paymaster-General will look. Such things are unfair.
    Another unfairness, which I am disappointed the Conservative Government did not tackle, concerns rates. I have been pressing for a long time that education should be taken off the rates and be made a national charge. I had hoped that the Secretary of State for the Environment would make a statement on what is to be done about rates. Alas, nothing very much came out in his speech, but there is an injustice in this matter.
    I have had letters on this subject from all over the country, because I have been tackling the problem on a national basis. Is it right that a householder who 10 years ago paid a rates bill for £50 should now face a rates bill for £307? This is creating unfairness and making people feel very strongly about the situation. Indeed, I am greatly disappointed that the previous Government did not tackle the problem.
    The danger is that the Government will take with the left hand without giving back with the right. The present system is expensive not only for individuals, but for the country. I should like to know how much debt we as a country have incurred through local government borrowing abroad in the last two years. It should be an interesting figure.

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    We must get away from the subsidy element in the rate support grant, because it is not giving us value for money. This subsidy element in the Budget is wrong, too. We must ensure that the money goes to those who need and deserve it. We cannot do that by a subsidy, because some of the money will go to those who can well afford to do without it.
    I underline again a matter which I have raised time and again during the last 10 or 12 years—namely, investment in industry. What disturbs me about the record of the previous Government is that they did not tackle the investment problem nearly as well as they should have done. I am particularly disturbed, because during the last 15 years I have seen the kind of investment that the Japanese have been putting into their industry through personal and national saving.
    As a country we must get rid of the spirit of envy. We must get back to a spirit of harmony, of believing in this country, and getting away from the kind of party politics that we have been throwing at each other across the Floor of the House during the last 10 or 15 years. This is the cause of our trouble. This is the cause of the lack of confidence in our industry today, and until this Parliament can give the country the kind of confidence that it needs we shall not get the investment in industry that this country deserves.
    It is for those reasons that I wish to see people levelling up, and not levelling down. I believe that if we can have that spirit, if we can believe in capital but attack monopoly, we can again solve the serious problems in this country.
    9.0 p.m.
    Mr. Maurice Macmillan: I add my congratulations to those of my right hon. Friend the Leader of the Opposition and other hon. and right hon. Members on both sides on the way in which the Chancellor presented his Budget Statement. I hope that he will not take it amiss if, as an ex-Treasury Minister, I add a word of appreciation, because I know the extremely heavy burden of work which must have fallen upon the whole Treasury team, both Ministers and officials, in presenting such a far-reaching Budget Statement. However, credit for staying power and delivery is the Chan-
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    cellor's alone, and I congratulate him on it.
    It is my happy duty to congratulate and welcome no fewer than four maiden speakers in this debate. The first was the hon. Member for Ormskirk (Mr. Kilroy-Silk). I confess that I do not know his constituency very well. I am aware from a previous incarnation, however, of its employment problem. He will not expect me to agree that nationalisation is necessarily the solution to it, any more than I should expect him to agree that consultation under the Code of Practice and the Industrial Relations Act is quite a good solution, too. The hon. Gentleman may share my regret that we have not yet heard very much from any occupant of the Treasury Bench on ideas for employee participation, profit sharing and so on. But I congratulate him on his speech, and on his extremely moving plea for help for children with congenital heart disease.
    I hope, as an ex-Member of Parliament for the West Riding of Yorkshire, that I may be allowed to congratulate my hon. Friend the Member for Pudsey (Mr. Shaw). I know his constituency a great deal better. It may no longer be a borough, but, if I know the West Riding at all, it certainly will not lose its identity. My hon. Friend's special plea that some kinds of food be not subject to value added tax was put with great wit and skill.
    Knowing the independent nature of the people in the West Riding, I am glad that my hon. Friend stressed the need for interdependence between management and employee, especially in small businesses. I am glad, too, that he made the point that for the smaller businesses in his constituency the change in the rating system made by the Government results in very rough justice.
    I must apologise to my hon. Friend the Member for Wolverhampton, South-West (Mr. Bugden) for not having been present during his speech. I understand that he referred to the borrowing requirement and money supply—perhaps following the tradition of his predecessor. The Chancellor said that in maintaining the competitive credit system he would keep a close watch on the money supply situation, and I hope that my hon. Friend will keep a close watch on the Chancellor, as well as on the Shadow Chancellor.

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    My hon. Friend the Member for Hitchin (Mr. Stewart), in referring to Maplin, showed that there are problems in not saving as well as in saving, as any ex-Chief Secretary knows. The speech of my hon. Friend the Member for Harwich (Mr. Risdale) also showed that one cannot please all the people all the time, whatever one does, particularly in matters as complex and difficult as Maplin.
    I hope that my hon Friend the Member for Harwich will allow me to correct him on one small matter. He referred to the reduction in demand of £700 million in the Budget. I think that the figures are £200 million in demand terms and a £700 million reduction in borrowing requirement—and it is the borrowing requirement to which I should expect my hon. Friend, with his deep interest in a sound currency, to refer.
    I congratulate my hon. Friend the Member for Hitchin on an expert speech, not least because, as a maiden speaker, he made a true debating speech, taking up issues raised in the debate. That is all the maiden speakers whom I have to congratulate—quite a number.
    In general terms, the Chancellor has attempted a fairly skilful balancing act in producing a Budget that is, broadly speaking, neutral. There are inflationary pressures, as my right hon. Friend the Leader of the Opposition pointed out yesterday, to work through into the price structure, including provision for wage costs, and including the £2,000 million extra on oil prices.
    On the other hand, as my right hon. Friend the Member for Carshalton (Mr. Carr) pointed out, there are considerable deflationary dangers as well. Paradoxically, they, too, come from the £2,000 million of extra oil costs which, in demand terms, are deflationary, however inflationary they may be in price terms. This does not make the task of Treasury Ministers any easier, as I am sure the right hon. Gentleman will agree.
    The heavy burden of taxation being placed on industry can represent a threat to growth and full employment. If that threat develops and if there is too much deflation, even for a short time, that will be difficult to correct because of the time lag that occurs in all these matters.
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    That is especially true in the kind of situation described by the right hon. Gentleman the Secretary of State for Trade, when there are deflationary problems in all industrialised countries. There is a danger implicit in our present situation not so much of "stagflation"—to use the old-fashioned term—but of what the right hon. Gentleman the Chancellor of the Duchy of Lancaster the other day called "slumpflation".
    I turn to the speech of the right hon. Gentleman the Secretary of State for Trade. Much as I should enjoy a rehash of some of the election issues with him, I agree with my hon. Friend the Member for Harwich that this is not the time or the place for that. It is not so much the submergence of the Board of Trade in the Department of Trade and Industry that caused balance of payments problems as world commodity prices. Whatever the right hon. Gentleman may say, that is what he himself stressed at the end of his speech when he described the turn-round in the terms of trade as being in favour of the primary producers and against the manufacturing countries.
    I am glad that the right hon. Gentleman stressed the need for co-operation with our trading partners in dealing with the problems caused by the high cost of energy and the surpluses that would be earned by the oil-producing countries. I hope that the Government do not intend to co-operate with others in acting against the oil-producing countries but will, instead, work with those countries. It would be extremely dangerous if it were thought that we were joining in an attempt to do down the oil producers, of whom in due course we shall be one, rather than working with them in their best interests as well as in the interests of the oil-consuming countries which are manufacturing industrial goods.
    The Secretary of State for Trade referred to the oil-rich countries which can absorb goods and services and said that we should seek to develop our trade with them—no one could quarrel with that—but he did not refer to those oil-producing countries—and there are a number of them—which, through no fault of their own—because of a shortage of population, geographical features, or for other reasons—cannot absorb goods and services. Their profits from the sale of oil are inevitably chalked up on one slate

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    or another. They represent a demand on future goods and services, and it is on this point that I should like some further explanation from the Government. Do the Government intend to encourage investment by those countries which at present cannot absorb goods and services?
    I should like an assurance from the Government that they will take positive action to encourage these countries to embark on projects which could lead to their building profit-making industries within their own boundaries after their oil is exhausted—because it is not inexhaustible. For example, a great deal could be done with British expertise and the export of British goods to help, say, Saudi Arabia, with such projects as desalination plants and agronomics which could help develop the resources in that country.
    Secondly, it is to be hoped that the House will hear about the Government's plans for encouraging the investment of Arab oil surpluses in the developed countries—not only in lending to them, but in investing in industry as I understand they are now doing in property. That needs careful consideration, and it is not a matter to be handled easily or alone. Despite the right hon. Gentleman's prejudices, it is something that I hope he will discuss with our European partners.
    Third, I hope that we shall discuss with our European partners, as well as with Japan and the United States, how best we can use the oil surpluses to help the underdeveloped countries. As the right hon. Gentleman rightly pointed out, most of the aid given to the under-developed nations is being absorbed in higher, oil prices. Again, when the Minister described the fall in world trade among manufacturing countries, he implied that no great surplus exists to develop aid on the scale that we should all like to see. Therefore, the industrialised countries should help the oil-producing countries to channel their funds in a way which would be of ultimate benefit to us all—to developed countries in their manufacturing outlets, to the oil-producing countries themselves and most of all, to the developing countries.
    The right hon. Gentleman referred to the need to co-operate to avoid the move-
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    ment of the surpluses of the oil producers across the exchanges in a disruptive way. I hope that this implied that we would not indulge in any competitive deflationary tactics or in attempts to have special incentives to move money from one place to another. In the present state of our economy I believe that we would be unlikely to win out if we undertook such action.
    My fourth main question is: have the Government any evidence of any other form of producer cartels being developed in primary products? The combination of the oil-producing countries is a fairly recent phenomenon. However, it occurred to me that it might be an encouragement to the producers of other raw materials to work together in a similar way. That could present serious problems to the rest of the world. If the terms of trade are already turning against the industrialised countries, any combination such as that organised by the oil producers would need serious attention by the Government.
    Finally and more generally, how do the Government propose to deal with the £2,500 million extra in oil prices, in view of the reduction of world trade, the difficulties of the developing countries and the critical importance of this extra burden for our balance of payments until such time as we no longer have to import any, and for most of Europe and Japan for a long time ahead? Because of its importance for Europe, Japan and our other markets, this is not only of medium-term but of long-term importance to us.
    I rather agree with the hon. Member for West Stirlingshire (Mr. Baxter). I am not sure that the Government have yet made sufficiently clear in this context just how grave the situation is, not only for the United Kingdom but for the Western World generally. The right hon. Gentleman described the worsening balance of payments position, and the Leader of the Liberal Party corrected the impression that the fall-off in our trade with Europe was entirely due to our membership of the Common Market. We are failing to sell our cars in the United States and Canada for the reasons given—because we are not competitive in price, delivery or service.
    But the Secretary of State gave only one half of the picture. He did not refer

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    to what was happening, regardless of the measures taken in the Budget, to the non-oil balance. Am I not correct in thinking that the greater part—possibly as much as two-thirds—of the projected deficit for 1974 is due to come in the first half of the year? This is due not to any measures taken by the present Government but to a trend already established before the General Election.
    The Budget does little to help the balance of payments. The right hon. Gentleman quite rightly talked about export prices and the possibility that we could increase export prices; this is the other side of the element of increased import costs due to the fall in the value of sterling. Export prices were very competitive in 1973. I think I am right in saying that a 10 per cent. increase would have wiped out the whole deficit, including the oil deficit.
    I agree with the right hon. Member for Walsall, North (Mr. Stonehouse) and my hon. Friend the Member for Hitchin that we have to approach the problem of fixing parities with great caution. But there is an implication here that sterling has been slightly undervalued in purely economic terms. Comparing, for example, the last nine months of 1972 with the last nine months of 1973 and the performance of United Kingdom exporters and United States exporters: United States export prices rose after devaluation of the dollar by about 13 per cent.—8 per cent. more than its rate of domestic inflation; United Kingdom export prices in the same period rose only by about 6 per cent., although domestic inflation was running at nearly 9 per cent. though we had a price advantage of anything between 10 per cent. and 20 per cent. Again I ask whether there is any intention of doing anything other than exhortation to take advantage of this situation.
    Of course the Government are right to borrow to cover the deficit. But I share the view of the right hon. Gentleman the Leader of the Liberal Party and that of the hon. Member for Birmingham, Handsworth (Mr. Lee), that we should know a little more about the conditions of the $2,500 million loan which the banks have so successfully negotiated under the guidance of the Chancellor and the Governor of the Bank of England.
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    I should also like to know what intentions, if any, the Government have in regard to the IMF tranche which is open to them of another $3,500 million. In view of what I said about export prices, I should like to know whether the Government have any idea of letting us know anything more about their policies for supporting sterling, which could be critical in trying to establish a greater level of exports at prices which are still competitive, but which get a price advantage, while at the same time helping to reduce our import bill.
    Apart from all this, my main criticism of the Budget is that it does nothing to create new wealth. If anything, it does the reverse. It adds to the problems of investment, and does not in any way help the saver. It does nothing to spread the ownership of wealth more widely, whether in home ownership or in income-producing assets. It does nothing in itself to keep down prices. As far as I can see, the effect of the 1½ per cent. or 1 per cent.—whichever it is—on the RPI of the £500 million food subsidies is more than offset by the increased tax on drink and tobacco, value added tax on petrol, sweets, and so on. The Chancellor's argument that he has avoided triggering the threshold does not hold water, and the Budget does not in any way help investment, savings or developing companies.
    I do not need to add to the arguments that, although I did not hear him, I have no doubt my hon. Friend the Member for The City of London and Westminster, South (Mr. Tugendhat) put with great skill on the problems of smaller companies and companies generally. It is worth remembering that they will have a cash flow problem quite soon. It appears to me silly to increase that cash flow problem by making them pay their corporation tax earlier and to rely, as the Chancellor said, on helping them borrow to cover temporary liquidity problems. Some of their liquidity problems may be more than temporary. This is especially true of unquoted companies and the smaller businesses generally.
    It is worth reminding the Chancellor that of our total employment, leaving aside the approximately one-third of employees who work directly or indirectly for the State, more than half are employed by unquoted companies—the 300,000 active unquoted companies, excluding

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    finance companies—and slightly under half are employed by the 9,000 companies whose shares are quoted on the Stock Exchange. The state of these companies is therefore of concern not only to their proprietors but to their employees.
    I add one word of warning to the Chancellor—given a long time ago by his right hon. Friend the Chancellor of the Duchy of Lancaster—not to kill the goose that lays the golden eggs. His right hon. Friend put it rather more elegantly. He said:
    "There is no fruitful source of revenue…from those who add to their capital by developing industrial and business enterprises. These latter are a tempting target but the temptation must be firmly resisted"—
    I am afraid that the Chancellor has not resisted it—
    "because of the seriously damaging effects of reducing significantly the incentive to invest in and develop enterprises."
    That is more elegant than "kill the goose that lays the golden egg", but it expresses my view exactly.
    The same applies to industry generally. I agree with hon. Gentlemen who suggest that reducing the level of investment income which attracts the lower rate of tax to £1,000 is a little mean. The Chancellor has to accept that there are two things that can be done to a cow—it can be killed, or it can be milked. What cannot be done is to continue killing and eating it.
    Again the Chancellor of the Duchy of Lancaster put it a little more elegantly when he said:
    "There are limits to the amount of redistribution you can achieve by your tax system compatible with a successful mixed economy and a parliamentary democracy. You cannot leave capital in private hands, and deprive its owners of substantial incentives to deploy it wisely. This is a recipe for getting the worst of all worlds. You cannot spur on the owner of capital to enterprise by offering profits from which your tax system prevents him benefiting."
    This is what the Chancellor is doing—not only on the industrial sector, but on a personal sector. He is doing the reverse some of his hon. Friends did long ago, and many Members of the Liberal Party supported me in my efforts in what was called the wider share ownership movement.
    Mr. Arthur Lewis: Where are they?
    Mr. Macmillan: He has done nothing to help co-partnership or profit sharing. He has disallowed interest as a charge against income for tax purposes. I am not necessarily quarrelling with that, but did he have to include stock options? If he had to include stock options for executives, did he have to include the employees' own-as-you-earn scheme? Did he have to deprive all work people of the opportunity of a tax-assisted purchasing of the shares of their company?
    I hope that he will pay great heed to those of my hon. and right hon. Friends and those from the Liberal benches who have appealed on behalf of those people who have overdrafts for purely business purposes, whether they be small businesses, small shopkeepers or farmers. Many people in that position have a considerable amount of investment, which is of no value to them for taxation purposes unless they disinvest. They cannot carry a heavy burden of taxation without selling out, but the nature of their businesses is such that they cannot sell part of it. One cannot sell part of a farm without destroying the whole farming operation. A small company or small shop has no shares which it can put on the market. I think, therefore, that the Chancellor must take great care in this matter.
    The Chancellor is to be congratulated on recognising that soaking the rich may be attractive for other reasons but that it does not produce any money to help payment for the plans and the developments which he would wish to see. In order to get the money that he requires to reduce the borrowing requirement and for increased public expenditure, he is relying on two major aids. First, there is the £1,300 million which my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) removed from public expenditure against strong opposition and criticism from the then Opposition in December last. The Chancellor is getting it, secondly, from soaking those people—be they wage-earners or salary-earners—who in the old days, when he was in Opposition, he used to call the meritocracy.
    This may be right and it may be necessary, but it does not itself deal with inflation, nor will it in any way affect the nature of wage claims coming forward. The whole of the Chancellor's policy to

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    contain inflation is relying on what he calls the social contract that he has made with the unions, and which the unions call a compact rather than a contract. It is in that difference of wording that I fear that his plans may come unstuck. We have seen the extent to which ASLEF has paid attention to it. Many of us heard Mr. Scanlon saying on television that he would proceed with the claim for the engineers, which dates back to August 1973, on the same basis as before. He said,
    "What we have said to previous Governments we are saying to this Government."
    He said that he wanted a settlement by 15th April or else the overtime embargo would start. For future claims he made it clear that he must feel free to act, as he should, in protection of his members, taking into account what the Budget and other legislation does.
    I hope that my fears are unfounded and that the Chancellor's incomes policy will stick. But if my fears are not unfounded and if they come about, the Government are in for a very difficult time and, much worse, so is the country.
    9.30 p.m.
    The Paymaster-General (Mr. Edmund Dell): In making my maiden speech as a Treasury Minister, may I congratulate four hon. Members who have today made their maiden speeches? First my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), a fellow Merseyside Member, in a very eloquent and moving speech referred to the deplorable deficiency in assistance to children with congenital heart disorders. My hon. Friend was a little afraid that this might not be relevant to a Budget debate, but I assure him that almost everything has relevance to a Budget debate, especially when it involves public expenditure.
    I should like to join with the hon. Member for Pudsey (Mr. Shaw) in paying a well-deserved tribute to the staff of the House for the help they give to new Members. He made a witty speech, which the House enjoyed. He also quoted Thomas Hobbes. I like quoting Thomas Hobbes. I recently published a book on the relationships of Government and industry, and I found that the most appropriate way of ending it was to quote Thomas Hobbes.
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    Unfortunately I missed the speech of the hon. Member for Wolverhampton, South-West (Mr. Budgen), but I am told that he spoke of the way that inflation can redistribute wealth in favour of the rich. I agree with him. I hope that that is a point which all members of the community will bear in mind.
    Then there was the hon. Member for Hitchin (Mr. Stewart). I heard only part of his speech but I understand that again it was a very fine maiden speech and that the House will certainly be looking forward to hearing him again.
    With one exception, I shall leave tax matters to be dealt with tomorrow night by my hon. Friend the Chief Secretary to the Treasury. He will deal with such matters more expertly than I can.
    My right hon. Friend the Chancellor said in his Budget Statement that he received a variety of advice before his Budget, and he has received a variety of criticism since. The Budget is the beginning of a change of direction for the United Kingdom. It is three weeks' worth of beginning, and it has been a productive three weeks. I hope that the Opposition will forgive us if, during our period of office, we are not guided exclusively by their advice.
    Much has been made of the uncertainties of the present economic situation, but there are some certainties too. The hon. Member for Harwich (Mr. Ridsdale) referred to some of them, and I hope he will not think I am taking the party political battle too far by mentioning some of the certainties in the present situation. For example, there is the fact that, despite the previous Government's policy, there has not been an increase in the underlying rate of growth of the British economy over the past three and a half years. There is also the fact that we have a serious balance of payments deficit which, as my right hon. Friend the Secretary of State for Trade explained, is not simply because of the oil situation—nor is it simply because of growth.
    I am frequently mystified by the emphasis which the Leader of the Opposition always places on the proposition that no economy can grow unless it runs into deficit. What about the export-led growth which has been the objective—admittedly' not a successful one—of successive Governments?

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    There are also the low level of investment which we have inherited, the rate of inflation and the rate of expansion of money supply, which has interested many Opposition Members. There is also the fact that as we take over the government of the country we find ourselves in a far more vulnerable position than our competitors in the face of the new crisis confronting the industrial world as a result of the oil price increases.
    To meet this crisis situation it is necessary that burdens should be borne. My right hon. Friend the Chancellor of the Exchequer repeatedly emphasised this during the election campaign. Price rises must affect the standard of living of the British people, and the question is how the resultant burdens can most fairly be borne. This is one of the objectives to which the Budget is devoted. It is a point which the previous Government did not understand and, judging from the attack on food subsidies by the Shadow Chancellor, they still do not understand it.
    Despite the assistance which this Government wishes to give to the less-well-off, and primarily to the less-well-off, the Shadow Chancellor evidently feels that food subsidies should not have been introduced. He said that the Budget was true to Labour form and that Labour Governments increase taxes whereas Conservative Governments reduce them. I believe, however, that Conservative Governments leave the country with serious balance of payments deficits, which are worse each time they leave office, and Labour Governments have to rescue the country from the consequences of those deficits.
    If the first step often has to be an increase in taxes, it is an inevitable result of the situation which we inherit on taking office. It would have been interesting to have heard from the right hon. Gentleman whether a Conservative Government, if still in power, would have reduced taxes or would have taken no action on taxes in the existing situation. If the answer had been that they would have taken no tax action I do not think the country would have believed it, because one of the reasons for the result of the General Election was that it was widely thought that it was being held prior to the next Conservative Budget.
    The determining factors in our Budget have been the uncertainty as to the pres-
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    ent balance of demand in the economy and the uncertainty as to present forecasts. Therefore, there is my right hon. Friend's decision to have a planned review at "half term" or whenever it is necessary. The previous Chancellor, whenever he made one of his Budget Statements, said that he would not hesitate to take whatever action was necessary. I think that my right hon. Friend might be prepared to use the same words, except that he has planned an occasion on which he will take any actions that are necessary.
    The second point was my right hon. Friend's decision to introduce a broadly neutral Budget. The third was the decision to move steadily, not violently, to a better balance of payments and to finance the deficit by borrowing—in other words, to avoid deflation—and the fourth was the decision substantially to cut the public sector borrowing requirement. Finally, the most fundamental decision in the Budget was the decision to begin the process of redistribution of wealth and income.
    The hon. Member for Pudsey and my right hon. Friend the Member for Walsall North (Mr. Stonehouse) discussed the problem of the building societies. The hon. Member for Pudsey particularly regretted the competition which National Savings might represent to income to the building societies in the present situation. Even now, after the increases, the terms which my right hon. Friend announced yesterday are only broadly comparable with building society rates. The hon. Gentleman should also remember that one has to have one's money in National Savings for some time before one achieves those rates. We do not therefore believe that this improvement in the terms of National Savings will have the serious effects that the hon. Member expects.
    However, my right hon. Friend listed various ways in which the Budget would help the building societies. He confessed that the total of this might well fall short of what it is now necessary to do to assist them. This is a matter which, as the House knows, we are considering at the moment.
    I should like to add one comment to what my right hon. Friend said on the subject of guaranteed income bonds. According to one unofficial estimate, funds amounting to as much as £1,000 million

    583
    have been attracted into these bonds over the past year. Much of this money would probably have been invested, or remained invested, with the building societies. The building societies, in their discussions with me before the Budget, certainly attached great importance to closing this loophole. My right hon. Friend has now done this. As the House knows, my right hon. Friend the Secretary of State for the Environment will be seeing the Building Societies Association tomorrow and I should like to express here the hope that the societies will study carefully what my right hon. Friend has already done in the Budget to assist them.
    I should like to refer to some remarks of the Leader of the Opposition yesterday about the North Sea oil situation.
    Mr. Arthur Lewis: Before he leaves the subject of the building societies, does not my right hon. Friend intend to give us some information about the dangerous situation which might arise in regard to the probable increase of the mortgage rate? He will recollect that I have written and spoken to him about a suggestion which might help in this situation. Will the Government do something on these lines?
    Mr. Dell: I express my gratitude to my hon. Friend for his proposal. My right hon. Friend the Secretary of State for the Environment will be seeing the building societies' representatives tomorrow morning. We are considering what the Government should do.
    The Leader of the Opposition imagined—admittedly just after hearing what my right hon. Friend said about North Sea oil—that we had accepted the decisions made by the previous Government about what it was appropriate to do. We are in some difficulty because we do not know what the decisions made by the then Government were. The normal processes of secrecy concealed that from us.
    Before the election I wrote to the former Chancellor of the Exchequer and the then Minister for Energy to ask what their decisions were on North Sea oil so that the country should have the opportunity of considering them. Their replies were that after the election a Conservative Government would do whatever was necessary. I remain in ignorance of the decisions that were made by the previous
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    Government. I suspect that they had not made very many. Therefore, it is not open to us to accept them.
    It is our firm intention to get a proper return for the United Kingdom from North Sea oil. There are two main aspects to the problem, and both were reported on by the now famous report of the Public Accounts Committee. The first is the tax loss situation arising from current and accumulated tax losses and capital allowances which might arise as a claim against North Sea oil profits from activities that might be irrelevant to the North Sea. I should be altogether fair and remind the House that the Financial Secretary of the previous Government gave one Government decision last December in the debate on the Public Accounts Committee's report. When dealing with tax losses the Public Accounts Committee pointed out that it did not suffice to cover the existing situation, and even since that report there has been a vast increase in oil prices.
    The second aspect is of much wider significance than the problem of dealing with tax losses—namely, how to rectify the situation created by past licensing policy, especially the licensing decisions of 1971. The result of those decisions is that enormous profits could be made at current oil prices. We believe that we should not rush forward with proposals on tax losses, which is only one aspect of the situation, before we have given consideration to the wider questions.
    I understand that the Opposition will require decisions on these matters before too long. However, we intend to review the whole problem of the Government's take from the North Sea in all its aspects, including future licences and existing licences. We shall engage in the consultations that are necessary to do that. We shall ensure that nothing is lost by our taking a little time to get the matter right once and for all.
    I now turn to the problem of investment and the fall in investment, which was the main part of the attack today by the right hon. Member for Carshalton (Mr. Carr). It is always difficult to forecast what the level of investment is likely to be. The right hon. Gentleman will know that paragraph 35 of the Financial Statement says:
    "Private sector fixed investment may be a little lower this year than it was in 1973.

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    Within the total, investment by manufacturing industry is forecast to rise though not to the full extent suggested by intentions enquiries taken at the end of last year".
    Our investment level has long been unsatisfactory. It is no use producing oversimplified answers to the problem. It was never so unsatisfactory as under the previous Government. That fact in itself shows the difficulties. After all, what greater encouragement, so the Opposition may think, could exist for investment than the existence of a Conservative Government together with the massive incentives which were introduced by that Government, with which my right hon. Friend has not interfered? Despite that, the level of investment under the previous Government continued to be poor and, indeed, fell. Under a private enterprise system a Government cannot guarantee the level of investment.
    The CBI issued a statement last night in which it said that the Budget was all right in its effect on demand as the Chancellor had taken the advice of the CBI—actually in that respect it was not the advice of the CBI alone—but that the Budget discouraged investment. If the Budget is all right on demand, why should it discourage investment? The steady growth of demand, especially export demand—it is a very profitable demand at present—should encourage investment. The 2½ per cent. rate of growth which is forecast in the Financial Statement is, after all, well up to the post-war average.
    There seem to be two possible answers to the question "Why in a state of adequate demand, according to the CBI, should the CBI and the right hon. Gentleman consider that this Budget will harm investment?" One possible reason is the lack of profit and the other might be the lack of liquidity.
    First, a squeeze on profits is an inevitable result of a counter-inflationary policy, but it was agreed by Tory right hon. Members that that was necessary, just as it is agreed by my right hon. Friend that it is necessary. It could well turn out, though the information is not yet available, that the greatest squeeze on profits that has occurred is the squeeze on profits due to the three-day working week; and that was an unnecessary squeeze on profits.
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    I do not believe that the difference between a rate of corporation tax of 52 per cent. as compared with the 50 per cent. which was expected will make much difference when account is taken of the massive incentive to investment that exists in this country, far greater than exists in any other country. If there are profitable projects, investment should be forthcoming.
    The second argument is that of lack of liquidity. There is reference to lack of liquidity created, perhaps, by the employers' contribution to the national insurance fund and by the advance corporation tax surcharge. The advance corporation tax surcharge does not increase tax liability. Indeed it may encourage retentions, as indeed does dividend restraint, and it may therefore make available more money for investment if there are profitable projects. I wonder how many chairmen of companies over the last year have said that but for the fact of dividend restraint their distribution would have been greater. They now have an alternative if they wish to avoid the surcharge on advance corporation tax. Surely there is still money available for good profitable projects.
    If one effect of a decline in liquidity is that the replacement of stocks will be kept to an efficient minimum, that would be a good result. The value of stocks in the economy is about half a year's output, and this stock-to-output ratio is higher here than it is abroad.
    Mr. Stonehouse: Before my right hon. Friend leaves the point about investment, will he acknowledge that the third reason is that the high rate of interest payable to banks—17 per cent. or more—is a grave disincentive to companies to invest in development, because it is not easy for a new investment to produce a higher return than that?
    Mr. Dell: I agree with my right hon. Friend that that certainly can be a disincentive to investment. On the other hand, what I am discussing is the effect of the Budget on the prospects for investment. The rate of interest was, unfortunately, a pre-existing fact with which we have to deal. Further, company liquidity was very high at the end of 1973 and so far it seems to be holding up very well. It is, therefore, not

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    at all clear that companies will find earlier payment of taxes a real problem.
    In any case, what other proposals would the Opposition have for dealing with the public sector borrowing requirement? I accept that we will have to watch company liquidity, because the general high level does not mean that all companies are in the same position. That is a fact to which my right hon. Friend referred in his Budget Statement. We shall have to watch the effect on investment, but I emphasise that industry has a home market sustained by a neutral demand effect Budget and it has an export market that should be profitable. If I may say so in passing, the CBI might be ill advised to encourage the Government too far in the direction of intervention to sustain investment.
    Mr. Cyril Smith: Does the right hon. Gentleman understand the difference between the liquidity of big business and the liquidity of small business in terms of having to pay corporation tax in advance?
    Mr. Dell: Yes. If the hon. Gentleman had been listening to me while he was preparing his intervention, he would have noticed that I was making exactly that point. Because I was making that point, I said that it was an aspect of the question which the Government would certainly have to consider.
    The right hon. Member for Carshalton asked about the effect of the Budget on the retail price index. He asked specific questions and made his own calculations. I will tell him about our calculations of the overall effect of the Budget on the retail price index. Changes in indirect taxes will raise the retail price index by an estimated 1¾ per cent. but this will be largely offset by food subsidies which will reduce the index by an estimated 1½ per cent. Taking account of non-budgetary matters, nationalised industry price rises, which are largely needed to cover cost increases which have already occurred, will eventually cause the index to rise by an estimated 2 per cent. The rent freeze will reduce the index by ¾ per cent. All these are approximate figures.
    On that basis the net effect would eventually be a rise in the index of an estimated 1½ per cent. There will also be
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    some effect on prices due to the increase in employers' national insurance contributions. The net increase, however, can be ascribed to the increase in price of less essential products—alcoholic drinks, tobacco, confectionery and petrol for private motoring.
    The nationalised industries' price increases take effect over a period, and by the end of the year we estimate that the effect on the retail price index might be in the region of 2 per cent. Even with these price increases the Government will be subsidising those industries to the tune of £500 million a year. Without these price increases the deficits of the industries would not have been reduced by £900 million as they have been. That would have had an effect on the public sector borrowing requirement, which has its own inflationary effect which would have had to be offset by other methods.
    I think that on reflection the right hon. Gentleman will confess that the overall effect of the Budget on the retail price index is as favourable as it could be.
    Mr. Carr: I think I now understand the figures aright. The right hon. Gentleman must surely still be admitting that the net effect of the Budget is to increase the retail price index to a significant extent. I do not understand why, if the Chancellor knew those figures, he did not tell us. In that event nobody would have misled the House.
    Mr. Dell: I do not think that anyone misled the House.
    The question is how to deal with an inflationary position. It is an absurdity for the Opposition to say to the Government that it is in any sense counterinflationary to allow nationalised industries to accumulate vast deficits and take no action. That is a policy that would have been bitterly criticised by the Opposition had we adopted it. What we have done is the only thing we could do. We have allowed the price increases to take place over a period so that the effect of them can be absorbed while we maintain the sort of subsidy on nationalised industry prices which the Opposition were contemplating when they were in office.
    The Budget has the characteristic of dealing with the inflationary effects of past policies by means of subsidies on

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    food prices, a rent freeze and a reduction in the public sector borrowing requirement. But ultimately inflation, which is not entirely or perhaps even mainly an economic fact but is a political fact, will have to be dealt with by political means in the light of a Budget dedicated to creating a fairer society.
    The Budget has two main aspects, one social and the other economic. It seeks to be both just and economically relevant. In terms of social justice—and hon. Members in various parts of the House may take different views about what the phrase means but we have a definite view about it—we have made a significant contribution by means of this Budget. We have concentrated in the Budget on the three priorities that we announced in the General Election: pensions, housing and food. In addition, we have removed 1,500,000 people from income tax.
    I believe that it is about time something radical was done about inequalities to bring about fairness in our community. Too many people are living in our society with too many privileges—privileges of leisure, wealth and position. There is too little evidence that industry, which complains greatly about egalitarian Budgets, provides a career open to the talented. And there is too little evidence that the system of private ownership, as it operates in this country, can open a career to the talented. We are a society that is too divided by class. Class is too great a determinant in respect of social privilege and personal as well as economic prospects. That is what this Budget is dedicated to rectify. It is a beginning, but it is a valid beginning which the great majority of people in this country will willingly support.
    Debate adjourned.—[Mr. James Hamilton.]
    Debate to be resumed tomorrow.

    STATUTORY INSTRUMENTS
    Ordered,
    That Mr Ronald Bell, Mr Denzil Davies, and Mr. Paul B. Rose be discharged from the Committee appointed to join with a Committee of the Lords on Statutory Instruments; and that Mr. John Lee, Mr. Robert Redmond, and Mr. Peter Snape be added.—[Mr. James Hamilton.]

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

    POULTRY (EEC DIRECTIVE)
    10.0 p.m.
    Mr. Bryant Godman Irvine: I am glad that the House has this opportunity to consider EEC directive 71/118 which deals with the future of the trade in fresh, processed, uneviscerated poultry. I had not given very great consideration to this matter until I began to receive communications on the subject from my constituents. Some of these communications were written in their own handwriting, but others came to me on small printed forms. If I receive a small printed form torn from another document, I do not tend to pay as much attention to it as I do to a letter that is handwritten by a constituent. I selected one of the letters I received from a constituent, written in his own handwriting, to send to the Minister when asking for the Department's views about the EEC directive—a directive agreed by the EEC before we joined the Community, to come into force in February 1976. I received a reply which I forwarded to my constituent, and I should like to put his reactions to the Minister.
    To put the matter in perspective, I should like to quote from the explanation which I was given by the Department:
    The Directive, which had already been accepted by the Community when we joined … requires poultry to be slaughtered on approved premises and to be subject to ante-and post-mortem inspection by inspectors working under the supervision of an official veterinarian. Each bird must he eviscerated immediately after slaughter so that post-mortem inspection can include examination of the viscera for disease conditions which would indicate that the meat was unfit for human consumption. This requirement, as it stands at present, means that fresh uneviscerated poultry should not be sold after February 1976, apart from sales made direct from a farm to a consumer. It will not, however, deprive the housewife of her freedom of choice between fresh and frozen birds as it will not mean an end to fresh poultry sales. Several big multiples sell fresh eviscerated poultry at the moment and there is no reason why this trade should not be carried on by any retailer who is able to hold the birds under chilled (not frozen) conditions until sale".
    That was contained in the information which I passed on to one of my constituents who wrote to me about the letter which I had received from the Ministry. He said:
    "In your covering note of 17th January you say you hope it will be reassuring and

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    that it will appear to be quite reasonable. To the comparatively small producer of fresh poultry (we sold some 46,000 to local shops in this way last year), and I believe to the small shop retailer also, it is so far from being either that it is difficult to see how anyone without an interest in ending this sort of trade can believe it to be so … To begin with, inspection—the benefits of which are in any case highly dubious—the mere mechanics of 100 per cent. pre- and post-mortem inspection would drive us out of business. To achieve our constant supply of fresh killed birds to our customers we normally pluck on three mornings a week but when demand is high do so at other times at short notice. It is certain that no inspector would be available for this length of time for our small production unless permanently attached to our staff: no doubt the industry will be expected to bear the cost which would be prohibitive. As to immediate evisceration, I have always supposed it to be incontrovertible that (a) a drawn bird does not keep as well as a whole one and (b) that this practice detracts considerably from the flavour. It seems that officialdom is only now, reluctantly, recognising the truth of the former and is, I suppose quite uninterested in the latter."
    I have taken up these points with the best expert I know in these matters, who is my wife. She tells me that both points are absolutely valid and that if a chicken is dealt with in both those ways precisely the results that my constituent has alleged follow.
    That is one reason why I want to put the matter directly to the Minister so that we may have a considered view from him.
    Mr. Robert Redmond: I had this same problem brought to my notice by a constituent some months ago, and I was not satisfied with the reply that I. received from the Ministry of Agriculture. I took it up with my hon. Friend the Member for Derbyshire. West (Mr. Scott-Hopkins), who is a member of the European Parliament. He sent me a very satisfactory answer saying that we had won that one and that the whole thing had been put back seven years.
    Mr. Bryant Godman Irvine: I hope that I receive as satisfactory an answer tonight. Until now, I had approached only the Ministry, and I have been quoting the advice that I received. If we have won it, the sooner that the Minister says so the better it will be for us all.
    I have also made a point of discussing the matter with the national organisations and with various other members of
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    the trade in my constituency, and they take a similar view.
    My constituent continues, in his letter:
    "That local butchers are certain of this is evident from those who have come to us for fresh birds since the largest local producer took to supplying only ready-drawn ones. Those who have done so have told me that far too many of these birds are slightly 'off' when they get them and most of my customers say that if this directive is enforced they will deal only in frozen poultry.
    It is also quite certain that in this neighbourhood the housewives are not going to accept willingly the story that these birds are comparable with those they can buy now. The suggestion that genuine fresh birds will still be obtainable at the farm gate is ludicrous. A producer will not remain in business for this trade only and the average town housewife would not be able to get there if he did.
    It seems unlikely that many small shops will or could install the capacity to chill perhaps 250 turkeys at Christmas as it would be idle for most of the year.
    To those with a commonsense (perhaps you would say old-fashioned) attitude to health problems, the whole exercise stinks of the bureaucrat's lust for interference and addiction to empire building, his allies no doubt being those who look forward to a profitable monopoly in the trade.
    Both I and my customers are perfectly capable of recognising a bird which should not be sold; the exception to this, of course, is the million-to-one-against chance of salmonella."
    He goes on to say that that requires looking into in a laboratory. He also says that, although he is a supporter of the European Community, if this interference goes on he will not be able to continue with that view.
    In view of the advice that I have received from the two sources I have mentioned, I thought it prudent to obtain the Minister's view on this matter. I should be obliged if he would confirm or deny whether what my hon. Friend the Member for Bolton, West (Mr. Redmond) has put forward is the position in the Community.
    Mr. David Mitchell rose—
    Mr. Speaker: Order. I should like to restate what I said the other day about Adjournment debates. These are debates in which an hon. Member must have adequate time to raise a particular matter and the Minister must have adequate time to reply. If any other hon. Member wishes to intervene, he must arrange with

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    the hon. Member raising the subject and the Minister, and, indeed, the Chair, that there will be time for him. Because I saw the hon. Member for Basingstoke (Mr. Mitchell) taking notes and looking as though he was about to make a speech, I ascertained from the Minister that he wants only ten minutes in which to reply. Therefore, I will call the hon. Member. However, this is a matter which should be arranged not by the Chair but by hon. Members concerned. Mr. David Mitchell.
    Mr. Bryant Godman Irvine: On a point of order, Mr. Speaker. It might be of assistance if I mention that my hon. Friend the Member for Basingstoke (Mr. Mitchell) asked me whether he could have about half a minute.
    Mr. Speaker: I shall be very surprised if the hon. Member confines himself to half a minute. He did not say anything to the Minister or to me about it. I am not trying to be difficult, but it is much easier if we know beforehand who wishes to speak and for how long and whether there will be time for the Minister to reply.
    10.10 p.m.
    Mr. David Mitchell: I am grateful to you, Mr. Speaker, for your advice. I apologise if I accidentally, but wholly unintentionally, trespass across the traditions in this respect.
    I am a supporter of our membership of the Common Market. I have always viewed it as a means of expanding our trade in a broad way and not one in which there was in any sense any detailed bureaucratic interference.
    My hon. Friend the Member for Rye (Mr. Irvine) has done a service to the House tonight in drawing attention to this matter. I hope that the Minister will be able to give the assurance we are seeking.
    The kind of detailed bureaucratic interference which I should think would be wholly repugnant to you, Mr. Speaker, and to hon. Members generally is when the Common Market interferes in patterns of national taste and traditional methods of choosing types of food or the slaughter of animals or fowls for food, or whatever it may be of that nature, which are specific to this country and have traditionally belonged to us for many centuries.
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    The suggestion in the proposed Common Market regulations for ante and post-mortem inspection, including inspection of the guts of the bird by a veterinary inspector, seems to me to be just the sort of detailed interference which will bring to an end the fresh poultry trade as we know it in this country, unless the Minister goes to Brussels to speak up for the poultry producers—because they have drawn it to our attention—and, much more, for the consumers of this type of product in this country.
    It would be extremely unfortunate if fresh-killed poultry—one thinks particularly of the Christmas turkey—were to become a thing of the past and we all had to eat frozen birds and the like. I, therefore, join with my hon. Friend in thanking you, Mr. Speaker, for allowing me to intervene briefly in this debate to impress upon the Minister the need for him either to give the assurances which have been asked for tonight or to go to Brussels and to make representations which enable him to come back within a relatively short time and give those assurances to the House.
    10.13 p.m.
    The Parliamentary Secretary to the Minister of Agriculture, Fisheries and Food (Mr. Roland Moyle): I join the hon. Member for Basingstoke (Mr. Mitchell) in thanking the hon. Member for Rye (Mr. Irvine) for the service that he has done the House in raising this matter tonight, because it is of concern to a number of people in this country as, indeed, the forays of the bureaucracy in Brussels often are these days.
    I should like to say to the hon. Member for Bolton, West (Mr. Redmond), that the enthusiasm of the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) for the European Parliament or for his own oratory carried him away to some extent. Nothing is ever decided at the European Parliament, and the issue raised by the hon. Member for Rye remains open for consideration and decision. To that extent, I take the hon. Gentleman immediately out of his state of suspense by saying that I am unable to resolve the matter here tonight, other than as the hon. Member for Basingstoke suggested, namely, that I, or someone in my Department, should go to Brussels to discuss the problem with the Commission.

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    I should like to give some of the background and history to the problem and some factors on both sides which are likely to affect a decision, so that those concerned will have an idea of what is happening. First, for example in the case of red meat in this country, we have had 100 per cent. post-mortem inspection for a long time. The inspections are operated by local authorities under a system in which all red meat has had to be produced in slaughterhouses for which detailed standards of construction and hygiene are prescribed. In addition, the meat then slaughtered is inspected by qualified inspectors.
    I need hardly say that this inspection involves examination of the viscera—"innards" would perhaps be a more readily understood description. There is no such thing as "New York dressed" or "clean plucked beef", terms often applied to uneviscerated poultry of various kinds. All these requirements are covered by the Food and Drugs Act.
    At present there are no such detailed requirements for poultry meat in this country. There are requirements in general food hygiene regulations, but there is no specific requirement for inspection and evisceration in respect of poultry as there is in respect of red meat. Over recent years the poultry industry has grown considerably. The present situation was totally defensible when the poultry trade was a luxury trade. Now, however, chicken in particular and most poultry are a common form of diet in Britain. As the industry has grown, some people have increasingly held the view that more detailed controls are needed during slaughter of the birds.
    This was the position at the time we joined the Common Market a year ago last January. When we joined, most of the six countries had developed a system of poultry meat hygiene and inspection. Therefore, it is not particularly surprising that when we joined the European Community it already had in operation a directive which was created in 1971—Directive 71/118 for those who like to collect these bureaucratic details. The directive came into operation for trade between Community countries from February 1973—for the original Six, not for Great Britain—and it is due to apply to the domestic trade within the boun-
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    daries of each country from February 1976. The hon. Gentleman was right in his timing.
    I wish to make two points without prejudice to the question of the application of the directive in this country. I am seeking to clarify the issues involved, not to create controversy. First—it is becoming a well-recognised feature of Community life—the Community's reason for applying the directive to the home market as well as to the market in the various countries of the European Community is the hope that, once universal standards operate throughout the Community, it should be possible for poultry meat to move freely about and for birds bred in this country to be sold in France and vice versa, and, of course, in other parts of the Community. That is the point to which I think the hon. Member for Basingstoke alluded at one stage in his brief intervention.
    The second point is that, whatever we may think about the possible effects of the directive, its basic objective is consumer protection. It is a public health measure designed to ensure that poultry meat is produced and inspected under proper hygienic conditions.
    The difficulty arises in trying to apply this policy. The directive requires that all poultry should be eviscerated immediately after slaughter. Unless the viscera can be examined, an inspector cannot be sure of the health of the bird. That is a reasonable proposition. At least the inspector can be more sure of the health of the bird if he has examined the viscera than if he has not. As the viscera can be a potent source of contamination, it is best on the whole that evisceration should take place under controlled hygienic conditions—not, for example, in a variety of hotel kitchens.
    That brings me to the point of tonight's debate, because if we are to apply this directive fully, and if all poultry are to be eviscerated immediately after slaughter, we cannot continue to market what is known in the trade as "clean-plucked" or "New York dressed" poultry, which are left with the viscera inside.
    There are arguments relating to this matter. First, it has been suggested that the full application of the directive would deprive the housewife of fresh poultry. This is not strictly speaking correct. It

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    would certainly deprive the consumer of fresh uneviscerated poultry. But fresh eviscerated poultry is often sold frozen. There are some firms which market fresh eviscerated poultry and, with modern techniques by which the birds can be held in chilled conditions, this form of marketing will probably grow.
    Mr. David Mitchell: Is the Minister saying that a frozen bird is the same as a fresh bird if it has only recently been frozen? I do not think that a housewife would recognise that similarity.
    Mr. Moyle: No, I am not saying that they are the same, but they have characteristics in common. It would be incorrect to say specifically that the consumer will be deprived of fresh uneviscerated poultry, as has sometimes been said, for the reasons I have given.
    Second, it has been said that a fresh bird with the viscera left in it can be less of a health hazard than a frozen bird. That is a second argument often advanced. If there is contamination and the bird is not completely thawed out before cooking, the argument is that any contamination introduced at the time of slaughter, or before, may persist. There is not sufficient statistical information available about outbreaks of food poisoning induced by eviscerated and uneviscerated birds for one to be able to refute that argument. However, as I said earlier, in order fully to inspect poultry it seems to me that an inspector needs to examine the viscera—he would have a much better idea of the health of the bird if he did so—and second, it is better for poultry to be eviscerated under controlled hygienic conditions.
    Third, it has been argued that the apparatus of control which the directive proposes to set up is ineffective because one of the bigger risks at present is from salmonellosis which cannot be detected by visual inspection in a slaughterhouse. I am not a vet, but I am advised that there are conditions of salmonellosis which can be detected by examination of the viscera—there are lesions on the viscera which can be detected by a medically-qualified person.
    It is true, however, that the ideal method of controlling salmonellosis is, as it were, at source on the farm, and the attainment of this ideal is still a long way off. None the less, the fact that
    598
    salmonellosis cannot always be detected in slaughterhouses is not a reason for not seeking a high standard of hygiene and poultry meat inspection in those slaughterhouses.
    I have attempted to deal with some of the arguments both for and against the directive which the Common Market has adopted. I now turn to the main issue, that is, the continuation in this country of the trade in "New York dressed" or "clean-plucked" poultry, about which the hon. Member for Rye is concerned.
    Basically, the problem is simple enough. As members of the European Community, we are required to conform in due course to Directive 71/118, which requires the establishment of a veterinary supervised poultry meat inspection service. Indeed, as the poultry meat industry has expanded it has become increasingly clear that there may be a need for more detailed regulation of it.
    If we impose the full conditions set out in the directive, the ultimate result will be that we shall have to ban the production and sale of poultry with the viscera left in them. The clean plucked poultry trade as we know it will come to an end, and this will have two consequences. First, as has already been pointed out, there will be some denial of consumer choice for those who like their poultry prepared and hung in this way. This is particularly true, at Christmas time, of the turkey trade.
    Secondly, a number of producers and traders, particularly small traders, who deal in this kind of poultry will either have to go out of business or, if they can, transfer to the production and sale of oven-ready poultry. Here I confirm what the hon. Gentleman said, that sales of uneviscerated poultry directly at the farm gate to the consumer by the farmer will continue unaffected.
    The issue really comes to this: how far should we go in applying the directive if in so doing we shall have to abolish the production of a particular product and deny some consumers the kind of poultry to which they have become accustomed? There are arguments for and against the issue, as hon. Members will realise.
    The previous Government had already made representations to Brussels about

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    this matter. It may be this to which the hon. Member for Bolton, West was referring when he mentioned the intervention of his hon. Friend the Member for Derbyshire, West. However, I dealt with that while the hon. Gentleman was discussing certain matters through the Chair.
    They were seeking a derogation from the requirements of the directive, in so far as clean plucked poultry are concerned, for a period of years beyond February 1976. Hon. Members will, I am sure, understand when I say that in the short period in which we have been in office we have not had time fully to examine the issue, or to open discussions on it.
    Before finally deciding his policy, my right hon. Friend the Minister of Agriculture, Fisheries and Food will consider the problem in detail and discuss it with the industry concerned, so that he will be fully briefed on all the various issues and views of the industry. I hope that will be some encouragement to hon. Members who have their constituents interests so much at heart. It is not a simple matter.
    In the meantime, officials of the Ministry will continue the representations that they have been making in Brussels. The debate here tonight has been helpful in
    600
    illuminating the various facets of the problem.
    Mr. Bryant Godman Irvine: The Minister has dealt with a number of aspects of the matter, but one on which he has not touched is the fact that a comparatively small producer, such as the one I have been speaking about, who is plucking birds on only three mornings a week, will not be able to have an inspector on those three mornings, so he will be put out of business. Will the Minister bear that in mind when these representations are made?
    Mr. Moyle: Yes, indeed, Those considerations most certainly will be borne in mind, and it is because we expect to receive representations of that sort that my right hon. Friend is making arrangements to see the trade. I can assure the hon. Member that that sort of problem will be seriously borne in mind before any decision seriously affecting the future of the people in this country is reached.
    I thank the hon. Member for Rye for raising the matter and assure him that the points that he raised will be fully and seriously considered by the Government before any decision is reached.
    Question put and agreed to.
    Adjourned accordingly at twenty-eight minutes past Ten o'clock.

FOREIGN AND COMMONWEALTH AFFAIRS
  Suez Canal
  Suez Canal
  Polish Government in Exile
  Polish Government in Exile
  Kenya (Ex-settlers' Funds)
  Kenya (Ex-settlers' Funds)
  European Economic Community
  European Economic Community
  Ambassadors (Appointment)
  Ambassadors (Appointment)
  United Nations Delegation
  United Nations Delegation
  Argentina
  Argentina
  Syria (Israeli Prisoners of War)
  Syria (Israeli Prisoners of War)
  European Security and Co-operation
  European Security and Co-operation
  HM Ships (Foreign Visits)
  HM Ships (Foreign Visits)
  BBC (External Services)
  BBC (External Services)
  Pakistanis and Bangalees (Entry Applications)
  Pakistanis and Bangalees (Entry Applications)
OVERSEAS DEVELOPMENT
  Ethiopia
  Ethiopia
  India (Aid)
  India (Aid)
ENVIRONMENT
  Vacant Residences
  Vacant Residences
  M40 (Denham—Beaconsfield)
  M40 (Denham—Beaconsfield)
  House Purchase
  House Purchase
  Driving and Vehicle Licence Centre, Swansea
  Driving and Vehicle Licence Centre, Swansea
  Motorways (Maintenance)
  Motorways (Maintenance)
  M23
  M23
  Noise Advisory Council (Report)
  Noise Advisory Council (Report)
  Rents
  Rents
  Speed Limits
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  Dwellings (Statistics)
  Dwellings (Statistics)
  Maplin
  Maplin
  A47 (Norfolk)
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  Lewes Bypass
  Lewes Bypass
  Snodland Bypass
  Snodland Bypass
  Henley Road, Ipswich
  Henley Road, Ipswich
  Local Authorities' Lands
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  National Parks
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  Bickleigh (Reservoir)
  Bickleigh (Reservoir)
  M25
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EMPLOYMENT
  EEC Social Fund
  EEC Social Fund
  Juveniles (Handsworth)
  Juveniles (Handsworth)
  Earnings (Scotland)
  Earnings (Scotland)
SCOTLAND
  Hoy and Graemsay (Water Scheme)
  Hoy and Graemsay (Water Scheme)
  Improvement Grants
  Improvement Grants
  Nursery Schools
  Nursery Schools
  Housing
  Housing
  Teacher Shortage
  Teacher Shortage
  Chronically Sick and Disabled Persons (Telephones)
  Chronically Sick and Disabled Persons (Telephones)
  Elderly Persons' Accommodation (Paisley)
  Elderly Persons' Accommodation (Paisley)
AGRICULTURE, FISHERIES AND FOOD
  Horticulture (Fuel Costs)
  Horticulture (Fuel Costs)
  Water Charges
  Water Charges
  Meat and Meat Products (Imports)
  Meat and Meat Products (Imports)
  Horticulture (EEC Fuel Taxes)
  Horticulture (EEC Fuel Taxes)
  Animal Exports (Report)
  Animal Exports (Report)
CIVIL SERVICE
  Widows' Pensions
  Widows' Pensions
  Civil Servants (Pay)
  Civil Servants (Pay)
  Civil Servants (Advances of Salary)
  Civil Servants (Advances of Salary)
DEFENCE
  Army Recruitment (Press Advertising)
  Army Recruitment (Press Advertising)
  United States Air Force Bases (Suffolk)
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  Fuel
  Fuel
  Bodmin Moor (Overflying)
  Bodmin Moor (Overflying)
  Northern Ireland
  Northern Ireland
EDUCATION AND SCIENCE
  Building Programme
  Building Programme
  Secondary Schools (London)
  Secondary Schools (London)
ENERGY
  Petrol Supplies (Garages)
  Petrol Supplies (Garages)
  Electricity (Power Station Fuel Stocks)
  Electricity (Power Station Fuel Stocks)
  Celtic Sea Oil and Gas Exploitation
  Celtic Sea Oil and Gas Exploitation
HOME DEPARTMENT
  Remanded Persons
  Remanded Persons
  Legal Aid Certificates
  Legal Aid Certificates
  News Broadcasting Service (North-East)
  News Broadcasting Service (North-East)
  EEC Nationals (Employment)
  EEC Nationals (Employment)
INDUSTRY
  Scrap Metal
  Scrap Metal
  Shipbuilding and Repairing
  Shipbuilding and Repairing
  Furfuryl Alcohol
  Furfuryl Alcohol
  Hovertrain
  Hovertrain
  PARLIAMENTARY JOINT COMMITTEES
  PARLIAMENTARY JOINT COMMITTEES
NATIONAL FINANCE
  Balance of Payments (Overseas Debit)
  Balance of Payments (Overseas Debit)
  Income, Profits and Taxation
  Income, Profits and Taxation
  Public Expenditure
  Public Expenditure
  Gross National Product
  Gross National Product
  Pensioners (Duty-free Spirits)
  Pensioners (Duty-free Spirits)
  Gaming Machines (Licence Duty)
  Gaming Machines (Licence Duty)
  Retirement Pension (Taxation)
  Retirement Pension (Taxation)
  Value Added Tax
  Value Added Tax
  Mr. Wynne Godley
  Mr. Wynne Godley
  Net Assets (Rate of Return)
  Net Assets (Rate of Return)
PRICES AND CONSUMER PROTECTION
  Milk
  Milk
  Unit Pricing
  Unit Pricing
  BEAVERBROOK NEWSPAPERS (SCOTLAND)
  BEAVERBROOK NEWSPAPERS (SCOTLAND)
SOCIAL SERVICES
  Benefits (Miners' Strike)
  Benefits (Miners' Strike)
  Hospitals (Expenditure)
  Hospitals (Expenditure)
  Family Income Supplement
  Family Income Supplement
  Medical Consultants (Pay and Conditions)
  Medical Consultants (Pay and Conditions)
TRADE
  Luton Airport (Traffic Level)
  Luton Airport (Traffic Level)
  Aircraft Noise
  Aircraft Noise
  Motor Car Components
  Motor Car Components
WALES
  Hospital Engineers
  Hospital Engineers
  Housing
  Housing
  Mid-Wales Economy
  Mid-Wales Economy

Preamble
The House met at half past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Liverpool):
The LORD CHANCELLOR on the Woolsack.

LORD GREENHILL OF HARROW
Sir Denis Arthur Greenhill, G.C.M.G., O.B.E., having been created Baron Greenhill of Harrow, of the Royal Borough of Kensington and Chelsea, for life—Was, in his robes, introduced between the Lord Mancroft and the Lord Gore-Booth.

LORD TREND
The Right Honourable Sir Burke St. John Trend, G.C.B., C.V.O., having been created Baron Trend, of Greenwich in Greater London, for life—Was, in his robes, introduced between the Lord Zuckerman and the Lord Adeane.
Several Lords—Took the Oath.

"HISTORY OF THE KING'S WORKS"
2.52 p.m.
LORD SUDELEY: 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 Her Majesty's Stationery Office will publish another volume of The History of the King's Works, which will continue the history from 1852 onwards.
LORD GARNSWORTHY: My Lords, as I understand the position, it has always been considered that the story of the King's Works ends in 1851, when the duties were taken over by a Government Department subject to full Parliamentary control and the history then becomes different in both character and scale. But I would add for the benefit of the noble Lord, Lord Sudeley, that three more volumes are to be published to cover the
582
period between 1485 and 1782. I hope that he will find that information helpful.
LORD SUDELEY: My Lords, I thank the Minister very much for that Answer. May I ask whether Her Majesty's Stationery Office might be persuaded to make better efforts to display and sell Volume VI of The History of the King's Works, published last November, bearing in mind the great inefficiency of Her Majesty's Stationery Office in disposing of whatever stocks they possess.
LORD GARNSWORTHY: My Lords, I am sure that note will be taken of what the noble Lord has said. He will appreciate that we have had very little opportunity of late to do very much about such matters.
LORD MOWBRAY AND STOURTON: My Lords, is the noble Lord aware that many of us on this side are highly grateful to Her Majesty's Stationery Office and the Department of the Environment for the work they have done? In my opinion it is a most instructive work. I should like to know whether the noble Lord agrees with me.
LORD GARNSWORTHY: My Lords, I agree with what the noble Lord, Lord Mowbray and Stourton, has said, and I am quite sure that what he has said will be balanced against what the noble Lord, Lord Sudeley, has said.

SCHOOL MILK
LORD BOOTHBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they propose to restore milk in our schools.
LORD GARNSWORTHY: My Lords, the possibility of restoring free school milk to the pupils from whom it was withdrawn in 1971 by the Education (Milk) Act is among the many matters which the Government are considering, but no decision has yet been reached.
LORD BOOTHBY: My Lords, is it not rather unfortunate that no decision has yet been reached, because the national milk scheme which I had the honour of introducing in another place in 1940 has

583
been the foundation of the health of our new population, I believe, over the last thirty years or so? Does the noble Lord not think it is time that the Government took a decisison to restore milk to our schools?
LORD GARNSWORTHY: My Lords, I appreciate that the noble Lord, Lord Boothby, thinks that this Government are capable of taking a vast number of decisions in a very short period, but I feel that a period of some three weeks is perhaps a little too short to make all the decisions that have to be made. I would suggest that my right honourable friend the Chancellor of the Exchequer did not make a bad beginning yesterday with regard to the consumption of milk.
LORD SEGAL: My Lords, does the noble Lord realise that it would cost far less now to restore this facility than it would have done prior to the General Election?
LORD MAYBRAY-KING: My Lords, is the noble Lord aware that the restoration of milk to schoolchildren is one of the most important minor reforms that could be introduced by Her Majesty's Government at this moment?
LORD GARNSWORTHY: My Lords, I agree very much with my noble friend Lord Maybray-King and I will see that the attention of my right honourable friend is drawn to what has been said.
LORD BELSTEAD: My Lords, in three weeks the noble Lord may have had time to check upon two things, and perhaps I may ask him about both of them. First, is the noble Lord aware that in 1970 the committee dealing with the medical aspects of food said that they would undertake to investigate a variety of different ways of monitoring the methods by which nutritional standards were achieved for children? Have Her Majesty's Government any reason to be concerned about nutritional standards? Secondly, may I ask the noble Lord about the findings of a very widely based Working Party which was set up by my right honourable friend the former Secretary of State to look into the school meals service? Have the findings of that Working Party any relevance to the Question which the noble Lord, Lord Boothby, has asked to-day?
LORD GARNSWORTHY: My Lords, I made particular inquiries about the first matter which has been raised by the noble Lord, and have been informed that it is too early yet to draw any conclusions. With regard to the second matter, concerning the Working Party, I have no information that I can give to the House.
LORD WYNNE-JONES: My Lords, would my noble friend bear in mind that all of us sitting on these Benches have always wished to have milk provided for our children in schools? Surely my noble friend would agree that this is a subject which should not wait for a long period of analysis: the school milk ought to be restored at once.
LORD GARNSWORTHY: My Lords, I am sure the whole House will know my views on this matter. I took a fairly active role in our proceedings when the Bill was before the House, and I shall be very pleased to draw the attention of my right honourable friend to what has just been said.
LORD BOOTHBY: My Lords, would it be possible for the noble Lord to suggest to me a date on which I might put down another but similiar Question?
LORD GARNSWORTHY: My Lords, I am quite sure that the noble Lord, Lord Boothby, does not expect me to reply in the affirmative.
BARONESS BROOKE OF YSTRADFELLTE: My Lords, would the noble Lord ask his right honourable friend, when he is considering the reintroduction of free milk in schools, also to consider ways of avoiding the wastage of just that commodity? When it was free previously a considerable amount of milk was wasted in schools. Much of it was not taken up, but it was not allowed to be sent to the homes of the children who might have benefited by it.
LORD GARNSWORTHY: My Lords, while I am quite sure the my right honourable friend is well aware of that matter, again I will draw his attention to what has been said.
LORD COLERAINE: My Lords, is it not the fact that the great majority of parents in this country could themselves well provide the milk for their children?
LORD GARNSWORTHY: My Lords, I think the answer is, Yes. Undoubtedly, since yesterday still more parents will be in that happy position.
LORD TREFGARNE: My Lords, can the noble Lord tell us which children are at present still entitled to free milk?
LORD GARNSWORTHY: Those, my Lords, who are certified by the medical officer of health as having a health need.
LORD BELSTEAD: My Lords, is the noble Lord aware that the answer he has just given is not strictly accurate? The entitlement also includes all children in special schools, which adds a very great number of children to those mentioned by the noble Lord across the Floor of the House.
LORD GARNSWORTHY: My Lords, I agree; but I should not have thought there was any need for confusion on this point.
BARONESS SUMMERSKILL: My Lords, is the noble Lord aware that we are somewhat confused on this side of the House, and are wondering why noble Lords are so interested in this matter in view of the fact that they withdrew the milk from the children?
LORD TREFGARNE: My Lords, could the noble Lord say why my son gets free milk? He is not specially certified by the doctor, and does not, so far as I know, go to a special school.
LORD GARNSWORTHY: My Lords, not having the precise details of the information the noble Lord requires, I am unable to provide the answer he desires. I will have inquiries made and write to him on the matter.

E.E.C.: UNITED KINGDOM AND TREATY OBLIGATIONS
3.0 p.m.
LORD GLADWYN: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, pending any formally negotiated change in the terms of accession of the United Kingdom to the
586
European Economic Community, they will abide by all their existing Treaty obligations.
THE PARLIAMENTARY UNDERSECRETARY OF STATE, FOREIGN AND COMMONWEALTH OFFICE (LORD GORONWY-ROBERTS): My Lords, my right honourable friend the Secretary of State for Foreign and Commonwealth Affairs has made it clear that Her Majesty's Government will certainly fulfil their international obligations.
LORD GLADWYN: My Lords, I hope that I am not embarrassing the Government in any way when I say that I find that Answer extremely satisfactory.
BARONESS TWEEDSMUIR OF BELHELVIE: My Lords, may I ask why the Foreign Secretary said in another place last week that the Treaty was the main obstacle?
LORD GORONWY-ROBERTS: My Lords, if the noble Baroness will look at the speech in its entirety she will find there the kind of assurance that I have given to the noble Lord, Lord Gladwyn. My right honourable friend's speech, and that of my right honourable friend the Prime Minister, made it absolutely clear that the commitments already entered into will be fulfilled.
LORD SHINWELL: My Lords, can my noble friend explain how it is possible to fulfil all the obligations of the Treaty and at the same time renegotiate the terms of the Treaty?
LORD GORONWY-ROBERTS: My Lords, it was made absolutely clear last week in another place, on more than one occasion, that obligations already entered into would be fulfilled, but that we would expect our friends and allies in Europe to understand that we could not proceed, pending renegotiation, to further commitments.
LORD SHINWELL: My Lords, is my noble friend aware that only the other day his right honourable friend the Minister of Agriculture and Fisheries (and he is also my right honourable friend and is still my right honourable friend), who was renegotiating some aspects of food policy, declared that he was not in favour at any time of the Common Agricultural Policy. Is there

587
some confusion in the mind of my noble friend?
LORD GORONWY-ROBERTS: No, my Lords. The Common Agricultural Policy is one major aspect of the terms on which we entered the E.E.C. which we consider ought to be radically renegotiated. What my right honourable friend the Minister of Agriculture and Fisheries quite properly said was that, while he was entirely against the terms as they now stand, nevertheless, like the Government, he wished to see radical renegotiation in the spirit and at the pace which my right honourable friends the Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs have described.
LORD O'HAGAN: My Lords, would it not assist the Government in the difficult process mentioned by the noble Lord, Lord Shinwell, in his first supplementary question, if they were to send Labour Members to the European Parliament soon?
LORD GORONWY-ROBERTS: My Lords, that is a somewhat different question, but I will say to the noble Lord now that the situation as it obtained before the General Election will continue, pending renegotiation, and that this, like other aspects of the terms on which we entered the Common Market, will be part of the comprehensive consideration leading to the renegotiation that the present Government will undertake.

ETHIOPIA: FAMINE RELIEF AID
3.4 p.m.
LORD BROCKWAY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action is proposed to help relieve the famine in Ethiopia.
THE Loan PRIVY SEAL (LORD SHEPHERD): My Lords, Her Majesty's Government have allocated £350,000 to Ethiopia for famine relief projects which include road construction and irrigation programmes. This is in addition to the normal development aid programme in
588
Ethiopia, amounting to nearly £2 million annually, a substantial part of which is devoted to rural development—the best safeguard against a repetition of this disaster. My right honourable friend is urgently considering, in consultation with the voluntary agencies, further measures to improve transport facilities for the distribution of grain, a project to restock the depleted herds of the Afar nomads, and the possible need for further emergency relief aid in the event of any worsening in the situation.
LORD BROCKWAY: My Lords, while greatly welcoming that reply, may I ask my noble friend whether, in their consideration of further relief measures, Her Majesty's Government will consider making the proposal to the United Nations that they should establish a permanent relief agency which could act in time of famine or natural disaster?
LORD SHEPHERD: My Lords, this is a view that I personally have held, which has been held within Parliament and, particularly, within our Party. It is a matter to which I know my right honourable friend will be giving the most careful attention.
BARONESS GAITSKELL: My Lords, would it be a good idea that my noble friend Lord Brockway should put his Question to the heads of the oil-producing countries whose main problem seems to be what to do with the wealth that they possess at this moment, which is not our problem? I noticed about a week ago that Emperor Haile Selassie, who went to Saudi Arabia to ask for help, was sent away with very little satisfaction.
LORD SHEPHERD: My Lords, it is the normal practice to direct questions to a Minister, in the expectation that he may be able to do something. I can only suggest to my noble friend Lord Brockway that he takes note of what my noble friend Lady Gaitskell has said.
LORD DAVIES OF LEEK: My Lords, would my noble friend please try to ensure, if aid is distributed to Ethiopia, that it is not given on any biased, theocratic basis, but that the aborigines in the South, who are not Ethiopian Christians, should get exactly the same chance of aid as the theorcratic Ethiopians?
LORD SHEPHERD: My Lords, the aid is being given to people in distressed areas.
LORD BROCKWAY: My Lords, while not wishing to comment on the question which has been put to me by my noble friend, Lady Gaitskell—to which I have a complete answer in my own actions—may I ask the Lord Privy Seal whether, arising from the question she has put, the Government will support the proposal at the United Nations on April 9 that there should be a discussion between the oil and the other producing nations, and representatives of the developed nations, to try to reach a balanced solution on this problem?
LORD SHEPHERD: My Lords, I am sure we shall.
LORD BOWDEN: My Lords, is the noble Lord the Lord Privy Seal aware that in concentrating efforts on road building he will solve only a small part of the problem? More than half the population of Ethiopia lives fifty miles from a road. Other techniques will have to be devised since the tracks are impassable. I beg to suggest that the complications are far greater than seem to have been envisaged in the reply given by the Lord Privy Seal.
LORD SHEPHERD: My Lords, the road building project was initiated to deal with the immediate situation, in order that food could be distributed. The capital aid and technical aid that we are now providing is concentrated in the field of irrigation and crop development.
SEVERAL NOBLE LORDS: Order ! Order !
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, is the noble Lord aware that we like to see his face as well as hearing his voice?
LORD SHEPHERD: I beg your Lordship's pardon for turning my head away. I thought my voice was loud enough for all noble Lords to hear me.
LORD SLATER: My Lords, is my noble friend in a position to state whether any support for Ethiopia is coming from the rest of East Africa, particularly from Kenya, which is on the Ethiopian border?
LORD SHEPHERD: My Lords, I have no information upon that matter. I suppose it must be recognised that many of those territories are experiencing drought conditions; but aid is at present coming from Europe.

SOCIAL SECURITY: BENEFIT AND CONTRIBUTION RATES
3.8 p.m.
LORD SHEPHERD: My Lords, my right honourable friend the Secretary of State for Social Services is making a Statement in another place on the up-rating of national insurance benefits. It has been agreed through the usual channels that, in view of the complex nature of this Statement, it should not be repeated here, but with the leave of the House I will arrange for it to be circulated in the OFFICIAL REPORT.
The Statement was as follows:
"With permission, Mr. Speaker, I should like to make a Statement about increases in social security benefits and contributions. My right honourable friend the Chancellor of the Exchequer yesterday announced the main proposals. The increases in benefits will take effect in the week beginning July 22. This means 17 weeks from now—and in the last three years the shortest timetable achieved has been 25 weeks. The 17-week timetable can only be met at a risk that some beneficiaries may not receive their increase until shortly after the operative date. We will do our best to avoid this happening but, given our overriding objective of introducing the increases at the earliest possible date, I am sure the House will agree that it is a risk we should be prepared to take.
"The standard rate of pensions, that is of retirement pensions, invalidity pensions and widow's pensions, will go up by £2·25 for single persons. Married couples will get an increase of £3·50. Thus our pledge to increase pensions to the levels of £10 for single persons and £16 for married couples will be honoured. Old persons' pensions will go up from £2·85 to £3·70 for wives and from £4·65 to £6 for other people.
"Short-term benefits, namely, unemployment benefit and sickness benefit, will be increased by £1·25 for a single person and £2 for a married couple, making the single person's rate £8·60 and the married couple's £13·90 a week. Maternity allowance and injury benefit will go up by the same amounts.
"We are thus giving the highest priority to the long-term beneficiaries—the pensioners, the chronic sick and the widows. Nevertheless, the increase in the short-term benefits will be more than sufficient to maintain their purchasing power, and I should remind the House that short-term beneficiaries can receive an earnings-related supplement Which can itself

591
bring their benefits up to levels in excess of £10 or £16.
"Attendance allowance where attendance is required both by day and by night will go up from £6·20 to £8; and where attendance is required by day or by night the rate will go from £4·15 to £5·35.
"The 100 per cent. war and industrial injuries disablement pension will go up from £12·80 to £16·40. The standard war widow's pension will be increased from £10·10 to £13 and the industrial injuries widow's pension from £8·30 to £10·55.
"For the older war disabled and war widows we propose a further improvement, in addition to the increases in the basic pensions themselves. The age allowances, which a war widow receives at the rates of 65p at the age of 65 and £1·30 at the age of 70, and which a disabled man with an assessment of 40 per cent. or more receives at the age of 65 at rates varying from 60p to £1·80, will all be doubled. Thus war widows will receive an age allowance of £1·30 at the age of 65 and £2·60 at the age of 70; and a disabled man with an assessment of 100 per cent. will get an allowance of £3·60 at the age of 65. Over 40,000 disablement pensioners and over 50,000 war widows will benefit from this special help. The net cost will be £4·5 million in a full year.
"The earnings rule will be relaxed as part of the uprating so as to increase the amount at which the rule starts to operate from the present £9·50 to £13 a week.
"I turn now to supplementary benefit. The increases in the main scale rates will be the same as, and will come into force at the same time as, the increases in the related national insurance benefits. The increase of £3·50 for a married couple—proposed for retirement pensioners—will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term rates. The increase of £2·25 proposed for single retirement pensioners will also go to supplementary pensioners and other supplementary beneficiaries who qualify for the long-term scale rates, where they live alone. Thus a supplementary pensioner living alone will become entitled to at least £10·40 a week plus rent and rates—£10·65 plus rent and rates if he is over 80. A supplementary pensioner couple will become entitled to at least £16·35 plus rents and rates, or £16·60 plus rent and rates if one of them is over 80.
"The supplementary benefit ordinary rates—for persons who are neither of pension age nor qualify for the long-term rates—will go up by £2 for a married couple and £1·25 for a person living alone, to match the increases in the short-term national insurance benefits.
"The prescribed amounts which govern title to family income supplement will also be increased.
"The cost of all these increases in social security benefits will be over £1,250 million in
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1975–76. Over £1,100 million of this cost will fall on the National Insurance Funds.
"Next I come to national insurance contributions. My right honourable friend explained to the House yesterday how we are proposing to allocate the extra contribution burden so as to put most of it on the employer and, in particular, to help the lower paid. The net effect of our proposals is that men earning £20 a week will pay 3p less than they do now and that, in general, no man earning less than £27 a week will have to pay more than he does at present, while the highest increases in contributions will fall on those earning £62 a week or more. These men will pay an extra 57p a week; and men earning £40 a week will pay an extra 7p a week. Women's contributions will be changed correspondingly. All the contribution changes are proposed to come into effect on August 5. The Treasury contribution will continue at about 18 per cent. of the income from contributions.
"For the convenience of the House I am circulating details of the new rates of benefits and contributions in the OFFICIAL REPORT. These, with copies of my Statement, are available in the Vote Office. I should add that I shall shortly be presenting the necessary Bill, which will be accompanied by the Government's Actuary's Report.
"Before I end I should say a word about financing after the end of the 1974–75 financial year. The proposed contribution rates, together with the associated Treasury supplement, will provide sufficient income to cover the cost of benefits at the new levels whilst the present national insurance scheme lasts. However, if the new structure and level of contributions provided by the Social Security Act 1973 were to come into force in April, 1975, the income of the National Insurance Fund would not be sufficient to finance an uprating of the basic pension on the generous scale we propose. We have not yet decided precisely how we are going to deal with all the interim problems raised by the Social Security Act, but I can say now that we intend to introduce legislation later in the year to secure income to the National Insurance Fund which will still be adequate to the new levels of benefit after April, 1975.
"I conclude by reminding the House that we are pledged to work for a greater measure of social justice. The proposals I am putting before the House will take us along that road. The increases in pensions will be the largest ever within the national insurance scheme, both in money and in real terms. The Government intend to build on this founlation by ensuring that in future pensions will be increased annually in proportion to increases in average national earnings. This is a pledge never before given to the most vulnerable members of our society. It is a pledge long overdue."
Following are the details of the new rates of benefits and contributions referred to in the Statement:

593

MAIN INCREASED NATIONAL INSURANCE BENEFIT RATES:

Proposed Weekly Rate £

Existing Rate £

Standard rate of invalidity, widows' and retirement pensions and widowed mothers' allowances:

Single person

10·00

7·75

Wife or other adult dependant

6·00

4·75

Standard rate of unemployment and sickness benefits:

Single person

8·60

7·35

Wife or other adult dependant

5·30

4·55

Married woman (normal rate)

6·05

5·15

Persons under 18

4·75

4·05

Widow's allowance (first 26 weeks of widowhood)

14·00

10·85

Widow's basic pension

3·00

2·33

Maternity allowance

8·60

7·35

Invalidity allowance payable with invalidity pension, when incapacity began before age:

35

2·05

1·60

45

1·30

1·00

60 for men or 55 for women

0·65

0·50

Attendance allowance:

Higher rate

8·00

6·20

Lower rate

5·35

4·15

Old persons' pensions:

Wife

3·70

2·85

Any other person

6·00

4·65

Guardian's allowance

4.90

3.80

Child's special allowance and increases for children of widows,invalidity and retirement pensioners:

First child

4·90

3·80

Second child*

4·00

2·90

Any other child*

3·90

2·80

Increases for children of all other beneficiaries:

First child

2·70

2·30

Second child*

1·80

1·40

Any other child*

1·70

1·30

* Family allowances are payable for second and subsequent children.

Injury benefit*†

11·35

10·10

Disablement benefit (100 per cent assessment)*

16·40

12·80

Unemployability supplement‡

10·00

7·75

Special hardship allowance (maximum)

6·56

5·12

Constant attendance allowance (normal maximum)

6·60

5·15

Exceptionally severe disablement allowance

6·60

5·15

Industrial death benefit:

Widow's pension during first first 26 weeks of widowhood

14·00

10·85

Widow's pension now payable at £8·30 rate

10·55

8·30

Widow's pension now payable at £2·33 rate

3·00

2·33

* Increases will also be made in the juvenile rates.

†Increases for adult dependants and children will be the same as those for unemployment and sickness benefit—see National Insurance table.

‡Invalidity allowances and increases for adult dependants and children will be the same as those for invalidity pensions—see National Insurance table.

MAIN INCREASED WAR PENSION RATES:

All ranks receive the same increases, officers' rates being expressed in pounds per annum.

PART I: DISABLEMENT BENEFITS:

…

…

…

Proposed Weekly Rate £

Existing Rate £

Disablement pension for private at 100 per cent rate

…

…

…

16·40

12·80

Unemployability allowances*:

Personal allowance

…

…

…

10·75

8·40

Increase for wife or adult dependant

…

…

…

6·00

4·75

Comforts allowance:

Higher rate

…

…

…

2·80

2·20

Lower rate

…

…

…

1·40

1·10

Allowance for lower standard of occupation (maximum)

…

…

…

6·56

5·12

Constant attendance allowance:

Special maximum

…

…

…

13·20

10·30

Special intermediate

…

…

…

9·90

7·75

Normal maximum

…

…

…

6·60

5·15

Half and Quarter day

…

…

…

3·30

2·60

Age allowance with assessments of:

40 and 50 per cent

…

…

…

1·20

0·60

60 and 70 per cent

…

…

…

1·80

0·90

80 and 90 per cent

…

…

…

2·60

1·30

100 per cent

…

…

…

3·60

1·80

Exceptionally severe disablement allowance

…

…

…

6·60

5·15

Severe disablement occupational allowance

…

…

…

3·30

2·60

MAIN INCREASED SUPPLEMENTARY BENEFIT RATES:

Proposed Ordinary Weekly Rate £

Proposed Long-Term Weekly Rate* £

Existing Ordinary Rate £

Existing Long-Term Rate* £

Ordinary scale:

Husband and wife

13·65

16·35

11·65

12·85

Persons living alone

8·40

10·40

7·15

8·15

Any other person aged:

Not less than 18

6·70

8·40

5·70

6·60

Less than 18 but not less than 16

5·15

—

4·40

—

Less than 16 but not less than 13

4·35

—

3·70

—

Less than 13 but not less than 11

3·55

—

3·00

—

Less than 11 but not less than 5

2·90

—

2·45

—

Less than 5

2·40

—

2·05

—

Blind scale:

Husband and wife:

If one of them is blind

14·90

17·60

12·90

14·10

If both of them are blind

15·70

18·40

13·70

14·90

Any other blind person aged:

Not less than 18

9·65

11·65

8·40

9·40

Less than 18 but not less than 16

6·05

—

5·30

—

Less than 16 but not less than 13

4·35

—

3·70

—

Less than 13 but not less than 11

3·55

—

3·00

—

Less than 11 but not less than 5

2·90

—

2·45

—

Less than 5

2·40

—

2·05

—

Class 1—EMPLOYED PERSONS—INSURED PERSON (including N.H.S. contribution):

Earnings

Present Rate Total £

Decrease Flat Rate £

Increase Graduated £

Flat Rate £

New Rate Graduated £

Total £

Employed Man:

Contracted-Out

£15

1·02

0·09

0·02

0·87

0·08

0·95

£20

1·15

0·09

0·06

0·87

0·25

1·12

£30

1·65

0·09

0·11

0·87

0·80

1·67

£40

2·15

0·09

0·16

0·87

1·35

2·22

£50

2·65

0·09

0·21

0·87

1·90

2·77

£60

2·83

0·09

0·58

0·87

2·45

3·32

£62

2·83

0·09

0·66

0·87

2·53

3·40

Not Contracted-Out

£15

1·15

0·09

0·03

0·75

0·34

1·09

£20

1·41

0·09

0·06

0·75

0·63

1·38

£30

1·91

0·09

0·11

0·75

1·18

1·93

£40

2·41

0·09

0·16

0·75

1·73

2·48

£50

2·91

0·09

0·21

0·75

2·28

3·03

£60

3·09

0·09

0·58

0·75

2·83

3·58

£62

3·09

0·09

0·66

0·75

2·91

3·66

Employed Woman:

Contracted-Out

£15

0·85

0·09

0·02

0·70

0·08

0·78

£20

0·98

0·09

0·06

0·70

0·25

0·95

£30

1·48

0·09

0·11

0·70

0·80

1·50

£40

1·98

0·09

0·16

0·70

1·35

2·05

£50

2·48

0·09

0·21

0·70

1·90

2·60

£60

2·66

0·09

0·58

0·70

2·45

3·15

£62

2·66

0·09

0·66

0·70

2·53

3·23

Not Contracted-Out

£15

1·02

0·09

0·03

0·62

0·34

0·96

£20

1·28

0·09

0·06

0·62

0·63

1·25

£30

1·78

0·09

0·11

0·62

1·18

1·80

£40

2·28

0·09

0·16

0·62

1·73

2·35

£50

2·78

0·09

0·21

0·62

2·28

2·90

£60

2·96

0·09

0·58

0·62

2·83

3·45

£62

2·96

0·09

0·66

0·62

2·91

3·53

BEAVERBROOK NEWSPAPERS IN SCOTLAND
LORD SHEPHERD: My Lords, with the leave of the House my noble friend Lord Hughes will be making a Statement at a convenient moment after 3.30 p.m. on the Beaverbrook newspapers in Scotland.

INDUSTRY AND COMMERCE: NEED FOR ENCOURAGEMENT
3.9 p.m.
LORD ERROLL OF HALE LORD ERROLL OF HALE rose to call attention to the urgent need for the policies of the new Government to give full encouragement to British industry and commerce; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion which stands in my name on the Order Paper. I think it is clear that a new Government, whether it be a Conservative or Labour Government, in the first few weeks of its formation is very sensitive to the views which may be expressed to it. Although it will be very

601
busy with programmes and proposals, it is also prepared to listen. I therefore tabled this Motion last week because it seemed to me that it would provide an opportunity of putting to Her Majesty's Government points of view regarding the encouragement of British industry and commerce which are of great importance at a time when the Government might be prepared to listen. As a Government moves into a longer period of office—and again this applies to whichever Party it may be—there comes a certain hardening of the arteries, a certain inflexibility of point of view as commitments are honoured and others are undertaken. So this seemed to me to be a very valuable opportunity of making points to Her Majesty's Government at a time when they might have some effect.
All of what I have just been saying has, unfortunately, been overtaken by the speech of the Chancellor of the Exchequer in another place yesterday which, from the point of view of my Motion, shows that Her Majesty's Government have already arrived at a rigid point of view. I appreciate that this debate is not a debate on the Budget, although I understand that it is quite proper to make some reference to various parts of the Budget speech—I am glad to see the noble Lord the Leader of the House acknowledging that this is in order. So I will deal with certain aspects of yesterday's Budget speech which particularly affect the topic of my Motion.
In that long and very skilful speech by the Chancellor of the Exchequer there was, disappointingly, very little reference to the wealth-creating activities of our island. There was a great deal that was said, and is to be enacted, for the benefit of the old and infirm; for the sick and the weak; and there are to be considerable hand-outs to those who are in need. I am not quarrelling with all this; indeed, there is a measure of justice in what is proposed. But all of this has to be earned. I was surprised to find that very little reference was made in that speech to productive industry and commerce. Here I would include, of course, the nationalised industries as well as the industries in the private sector, because in their own way the nationalised industries, too, are able to contribute to our national wealth. This omission from the Chancellor's Budget strikes me as most
602
extraordinary, because unless industry and commerce are to be encouraged to do that little bit extra there will not be the wealth to distribute under the Budget proposals; it will be a country that will be becoming progressively poorer instead of progressively richer.
The urgent need to-day is to maximise our resources, to put them to the most profitable uses, and particularly to do that everywhere in the world. The Budget speech does nothing to give encouragement to industry and commerce. After all, industry and commerce, at all levels, are a matter of people; whether they be represented by trade unions or, at the other end of the scale, by the Institute of Directors. They are all people, all wanting to do better for themselves and their families, and to do well for the companies or the businesses with which they are associated, in whatever capacity. Only if this effort can be maximised can we hope to generate the increasing wealth that Britain needs, and also the increase in foreign currency earnings. All this was glossed over. I for one, am very sad that a Chancellor, who may have shown some promise yesterday, should have ignored the real source of Britain's wealth. I hope, therefore, that Her Majesty's Government will pay some heed to what I am going to say to-day.
My Lords, I think we all accept that a measure of cutting back in personal consumption, personal ambitions and improvements for our families and our social life are necessary at all levels. But I think that it was particularly unfair to hit so hard those in middle management, those earning from about £2,000 to £6,000 a year upon whom the future of British industry and commerce, managerially, is particularly dependent. I think they have been hit harder than any other section. On percentage points and the like, it may be that the very rich have been hit proportionately harder, but I am not going to plead their case to-day. It is the young middle manager and his family who are going to feel the Budget impositions harder than any other group. It is on the young and enterprising managers that the prosperity of British industry and commerce depends.
I feel particularly sad that in this great speech by the Chancellor of the Exchequer there was no reference, or

603
virtually no reference, to the wealth-creating elements of our society. Could that have been because the Government do not understand what it is all about? Would it not be possible for them to try to learn? It was interesting to note that in the interview which Mr. Benn gave to Mr. Groser, reported in The Times about W days ago, Mr. Benn said that the Labour Party had been having a considerable dialogue with the trade union leaders over the past two years. Excellent! I wish he had also had a similar dialogue with industry and commerce—not just with the established bodies, such as the Confederation of British Industry, but with the management and directors of individual business and companies. I would put to Her Majesty's Government: Please, first, understand the point of view of the businessman; and then, please, have some regard for it, for it is in the private sector that the greatest opportunities exist for increasing our resources and increasing the wealth which the Government wish to distribute.
I should like to develop this theme briefly. Let us take the hardest question of all first; namely, the profits. I know that for many people on the other side of your Lordships' House the word "profits" is an emotive word; but it is profits which in fact must be secured by any enterprise if that enterprise is to continue to exist. Indeed, it is the profits which provide most of the additional capital for further investment and expansion. If there is a failure to generate profits the business suffers and probably collapses, and that leads to further unemployment. I was going to make a rather more detailed reference to the problems of the Express newspapers, where failure to generate profits is causing the closure of important plants and the unemployment of 1,500 or more people in Scotland. That illustrates that the first call is to have an efficient business which can make, and continue to make, a profit. Let us be quite clear about the importance of profits in the private sector. I hope that Her Majesty's Government will realise that the ability to produce profits is of the first importance in any business. Pure profit seeking on its own is not enough, of course. Profits come when other things are right as well; when the business is efficiently
604
run, when the employees are contented and keen, and when good service is given to the customers. Profit is merely the end product of all the other things which a successful business should achieve.
Then comes the question of the disposal of those profits: the question of how much should be reinvested in the business and how much distributed. A certain distribution, of course, is right if further risk capital is to be attracted into the business. I hope, therefore, that Her Majesty's Government will bear in mind the importance of a business being profitable; and the importance, too, at the right time, of permitting proper distribution of dividends when the company so decides. In connection with the running of a business, I hope that Her Majesty's Government will realise that what is entailed is a co-operative effort at all levels. It is not just the workers on the shop floor; managers, too, have their responsibilities, and in particular the directors have theirs: because, while the managers may have many responsibilities, it is the directors who are the custodians of capital invested in the business and it is they who have responsibility for deciding to what use the profits will be put, when profits can be earned. But the difficulty to-day, apart from the few fortunate exceptions, is for a company to earn the profits which are needed.
I thought it was typical but unfortunate that Mrs. Shirley Williams (I think it was) should say that she was going to stop businesses in the retail trade from selling old stock at the new prices. I know this is a good example of a misunderstanding of the importance of capital and profits, because if one sells the old stock at the old prices there is not enough money to buy the new stock at the higher prices, and so in the event the capital is handed out to the customers and is lost to the business. This is a point which is not widely understood or appreciated, but I thought it worth making to-day to demonstrate the great gulf there can be between those who are in business and those who prefer to attack and sneer at it from the outside.
I referred to the hard position of middle management. It is important to appreciate that salaries are high in business because of the responsibilities which are carried. A playwright or an author may not make a great deal of money, but that

605
person is not carrying the day in and day out responsibility of those who are in the top echelons of business and industry. It is responsibility which wears people, and it is responsibility which should be rewarded. The reward is not at a high level in Britain. One has only to look across the Channel—ignore what is paid in America—to see that the rewards are considerably greater, after tax, in mainland Europe than they are in this country; and the growth rates in mainland Europe are correspondingly greater as well.
I want now to turn to one or two specific items which I hope Her Majesty's Government will consider in the course of the coming months. I urge Her Majesty's Government particularly to have regard to the position of small businesses, those which are proprietor-owned. A great deal of good work was done by the last Government in providing meaningful help for small businesses which are beset by the complexities of modern government and modern intervention from Whitehall. The small businesses of this country have a very important part to play in creating the wealth which this Government seek to redistribute. Do not ignore, I suggest to Her Majesty's Government, the important part that small businesses can play if given the chance. I know that my noble friend Lord Strathcona and Mount Royal, who is going to wind up for our side, will say rather more about this topic than I, but it is a subject of great importance since so many small businesses become large businesses, and very successful ones as well.
I should like to urge on Her Majesty's Government the proposals for the reform of company law which already appeared in another place before the Election. There are many sensible proposals in the Bill that existed up to the Dissolution which could well be enacted on a non-controversial basis. But, unfortunately, I read that the Under-Secretary in another place was not very interested in that Bill because he said that it was concerned only with the interests of shareholders and creditors and barely dealt with the responsibilities of a company to its employees and to the community. I am sorry that thinking of that kind should have already started to generate itself in the minds of Her Majesty's Government. Creditors are very important people, as
606
anyone who has been a creditor to a business that has gone bust will fully realise. Her Majesty's Government may well be finding in the course of the coming months there will be a number of businesses which are going bust through the policies and attitudes of Her Majesty's Government.
THE MINISTER OF STATE, DEPARTMENT OF INDUSTRY (LORD BESWICK): My Lords, if I may interrupt the noble Lord, since he has been good enough to read Hansard of another place. I wonder whether he would also read Hansard of this House. He would then see that last week his noble friend Lord Limerick raised this point and I did my best to answer it.
LORD ERROLL OF HALE: My Lords, I apologise to the noble Lord because it has not been possible for me to read the enormous stream of material which has been coming out in the last few days. That particular reply of the noble Lord I will certainly read, and if I have made the wrong point I will gladly withdraw. Nevertheless, I hope that a non-controversial Companies Bill can be introduced in order to clear up certain technical matters which could be improved by fresh legislation.
LORD RAGLAN: My Lords, if the noble Lord will allow me to intervene, before he begins to be controversial and to blame one side or another, may I ask whether he is aware that more small firms are on the edge of bankruptcy because of the three-day week than because of anything the present Government have yet done or have said they are going to do?
LORD ERROLL OF HALE: My Lords, that is a point which has been made a number of times. My information is very much to the contrary: that small firms were in fact able to cope with the problems caused by the three-day week far better than was expected. Indeed, I know some cynics have called it, not the three-day week but the four-day weekend, which was very congenial to many people, since so much additional work was done in the three working days that it surprised everybody, including the workers themselves. The problem for the small business is much more the problem of finding sufficient working capital to finance the higher cost of raw

607
materials, to finance pay increases, to finance fuel and electricity increases, which all have to be paid for before the goods, having been manufactured, are themselves paid for. The real strain for small companies and big ones alike will be in the coming months, not in tidying up the short disruption caused by the period of the three-day week.
In the one or two other points I wish to make in the course of my opening speech I would ask Her Majesty's Government to make up their minds about the nuclear energy programme. The previous Administration were taking a long time about it. This action Government of ours might take a little action here as well. The postponement of a decision on the grounds that the 30 per cent. increase in electricity prices will damp down demand for electricity and so reduce the need for new stations is tempting, but many companies, particularly in development areas, would be enormously benefited if they knew what system was going to be decided upon by Her Majesty's Government and the Central Electricity Generating Board. This is not a controversial matter. I am sure that the new Minister for Energy will have access to all the documents of the previous Administration at official level, so none of the earlier work will be wasted. A decision of this kind made quickly could do a great deal to help engineering and other companies which are wondering how their order books are going to be filled in the coming years.
Another matter, which again is of a non-controversial nature, but well worth looking into, would be to review the policy of investigating proposed mergers. This has been a very clumsy operation in the past. It was introduced by the former Labour Administration and continued by the Conservative Administration. A clean-up here is clearly required, and an opportunity arises from the early retirement of the existing Chairman of the Monopolies and Mergers Commission to have a face-lift in this aspect of procedure, which does so much to slow down, and indeed possibly negate altogether, useful and desirable mergers which would improve the efficiency of British industry.
In a more general way, I urge Her Majesty's Government, before hardening
608
of the arteries finally sets in, to try to look at the economy of Britain from the point of view of setting general guidelines and avoiding detailed intervention. The will to create wealth is there; the desire is there; the potential is there; but if decisions are delayed, if there is to be petty detailed interventionism in individual companies no good will be done but a great deal of damage may be caused. I suggest to Her Majesty's Government that British industry and commerce are very willing for a dialogue to start and to continue at all levels with individual firms, and not always with institutions, about what should be done and how it should be done. This is an opportunity for Her Majesty's Government to show themselves as fully understanding the importance of the private sector of industry and commerce, the importance of profits, the importance of dividends, too, when the time comes to increase them, to rise above narrow Party sectarianism and to be what they could be, a great Government. Alas! the speech made yesterday gives me very slender grounds for hope. My Lords, I beg to move for Papers.
3.31 p.m.
LORD BESWICK: My Lords, I do not exactly enjoy making a speech and certainly not twice on the same subject, in the same House, within practically the same week. As I still have the same views that I held last week, and as the Government's policy remains the same, there may well be an element of repetition in what I have to say. But as this time I am speaking early instead of winding-up I thought it might be useful if I spelled out, in response to the noble Lord's Motion—rather than getting involved in a debate on the Budget—some general lines of approach inherent in this Government's industrial policy. Then if the noble Lord, Lord Erroll of Hale, will agree, I shall take up some of the more specific points he made when I come to wind up. Again, I fear, I have to inflict a second speech on your Lordships.
My Lords, one undoubted bonus of having this second debate is that it enables me to welcome back to our deliberations the noble Lord, Lord Erroll of Hale. I have no doubt that he has been using his time well, and we all welcome him back to this House. The noble Lord always has a most conciliatory approach to our political discussions,

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even though he usually contrives to conceal it beneath a veneer of agreeable controversy. He started off, I thought, as if he was going to abandon his controversial posture when he spoke of the open-mindedness of this and other Governments, but then, after about the first sentence and a half, he was accusing us of premature hardening of the arteries, that we did not know what we were talking about and—I do not really think he meant this, and I take it in a friendly fashion from him though I would not from anyone else—that some Members of the Government were sneering from the outside at the efforts of industry. I am sure he does not really mean that.
May I tell the noble Lord about small firms, though I am going to say something more about them later on? He really should not say that this Government ignore small firms, when after all it was my right honourable friend Mr. Crosland who appointed the Bolton Committee. Much has been done since that Committee reported although the work was taken on by another Government. I assure the noble Lord, Lord Erroll, and the House, that we start off to-day with an agreed proposition, that industry—and I mean "industry" in every sense of what I regard as a good solid sound English word—is to be encouraged. I absolutely agree with him about that. There is no future for this country unless we can establish—or should I say "reestablish"—this industrial base. That, my Lords, is common ground. The question is, how do we go about it?
Let me first deal with two general anxieties expressed by the noble Lord. Of course there has to be consultation, genuine consultation, with all those involved—employed and employers alike. I know that some noble Lords opposite are concerned—and the noble Lord himself expressed this anxiety—that we on this side may underrate the contribution of directors and managers. I admit that the caricature of the fat cigar-smoking director still exists, in the same way as certain noble Lords opposite seem to think that all workers are agitators or spend their time driving up to the local social security office in a taxi to draw some immense uncovenanted sum in social benefits. Neither picture truly reflects the facts, and I should like to
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think that in this House at any rate we can do something about that process of mutual understanding which we said in last week's debate was absolutely essential if this country is to take a path of really effective social and economic progress. I can assure the noble Lord, Lord Erroll, that there will be intensive consultation with all those concerned on all sides of industry, and that it will be carried out in the spirit I have tried to indicate.
My Lords, there is then the question of profits. In general, I would say that those people who declare, as did the noble Lord to-day, that the Labour Government are against profits as such are just being old-fashioned. I come from a generation and from an area where certainly there was, to use the term employed by the noble Earl, Lord Limerick, last week, a hatred of profits. When there was a controversy between the miners and the mine owners then it was a question of the division between one lot of people who owned and managed a company and those who worked for them. Those days are gone. Political thinking has got beyond that stage. Of course some profits may be criticised as being excessive. Of course some profit margins should be cut. But a sophisticated discussion about profits really raises the question as to how they are allocated. I beg the noble Lord to think that there are some on our side (I am not including myself, but some of the younger people coming along) who are just as sophisticated as anyone on the opposite Benches, who discuss this subject in a completely different way. They are concerned not with attacking profits but with deciding what the allocation should be between one use and another. So, my Lords, despite what some may be disposed to say about an emergency Budget to deal with an emergency situation not created by the present Government, the fact remains that we believe that there must be a partnership with industry and we hope and intend to do our utmost to encourage and guide the expansion of industry.
The noble Lord asked how the guidance should take place. An essential tool of this expansion policy will be a new Industry Bill. This was stated in our Election Manifesto and it was specified in the Queen's Speech. I cannot give

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details of that Bill at this stage, and in any case we must have further consultation with the C.B.I., with the T.U.C. and with other interested parties. Broadly, however, we shall want to develop the powers in the present. Industry Act and, in addition, we shall want to set up a system of planning agreements and a National Enterprise Board. A good deal of preparatory work has been done; some exciting prospects are open and I would tell the noble Lord that the enthusiasm and the deeply informed nature of the leadership given by my right honourable friend Mr. Wedgwood Benn is truly exhilarating in this matter. I hope that the noble Lord will come along some time and take part in the discussion; I am sure that he too would find it exciting. This work has started, but much further study and consultation has to take place.
My Lords, the planning agreements system is intended to help British industry to make its maximum contribution to strengthening our economy. The basic idea is a simple one. It is to give the leading firms in this country, on whom our prosperity depends—and here I agree with the noble Lord—a better opportunity to contribute to the attainment of certain economic objectives. These objectives may be an increase in exports, replacement of imports, an increase in investment, or an acceleration of technological development in some key sectors.
It is intended to be a constructive partnership. The leading firms will give information about how they see the future in their particular sectors and about the plans which they are making for the future. The Government, with the general economic information at their disposal, which will be reinforced by the flow of information from leading firms, will seek to give these firms clearer guidance on how they can help the attainment of economic objectives. The approach will not be one of detailed interference. The aim will be to ensure that there is a greater consistency between the strategies of the major firms and the strategy for the economy generally. If the firms are willing and able to help in the way the Government suggest, it will be for the Government in turn to smooth their path in whatever ways are
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open. It is of course an important feature of our proposals that there should be appropriate participation by the trade unions. They indeed have a major contribution to make to the success of these proposals.
It may be said that although the idea is attractive, all past experience of attempts at economic planning in Britain suggest that it will not work in practice. My answer to a criticism of that kind is the answer that was once given by Robert the Bruce. Arrangements of this kind have operated successfuly in several European countries. A system of this kind, called the "programme contracts system" was introduced in France in 1965 and is still operating. Similar systems were introduced in Belgium and Italy in 1969. I think it is generally recognised that in France considerable industrial progress has been made over the past decade, and there are many who believe that a major factor in this has been the way in which the Government, management and the unions have been able to co-ordinate plans for the future development of particular sectors of industry. The system certainly seems to work there, and there seems to be no reason why it should not work in Britain. At any rate we have to try, and we intend to try.
I may be asked whether this involves an element of compulsion. I may be asked what sanctions the Government intend to introduce. We have recognised that there may well be a need for reserve powers to make a planning agreements system fully effective. The Secretary of State, my right honourable friend, has referred to powers to obtain information and to intervene temporarily in the management of a particular company. There are certainly precedents for this. For example, I believe the last Government were taking similar powers to regulate insurance companies. The view might be taken that some reserve powers are needed if only to ensure that companies who co-operate have some reassurance that they will not suffer at the hands of their competitors by doing so. But the point here is that if the planning agreements system is to work properly it can do so only in a co-operative spirit, and it is voluntary agreements which the Government will be seeking.

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Fears may be expressed that the National Enterprise Board proposal implies a massive extension of public ownership. The Government certainly contemplate some extension of public ownership. But the previous Government also, despite their philosophical attitude, found it necessary to extend public ownership. I have only to recall the setting up of Rolls-Royce (1971) Limited and Govan Shipbuilders Limited. It is surely recognised by now that public ownership is sometimes the only way of ensuring that some particular sector of the national economy develops in a way consistent with the national interest. And there remains the argument that we ought to aim at more equality of ownership of important assets in our nation, and that is an argument which should not be underestimated.
The National Enterprise Board proposal recognises that nationalisation of whole industries on the traditional pattern is less likely to be appropriate in the future. It is more likely that a need will arise to take into public ownership a particular enterprise of national importance. Where such individual enterprises are taken over, it is clearly desirable to have proper machinery for managing these publicly owned assets in the national interest. That is where the National Enterprise Board proposal would come in. It is too early to go into details about the kind of organisation which will be thought appropriate or to forecast which enterprises will be brought within its sphere of responsibility. In certain cases, however—and the Labour Party Manifesto details those cases—we have set out our objective of full public ownership in certain industries.
My Lords, in all this I am of course looking to the medium and long-term future. It is unlikely that the impact of a new Industry Bill will be felt within the lifetime of the present Parliament. While we are working upon a new systematic approach to this crucial problem of investment in the manufacturing and service industries, it is important to ensure that there is no let-up now in our efforts towards recovery. There is much that we can do now towards achieving a high—and this time a sustainable—growth of our economy. Equally, we have to maintain, and indeed intensify, efforts to eliminate the disparities in employment and development that have built up over the
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years in Scotland, Wales and the English assisted areas. Our broad intention, therefore, is to maintain the priority which those areas receive over the whole field of Government policy and to continue and develop financial and other incentives now available for the location of new industry and the expansion of existing industry in those areas. The need for continuity is accepted, but there must be no doubt that this support will require a wider, more active and, we hope, more fruitful role for the Government.
I hope there will be no disposition to say that we should not try a new or more developed form of partnership. I hope there will be no attempt to point to the past as an example for policies of the future. I am not going to quote again the figures that I used last week about the budgetary deficit and the balance-of-payments failures of the previous Administration. But probably it is worth bearing in mind—all of us—one figure that I quoted last week. I have myself spent some little time brooding over it. I said then that our manufactured imports now amount to 90 per cent. of our manufactured exports. And this for a country which made its name and owed its position in the world as a leading industrial nation!
I make no Party point of it when I say that in 1968 the ratio was one of 67 per cent. If one goes further back, we find that at one time manufactured imports were only 50 per cent. of our manufactured exports, and thus we had 50 per cent. of our manufactures helping to pay for our raw materials and essential foodstuffs. The fact is that a deterioration which has been taking place over the years has to be reversed. Clearly some new attempt has to be made; some new methods have to be tried. I suggest that the case for trying some new form of partnership within industry is obvious. I say to the noble Lord that it will be a partnership resulting from full, genuine consultation. Where additional public ownership is indicated, the right of Parliament to say "yea" or "nay" will be completely respected. I end by saying I should like to think that in all the discussion and controversy which the Government's policy will inevitably involve, this House will play a full and constructive part.
3.50 p.m.
BARONESS SEEAR: My Lords, may I begin by apologising for the fact that, owing to an engagement this evening from which I am unable to escape, I shall be unable to be in the Chamber to listen to the winding-up. As I say, I apologise, but it is inevitable.
My Lords, I should like to repeat what the noble Lord, Lord Beswick, has said, in that a great deal of the ground to be covered to-day was gone over in our debate last week. I do not intend to waste the time of the House by repeating the arguments and facts advanced in that debate, but after listening to what the noble Lord has said, I would pick up one point that he made at the very beginning of his speech—and I hope that it was more than a throw-away line. He said that perhaps at least in this House it would be possible for all of us, in all parts of the House, who are deeply concerned with these questions of economic development, industrial efficiency and relationships in industry to work together in the closest possible way. If this is in any sense an invitation to collaborate on these matters, I am sure (although I have not consulted all my colleagues) we shall be delighted to take part in any consultation in any way that it is possible for us so to do.
Since the debate last week, there have been two events which underline, though I do not think they basically change, what was said in the previous debate. There have been the worst ever balance of payments figures for the month, and there has been the Government's statement of policy in the Budget Statement in another place yesterday. To me, of course, and to Members on these Benches, there are certain aspects of that Budget speech which we greatly welcome. We welcome, as I am sure noble Lords opposite knew we should, the increase in pensions and the extent to which some of the worst-off sections of the community have been safeguarded by the provisions of the Budget. I will repeat, but not elaborate, what was said last week: that we do not think the way in which the money is being used to redress and avoid hardship is the wisest. It would have cost something like £340 million to give family allowances for the first child. The Government have chosen instead to spend £500 million on food subsidies.
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I am fully aware of the argument that using the money for food subsidies helps to keep down the retail price index and therefore postpones—though only for a short period of time—the moment at which the threshold agreements are brought into operation, and therefore a considerable inflationary influx of money is put into people's pockets. But this is only a very temporary and superficial way of dealing with the problem of inflation, which needs a far more drastic effort to deal with it than merely holding back for a few weeks what is, in our view, an extremely wasteful use of subsidies by paying them to all people for their food, whether they need the subsidies or not. We discussed this last week, and I do not intend to go into the matter at any length.
My Lords, another matter in the Budget speech yesterday, and indeed in what we have heard so far to-day, which I find of deep concern is the absence of any sense of urgency to deal with the really critical situation in which we find ourselves at present. We must increase our export trade, and increase it very quickly. We are living "on tick", and we are doing so to a most alarming extent. We have become so accustomed to living "on tick" that our balance-of-payments loss for one month, which in previous years, if it had been for a whole year we should have found of the greatest concern, is passed by as if it is something that we can live with, given that we have been able to work out how many noughts there are on the end of the sums that we are talking about when told of the size of the loss. I ask the Government a direct question: what are the Government proposing to do?—because I do not find it in the Budget speech. What are the Government proposing to do now—not in some middle-term or long-term, distant future, but now—to increase exports? Something on a really drastic scale is needed if no other increase is to take place from this present moment on.
The second sense of urgency which seems to be lacking in the Budget speech—and here in some ways I am echoing what the noble Lord, Lord Erroll of Hale, said, but with, I hope, a slightly different emphasis—is a sense of urgency in the need to increase the total volume of production in this country, and to increase productivity and efficiency in industry.

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To do this (and I am sure we were all agreed about this last week) we have to stimulate investment. What is there in the Budget proposals to encourage investment in industry? We are presented with the 52 per cent. corporation tax; we are presented with a rigid, and in the minds of many people very ill-understood, control over price increases. I am all for controlling price increases where it can generally be done without restricting the amount of money available for investment. But there is considerable discouragement in the Budget to save, and therefore to invest.
A great many of us over a number of years have been pressing for savings from the small saver. I know that this represents only a relatively small proportion of the total saving to be done, but it is a matter of getting the right proportion. What is there in the Budget to do anything other than discourage saving—particularly by the small saver, who has been hideously "clobbered" both from saving in Government securities and in the attempt to get into equities over recent years? Will the Government do anything about this? Industry must invest more. We all know that the proportion invested in the gross national product has gone down and down, and compares very un-favourably with our competitors. We all know that our growth rates are deplorable in relation to our competitors. We are in a situation that our balance of payments and prosperity at home will be in a very sorry state indeed unless somehow or other we manage to get a large share of contracting world trade; and this will be done only by an increasingly efficient industry.
We are entitled to receive from the Government precise answers to our questions, not just schemes for planning, systems of collaboration with industry in a middle and distant future, but answers as to what is being done now to restore the confidence of industry. We all know companies which are cutting planned investment programmes because of the present state of the economy. What has the Budget done to reverse the attitude that has grown up over recent weeks, and which is disastrous from the point of view of the general economy? What are the Government proposing to do?
There is also the huge increase in prices of commodities coming through the
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nationalised industries. Maybe it is necessary, but all the way round industry is being "clobbered". I know that the noble Lord, Lord Beswick, speaks so that we are persuaded that he understands as well as any managing director the necessities of industry, but that understanding is not reflected in the Budget. It is not reflected in the speeches of many of his supporters, and the mood engendered in the country is that the future of industry is very bleak indeed. My Lords, may I close by saying,
"Thou shalt not muzzle the ox when he treadeth out the corn."
That is what the Government are doing.
LORD SHINWELL: My Lords, before the noble Baroness resumes her seat, may I ask her a question? I found her observations on the constructive side intensely interesting. For example, I accept 100 per cent. what she said about the need to boost exports. That seems to me the pièce de résistance of the whole subject. The two points she emphasised were the need to boost exports and stimulate investment. I noted what she said earlier on, following the very fine speech of my noble friend Lord Beswick, that the Liberal Party would like to be consulted in this dialogue. Would it not be even more interesting if she could tell us, in a sentence or two, how to boost exports and how to stimulate investment, instead of asking what the Government are going to do?—because I tell her quite frankly that I do not believe the Government themselves know what should be done. If she could tell us, it would be most interesting.
BARONESS SEEAR: My Lords, the noble Lord, Lord Shinwell, has made very well the point that I was making. I do not think the Government do know; but we are entitled to hear whether they know or not. It is, after all, their responsibility.

BEAVERBROOK NEWSPAPERS IN SCOTLAND
4.2 p.m.
THE MINISTER OF STATE, SCOTTISH OFFICE (LORD HUGHES): My Lords, with permission, I would like now to repeat a Statement which is being made by my right honourable friend the

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Secretary of State for Trade in another place. His words are as follows:
"In my Statement of March 19, I promised to keep the House informed of the discussions I was having with Beaverbrook's Scottish newspapers. Since then my colleagues and I have talked to the various interests concerned.
"On the question of the transfer of Beaverbrook's Glasgow Citizen to the proprietors of the Glasgow Evening Times, my right honourable friend, the Secretary of State for Prices and Consumer Protection, has satisfied herself under the terms of the Fair Trading Act that the Glasgow Citizen is not economic as a going concern and as a separate newspaper. She has, therefore, today granted her consent, as under the Act she was bound to do, to the proposed acquisition.
"The House will recall it was when this application had been lodged with the then Department of Trade and Industry on February 19 of this year that the larger problem of the future printing arrangements for the Scottish Daily Express and the Scottish Sunday Express became apparent. Labour Ministers met the Beaverbrook management on March 13, and they impressed on us their view that the transfer of the arrangements for printing their two Scottish newspapers to Manchester had become essential to the financial viability of the group. We requested that the whole Beaverbrook group should look again urgently at its position, in the light of the number of jobs that would be lost, and against the background of the Government's Development Area policy and the special assistance available to firms in them.
"That was the position when I made my last Statement. Immediately afterwards the Prime Minister, together with the Secretary of State for Scotland and myself, met the Scottish T.U.C. at their request. My colleagues and I then met a strong deputation from the trade unions concerned. This was followed on the same day by a long and detailed discussion with the Beaverbrook management, when we put to them the suggestions and criticisms that had arisen from our talks with the trade
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unions and our own concern about the implications of their decision. It became clear at that meeting that there was only a slim prospect of arrangements being made to safeguard employment for the Albion Street labour force. This was contingent upon a satisfactory agreement between Beaverbrook's and Sir Hugh Fraser under which the latter would, on contract, continue printing the Scottish Express papers in Glasgow.
"We then met Sir Hugh and his management team to explore further the possibilities of these arrangements. From this it emerged that it was not physically possible for him to print the two Express papers in Albion Street and at the same time print there the two Glasgow papers for which he is responsible—a view with which the Beaverbrook group concurred.
"We then looked at further possibilities, including that of the Fraser Group printing the two Scottish Express newspapers at Albion Street while retaining its own two papers at Buchanan Street, and the proposal made by Sir Hugh to buy the two Scottish Express papers. Sir Hugh informed me that the latter proposal had been rejected by Beaverbrook's. So far as the first proposal was concerned, he expressed willingness to consider this carefully but doubted whether a contract could be made that would be economic for both parties.
"I saw the Beaverbrook management again yesterday to press them further to consider both these possibilities. Late last night, after further contact between the two groups, Sir Max Aitken informed me that neither of these possibilities was practicable.
"As the House will see, throughout these discussions we have been concerned with two objectives: first, to explore all possibilities of avoiding the grievous loss of jobs in hard-pressed Glasgow, and, second, to try to find an alternative solution based upon a Scottish newspaper group. It is with profound regret that we have been forced to the conclusion that no solution could be found.
"Many factors, over many years, have contributed to the situation. But it is clear to me that Beaverbrook's

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decision is based upon a serious concern about the future of their group as a whole and that the immediacy of their action, with all its deplorable consequences for unemployment, is greatly influenced by the financial need to defend the group as a whole and the need to find substantial funds to meet their redundancy commitments to the workers involved.
"As to the future, I can only say this. First, a substantial printing capacity remains in being in Albion Street; and we shall certainly be ready to discuss any serious proposal that may still emerge. Second, the whole unhappy sequence of events re-emphasises the point made by my right honourable friend the Prime Minister last Thursday when he said that he was urgently considering the possibility of some form of inquiry into the newspaper industry."
My Lords, that completes the Statement.
LORD POLWARTH: My Lords, as I think this is probably the first piece of Scottish business (if we can call it "Scottish business") to come before your Lordships in this Parliament, I am sure that your Lordships, certainly those behind me, would join me in congratulating the noble Lord, Lord Hughes, on his return to what was a former position of his, though I think we must commiserate with him on being given such a sorry Statement to make as his first contribution.
This is sad news indeed, though not entirely unexpected. The Beaverbrook papers in Scotland are something of a national institution. Many of us have suffered from the whips and scourges of their writers. We have at times had their encouragement and support. But, whatever we have felt about them individually, they have been a vital force on the Scottish scene, lusty, robust and, above all, for Scotland all the time. They have done much to create a conscious awareness in Scotland of the important issues facing us, and therefore the prospective loss of these papers, their removal to production further South, is something that we must all lament very deeply. That said, I am bound to agree with the noble Lord that there seems little more, if anything, that can be done to save the
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situation. These papers have been the victims of the pressures of rising costs which we strove so hard when in power to contain.
There are, I think, two wider aspects of this matter that must create worry beyond the immediate one of this particular group. One is the whole future of the newspaper industry itself, which must be under threat as a result of these same forces. Therefore, I am sure we are all delighted to hear that some form of inquiry into that industry is under consideration, and I hope that a decision will be made quickly. The second worrying matter is that this is an example of the situation that arises when a major national concern finds itself the victim of pressures of this kind, many of them not the responsibility or the fault of management; when in difficulty it will retrench on the operations furthest from the centre. In this case the blow falls first on Scotland; in other cases it may fall on Wales, the North of England or other remoter parts of the country. So I think we can but receive this Statement with profound regret.
LORD BYERS: My Lords, as one who was closely associated with the News Chronicle in its final days, I find what has taken place in Scotland a most distressing event. All of us would deplore the loss of any newspaper, no matter what its political views, in this country or indeed elsewhere. We are short of newspapers. This is a distressing and deplorable situation. I want to ask only two questions of the noble Lord, Lord Hughes. First of all, what are to be the redundancy arrangements? In asking that question, I should like to express our sympathy with the 2,000 people who are going to find themselves without a job in the very near future. Secondly, what is the position of the pensioners, and the future pensions of those who will become redundant in the very near future? Are these fully protected and, if not, what is going to be done about the situation?
4.11 p.m.
LORD HUGHES: My Lords, I must first of all express thanks to the noble Lord, Lord Polwarth, for his remarks, and to both the noble Lord and the noble Lord, Lord Byers, for the sympathetic way in which they have received

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this rather lamentable story. I could certainly have wished for something much more pleasing to be my first Statement on Scottish affairs. The noble Lord, Lord Polwarth, expressed the hope that the inquiry into the newspaper industry which was mentioned as a possibility would in fact become a reality. I shall certainly ensure that these remarks are brought to the notice of my right honourable friend the Prime Minister, because I sense that this would probably be the wish of the House as a whole.
With regard to the two questions asked by the noble Lord, Lord Byers, I am sorry I cannot answer the question about the pensioners because, although the admirable officials tried to anticipate all possible inquiries, with his usual accuracy the noble Lord has managed to pitch on one they had not thought of. It is a point of considerable importance, and I shall make certain that the noble Lord is given the answer as speedily as possible. So far as the redundancy payments are concerned, first of all the basic statutory requirements will be met, but Beaverbrook are offering substantially more. The details are for negotiation between them and their employees, but I understand that what they have offered as a first stage is made up of two weeks' pay for each year of set-Vice in addition to payment in lieu of notice and holiday money, and these together will cost £3·9 million. They hope to be able to make a second payment in January, 1975, of one week's pay, which would cost £1·4 million. Having said that these are the arrangements which Beaverbrook hope to make in supplementation of redundancy, I do not think that I am sticking my neck out unduly when I say that I think they would probably regard as an equal charge upon their resources the safeguarding of the pensions position, but I do not have any specific right to answer that problem. However, as I said, I shall try to find out.
LORD SHINWELL: My Lords, I would inform my noble friend that I was in Glasgow last Thursday attending a function organised by Beaverbrook newspapers, and I am bound to tell him that the redundancy payments, however adequate they are likely to be—although, in the opinion of the journalists and
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those engaged in the printing side they are far from adequate—and even if they are improved, would be quite unable to remove the depression that exists in Glasgow at the present time because of the closing down of the Albion Street Works. In view of what I have heard, I should like to ask whether it is likely that the Beaverbrook firm will be able to liquidate some of the vast properties they possess, thereby ensuring the availability of more adequate redundancy payments?
I should also like to ask whether my noble friend has any information to the effect that there were three items responsible for the closure: first, which seemed to me remarkable and I cannot vouch for the truth of it, that payments made both to journalists and printing operatives were far in excess of what ought to have been paid; secondly, the reduction in advertising revenue because there were two evening newspapers in Glasgow, the Evening Times and the Citizen (mention of the Citizen I understand, because of suggestions made by Sir Hugh Fraser, that it was likely to be merged in the Evening Times); thirdly, the cost of newsprint. I should have thought that the cost of newsprint would have affected papers generally. Why is the suggestion made in Glasgow that the cost of newsprint is one of the items that has caused this adverse situation?
LORD HUGHES: My Lords, first of all on the question of redundancy, as I stated in reply to the question about redundancy payments this is a matter for discussion between the two sides. I indicated what the Beaverbrook organisation had offered. I can only add to that, that what will eventually emerge will depend very largely on these discussions, and say that of course no amount of redundancy payment, no matter how extraordinarily generous it might be possible to make it at the end of the day, can be anything but a poor substitute for the loss of 2,000 jobs in the newspaper industry in Scotland, for which in the foreseeable future there can be no alternative source of employment. Therefore, one can well understand the feeling of depression of these 2,000 people.
So far as the suggestions as to how this situation has come about are concerned, I have no doubt that there will be many

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ideas put forward by different people as to the contributory causes. Without having an exhaustive investigation into the finances and organisation of this particular group it would be quite impossible for me or, I would suggest, possibly any other Minister, to say which of these factors had the greatest contributory effect. All I can say is, that if in fact the excess of payments to journalists was a contributory factor, no journalist had suggested hitherto that he was being paid too much. On the question of the cost of newsprint, this is a complaint that is being made by newspapers throughout the country. It is undoubtedly a factor which increases their costs considerably. While it may not be any more expensive to the Beaverbrook group in Glasgow than it is to anybody else, if it comes on top of another set of adverse circumstances it may turn out to be the straw that breaks the camel's back. Unfortunately, although I wrote down very quickly the noble Lord's second point, I wrote it so quickly that I cannot now read it. Would my noble friend be good enough to repeat it for me?
LORD SHINWELL: My Lords, it was the question of the reduction of advertising revenue because of the existence of the two evening papers, and whether the disposal of one of them would not have made a vast difference.
LORD HUGHES: My Lords, when there are two evening newspapers, or sometimes two morning newspapers, circulating in a particular area, one of them inevitably grows stronger at the expense of the other, and it then attracts a larger share of revenue. Presumably there is a reasonably successful future for one evening newspaper in Glasgow, and this is why the alternative newspaper proprietor has found it advantageous to pay a very considerable sum—I gather approaching £3 million—merely for the right to have the title of the evening newspaper that is being closed down.
LORD BYERS: My Lords, must not we also recognise that here there was a history of industrial disputes and industrial action, no matter who was responsible for it? This is a prime fact in this situation.
THE EARL OF ONSLOW: My Lords, first may I congratulate the noble Lord, Lord Hughes, most sincerely on his
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appointment; and, secondly, say how sorry one feels about people losing their jobs? Can the noble Lord tell us how many industrial disputes there have been in the past year in the Beaverbrook newspapers in Scotland? Also, I find it a little difficult to gather from the figures what are the average gross earnings of the people operating the newspapers in Scotland. Can the noble Lord tell us what these were?
LORD HUGHES: My Lords, I find the noble Earl twice as difficult to answer as the noble Lord, Lord Byers, because he has asked two questions to which I do not have the answers. However, they are questions of very real importance and I shall do my best to get the answers for him as quickly as possible. What I would say is that I have not heard it suggested—and I think that what I am now saying can be taken in part as a reply to the noble Lord, Lord Byers—that industrial disputes in the Express group in Glasgow have been a major contributory factor to the present situation.
LORD DRUMALBYN: My Lords, does the noble Lord know whether any talks took place between management and employees about such possibilities as might have been open? For example, the noble Lord, Lord Shinwell, suggested that the rates of pay were above the normal. Was it suggested that it might be possible for the printing to go on in Glasgow if lower rates were acceptable? I take it that the Scottish Daily Express will continue to circulate in Scotland but will be printed in Manchester. That means there will be a considerable journalistic staff remaining in Scotland, so am I right in thinking that not all of the employees of the Scottish Daily Express will have to be paid off?
LORD HUGHES: My Lords, it is correct that there will remain a journalistic staff in Scotland, although I do not know what proportion that will be of the total journalists employed at the present time. I understand that the figure remaining will be approximately 50 and when that is set off against the total number of jobs involved in the printing of the newspaper it will be seen that it is a very small part. So only time will tell what will be the effect of printing in Manchester, and to what extent the

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newspaper will continue to be sold in Scotland. What was the noble Lord's first question?
LORD DRUMALBYN: My Lords, I asked whether the alternatives had been considered.
LORD HUGHES: My Lords, I do not know anything specific about that aspect, but having regard to the negotiations which have taken place between management and staff, between management and Sir Hugh Fraser and between management—when I say "management" I mean the Beaverbrook management—and Ministers, I am quite certain that every possibility, including the one mentioned by the noble Lord, Lord Drumalbyn, has been gone into most exhaustively. But I think that the nature of the financial catastrophe which the group are meeting is such that, in their opinion, none of these suggestions is of value in restoring a viable operation in Glasgow.
LORD BESWICK: My Lords, may I suggest that it might now be appropriate if the noble Lord, Lord Polwarth, resumed the debate on industry and commerce?

INDUSTRY AND COMMERCE: NEED FOR ENCOURAGEMENT
4.24 p.m.
Debate resumed.
LORD POLWARTH: My Lords, I must admit that it had not been my intention to take part in a debate in your Lordships' House quite so soon after the events of the last few weeks. But having returned only three days ago from a short sojourn abroad and seeing the terms of the Motion down in the name of my noble friend Lord Erroll of Hale I felt bound to say a few words, however ill-prepared they might be. I had certainly not expected to speak from this Bench, nor indeed to be asked to reply to the earlier Statement, and I can only plead the fact that I was hijacked in the Princes' Chamber by my noble friend the Opposition Chief Whip.
It is about two years since, as a result of a bit of arm-twisting, I left business for a sojourn in this place in my former capacity, "when"—to adapt the words of Hilaire Belloc—"approaching 56 they pushed me into politics"; although I
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have always regarded my activities more as the business of government than of politics. Having served my term I can associate myself with what my noble friend Lord Windlesham said last week in the debate on the Address about the joys of freedom from office, and at the same time I can sympathise with the noble Lord, Lord Hughes, who has now left us, on now being subjected to the restraints of office instead of having the freedom which he exercised in a most friendly and fair manner when he sat on this side.
I think that I can express my joy at my freedom even more than some of my colleagues who, I am quite certain, will be finding themselves before very long—views on how long may differ—back in office because, as I have made to clear to them with much regret, and as I think I should make clear to all of your Lordships, I am not a candidate for a further spell of ministerial office, for, I believe, much the same reasons that the noble Lord, Lord Shackleton, was unable to take a place on the Front Bench opposite, to the regret of all of us. One can break off an existing career once for the purpose of taking office, but it is quite unfair to do it more than once and then expect to be welcomed back into the business world.
I can support wholeheartedly everything that my noble friend Lord Erroll said in opening the debate, which was most timely on the day after the introduction of the Budget. I want to comment on one aspect only of his speech, and that is the vital importance of giving encouragement to the development of industry and commerce in the regions, particularly in Scotland. I am glad that the noble Lord, Lord Beswick, mentioned this point a few minutes ago and told us that a new Industry Bill will be introduced. Naturally he was not able to tell us very much about it, but we shall look forward with great interest to its proposals. I have never regarded the regions—I know that we do not like Scotland being called a "region", but generically I think we must call it that—as a liability to the country. I regard them as an asset, because they have space for development, there are people to assist in the development—we still have a higher figure of unemployment than we should like; and I must apologise to noble Lords opposite for the fact that I have

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temporarily increased the figure in Scotland by one—and we have resources of skills. So that the regions are a real asset, provided that they are given the necessary encouragement.
I was sad that nothing in the Budget speech appeared to offer specific encouragement to industrial investment which is so badly needed, particularly in the regions. As the noble Baroness, Lady Seear, said, industry is burdened with higher corporation tax, and with increased costs for fuel, power, transport, posts, telephones and national insurance contributions. Almost the only compensation that one could see in the Budget was the promise that the regional employment premium would not yet be withdrawn. I should make it clear that even when we were in power there was no question of withdrawing it immediately, and plans were well advanced for a phased withdrawal of it. But in the present circumstances I think it is wise that it should be continued and, indeed, I think that many companies, particularly in the regions, would find themselves in severe financial difficulty if it were not.
There was one other possible burden in the speech which struck me and about which, perhaps, the noble Lord who is to wind up for the Government, may be able to enlighten us. It may be my fault for not studying the speech sufficiently closely, but in the passage about the disallowance of overdraft interest for tax, mention was made that whereas previously it had been allowed for qualifying purposes, there were loopholes and it was too easily got around, and that in future it would apply only to loans for particular purposes. I should point out to your Lordships that, particularly in Scotland, it is the normal practice of industries to finance themselves through fluctuating overdrafts rather than through fixed loans. My Lords, I think that we should like to have an assurance that this disallowance of overdraft interest will not apply to overdrafts genuinely incurred for the purposes of businesses of all kinds.
My Lords, before the recent upheavals from the fuel crisis and the miners' troubles in the winter, I believe that industry in Scotland, and many other regions, was probably better poised for a real breakthrough than it had been for many years. There were all the signs:
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unemployment had been coming down continuously for about eighteen to twenty months, until those sudden winter events; unfilled vacancies had been rising and there were indeed shortages of labour in individual places and categories. I think that we were all set for a big advance. I believe that once the present immediate difficulties are removed that advance can be resumed.
There are many causes. First and foremost are the very strenuous efforts made by industrialists in Scotland and others interested in the development of industry there, to achieve this. One must attribute some of the reasons to the impact of North Sea oil, and, my Lords, that is another subject on which I would rather not touch to-day because we shall undoubtedly have another opportunity before long to concentrate on it, although I must take the opportunity of congratulating the noble Lord, Lord Balogh, on turning from poacher to gamekeeper: we shall watch his performance in the new role with intense interest. I hope that, whatever new arrangements are made for handling North Sea oil, those responsible, in whichever Ministries, will take note of what I think is the extremely effective team that has been built up within the Scottish Office for handling oil matters, There is a considerable amount of expertise, knowledge and understanding in that office of the impact of North Sea oil, in its broadest sense and I hope that that will continue to be made full use of in whatever way the new Administration evolves.
The opportunities exist for maintaining this impetus. I am glad to hear from friends in recent days that the prospects for the capital goods industry in Scotland are basically good and that on the whole order books are good if they can deliver the goods, and we must help them to keep this up. That is why I think the maintenance of an effective regional policy is so immensely important. I was glad to hear the noble Lord say that they intended to develop these policies in new ways. I hope that that is so and that it does not mean a wholesale uprooting and change because in the past one of the difficulties with which industry has been faced has been the frequency of change in the forms of inducement and encouragement within the regions. This is where consistency and continuity are so important.

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My Lords, I believe that the measures introduced in our Industry Act almost two years ago have been for the better. One of the most important factors was that for the first time there was a genuine measure of devolution of their administration to the regions. Certainly my own experience has been that this has worked extremely well in Scotland. It has worked well because we have had an admirable Scottish Industrial Development Board made up of industrialists, bankers and all sorts of people who have given a great deal of time and trouble to handling the cases, and because we have been fortunate in having behind them (if I am allowed to say this) an extremely effective administration of the Department of Trade and Industry in its Glasgow office. I hope, therefore, that changes will be a development of policy rather than a wholesale rooting up and renewal.
If I could carry that to a more particular line, I should like to say something about the future of the steel industry in Scotland because this is one of our basic industries. Unlike other parts of the country, which are mainly related to one specific form of steel production according to region, we have in Scotland almost a microcosm of the steel industry, with a variety of products, which is vitally important to us in terms of employment and in the supply of basic materials for our engineering industry.
My Lords, as we all know, the engineering industry has suffered greatly, particularly in its investment plans, from political uncertainties for many years past. During 1972, as your Lordships will remember, there was a very thoroughgoing review of its investment plans between itself and the Government, and eventually, at the end of 1972, its forward plans for the next steel generation—if you can call it that—were agreed and publicised. While at the time I know that there was a good deal of concern at the number of closures and the reduction in the total numbers to be employed in the industry, particularly so within Wales, more than in Scotland, there was a general realisation that if the steel industry was to be competitive it simply had to trim and modernise itself and that a smaller industry with greater production would give much
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greater job security to those continuing to be employed in it.
My Lords, at the end of the day I believe that Scotland came remarkably well out of those plans, rather better than at one time it looked like doing. I was a little concerned, therefore, to see that Mr. Wedgwood Benn in, I think, the interview previously referred to, had talked about reviewing closures with the British Steel Corporation and indicating that possibly there might be another review. I beseech the Government not to have another thoroughgoing review of the steel industry's investment plans because I believe, certainly in Scotland, that we have broad acceptance of what was planned at all levels, including the trade unions, who have been very co-operative.
What is more, I know from my own visits within the last few months that we have a good and enthusiastic management in the plants and good leadership on the plant floors, too. The worst possible thing would be to introduce fresh elements of uncertainty at this time when there is general agreement about those plans. We have gone a long way in plans for finding alternative employment for those who inevitably would lose it in the steel industry and, under me, we had working in the Scottish Office a reconstruction team bringing together the steel industry, the trade unions and the local authorities to see what could be done. With their help we had already earmarked surplus British Steel Corporation land in the Clyde Valley for the possible creation of a major new industrial estate, extremely favourably sited, which I believe would be a great attraction to new industries. I sincerely hope that that scheme will be allowed to be continued. We also had plans for the Glengarnock area in Ayrshire. We had plans for giving a great facelift to this area, with the rundown of the steel industry in it. I hope that these will be allowed to continue.
My Lords, I think the great thing here, and the final point I would make, is: let us not root everything up for the sake of new theories and new ideas, however anxious new Ministers may be to leave their particular imprint on these new fields. Industry cannot survive if its roots are going to be pulled up and inspected every two or three years.

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Investment plans are essentially long term. It may often be anything from five to ten years, or in some cases even 15 years, from the genesis of the idea to when the investment is completed and the finished product comes off. Therefore, I make a plea for continuity and for support and encouragement.
I am bound to say that this first, interim Budget does not contain anything much that I can see by way of encouragement. I only hope that the second, autumnal Budget, if it is introduced in due course (I say "if it is introduced" because I noticed that the Chancellor took the precaution of saying, I think, "If the House and the country agree", and I think that was a wise precaution to take), will not be concerned solely with the discomfiture and discouragement of certain sections—those who, while they may be considered to be enemies of society, in many cases are simply people who are using the normal instincts of working hard, of enterprise and of wishing to see some material results from their efforts in leading industry and commerce, and if I may say so, the not totally reprehensible motive of passing on some of those results to their heirs and successors—but will be very much concerned with the encouragement of our industry and commerce, and of those who carry the very heavy burdens of its management.
4.42 p.m.
LORD MAIS: My Lords, I am grateful to the noble Lord, Lord Erroll of Hale, for giving us the opportunity to discuss this matter at such an opportune moment. On the other hand, I cannot help feeling that, opportune though the debate may be, it is a little ironical to ask this Government their intentions so early in their tenure of office, bearing in mind the general state of industry when we took over only a matter of three weeks ago—a state which I believe was largely produced as a result of the Industrial Relations Act and the inflexible manner in which it was applied. I think there were few of us in your Lordships' House when that Bill passed this way some time ago who did not go away with some concern as to the final outcome. I mention this merely because I believe that before one can consider what is required in order to give full encouragement to industry and commerce it is necessary to give some
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thought to some of the problems which are facing industry at the moment.
What industry and commerce require, what is in fact a prerequisite to their success, is not only encouragement but confidence. Confidence in industry and commerce has been badly shaken over the last four months. By that I do not mean only in the boardrooms, but on the factory floor and the shop floor as well. Without confidence industry will not attract the money it requires to operate, whether that money comes from shareholders, from the banks or from the finance houses. Without confidence industry will not be prepared to invest money in research and development, in the exploration of markets at home and overseas or in the expansion and improved efficiency of their companies. Without confidence they will hesitate to recruit labour. They will find it difficult to retain that labour, or to satisfy it. But, principally, without confidence industry will inevitably slow down. It has already been slowed down. To draw a parallel, an aircraft requires a certain amount of speed in order to stay in flight. Industry requires confidence and the facilities to enable it to operate and to expand; otherwise it also loses flying speed, and sooner or later, as the aircraft will crash, so will industry.
The noble Lord, Lord Erroll of Hale, referred to the rather vexed word "profits", and perhaps I may be allowed to do the same. My Lords, all industry and commerce must ultimately depend on the profit element, for without profits and a good profit record you cannot attract adequate funds into your business in order to operate efficiently. Without profit you cannot take steps which are necessary to expand your business or your business activities. Without profit there is not very much you can do to improve the conditions of those who work for you; and it is very little use anybody submitting a wage claim to a firm that is losing money.
I remember—and I shall never forget—what happened back in the late 1940s or early 1950s, when I was engineering director of a company of which I later became chairman and which was building an experimental atomic plant. It was so experimental that those designing it had not much idea what was going to happen at the end, and certainly those of us who, were building it were even less well

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informed. It was very much a hand-to-mouth existence, with the result that we were negotiating, or were trying to negotiate, how we were to be paid for it as we went along; and, as so often happens in these cases, it was not a very satisfactory business. One day one of those stalwarts from the trade unions, the late Sir Luke Fawcett, came to see me. His first question was, "Are you making a profit?" I told him I was not, and that in fact I was losing very heavily. He pondered for a moment and then, being the man he was, he said, "You know, I do not like companies which do not make profits because it is not the slightest good my submitting to you a claim on behalf of those I represent if you have no money to pay it." What did he do? He then threw his influence in on our side in order to get negotiations finalised rather quickly, with the result that in a few weeks we were happy, and so were the trade unions. I refer to that only for two reasons: first, to show that profit is necessary, and, secondly, to show what can be achieved if there is a good rapport between the senior management and the senior officials of a trade union. We should never have got that matter settled had it not been for their support.
It is necessary, my Lords, that we stop thinking of the word "profit" as a dirty word. Without profit industry cannot survive, and there is little hope of happy industrial relations unless we can achieve it. The real problem is that profit in itself will always be suspect. What we have to be careful about is the amount of that profit and the use to which it is put. Therefore it is essential that whatever Government are in power they must give every possible encouragement to industry and commerce. What I find difficult to understand at times is why anyone should expect or anticipate that the present Government, and those of us who sit on this side of the House, are any less alive to this fact than the previous Government and those who sit on the other side. If a firm falls upon bad times, then it is often the case that it is the lower-income groups and the men on the shop floor who feel the bite first. Therefore, so far as this Government are concerned, we have certainly as much, if not perhaps a little more, interest in ensuring that industry and commerce are profitable and that they are given every possible encouragement.
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There was a time when British goods were admired throughout the world for their quality and for our delivery. Many of your Lordships may have travelled around the world as much as I have during the last fifteen months, and I regret to say that our quality is now in many cases suspect, and our delivery dates deplorable. My noble friend Lord Beswick referred to the closing gap between our exports and imports of manufactured goods. I believe that our problem is due largely to two things. We all know that we have a problem with regard to essential materials, but, secondly, I believe that one of our principal problems is the present state of industrial relations. In 40 years in industry I do not remember when industrial relations have been quite so bad as they are or have been during the past twelve months. The Industrial Relations Act created a great deal of ill-will between the operatives—or employees—and management. I should be the last to advocate a free-for-all, but we are at this moment in a serious economic state. We have rising prices, in fact we have an escalation of prices in almost every direction. What is necessary—and it is a matter of great urgency—is that we should have a wages and incomes policy which is seen to be fair, and which we hope will be acceptable to all concerned, if not in perpetuity at least for the period of this crisis, or for a limited period. Personally, I hope that it will be in perpetuity. But if that is to be so it must be a flexible arrangement and one that is kept constantly under review.
I have already referred to the shortage and rising costs of raw materials. We sometimes overlook the fact that almost all our troubles, or a very large proportion of our troubles to-day, are entirely due to this factor rather than to internal ones. I do not imagine for a moment that it is possible for us to have any form of import control, nor may it be necessary in fact, but I should like to see consideration given to directing that limited supply of raw materials to those industries which are most closely connected with export. If that means cutting back on the output in less important fields, then so be it.
There are of course a number of rather ridiculous situations existing at the moment. They are small in comparison with the whole but they make one wonder

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what is happening. Three or four times in recent months we have had projects held up because of shortage of steel, principally reinforcing steel and light sections, and we have had to buy from abroad. You may think it ridiculous, but it is true, that my company had a delivery, in fact we had several deliveries, that arrived on the site after having left a works not more than 40 miles away eight days before. They had crossed the Channel and had been delivered back on the same lorry. The only difference was that the delivery had been exported at the control price for steel and bought back at £50 a ton more. For every ton of steel that goes that way we have a £50 per ton deficit on our export/import. Surely it is not beyond the wit of Government and industry to see that that does not happen.
My Lords, I ask you also to consider whether there is as close a relationship as there should be between very senior union officials and the senior people—by that I mean the chairman and managing director level of companies. I started my life a good many years ago on the equivalent of the shop floor as a young engineer working on engineering sites, and I had a very close relationship then with the junior union officials with whom I had to do business. I kept that relationship for quite a while, but as I moved up the ladder and by the time I reached the Chair I found that that relationship had gradually been whittled away and did not exist to the same extent. That is a matter which requires careful consideration, and I sincerely hope that Her Majesty's Government will see what they can do about it. It is one thing to have a close relationship between the trade unions as a whole and industry as a whole, but that is not at the bottom of things. Where the trouble starts is in the individual company and on the shop floor, and unless management of companies and senior union officials with whom they deal are not only in close contact but also, if you like, have some understanding of each other's problems, then you are in for serious trouble.
Undoubtedly industry is going to be hit with the additional taxation, although perhaps they may consider that it is not so bad as they were expecting. But I would hope that the Government would give very serious consideration to some
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relief on taxation as soon as the economic situation improves. In the meanwhile, I sincerely hope that they will also consider whether relief cannot be improved, or allowances cannot be improved, in order to encourage firms to invest in new machines and new plant, new factories, to spend money on research and development and also on looking into markets at home and overseas. Let us face it, searching out new markets is an expensive business. If the Government could in some way give an indication that this matter will be considered, then I believe that it will go a long way towards restoring confidence in industry. Confidence is badly needed at the moment.
It has been said many times before, my Lords, that this country exports or dies. I am sure that the dying would be a very painful process and would last a long time. The lowering of our standard of living would be very painful. It is important to any Government—and I am sure this Government will appreciate this probably more than any other—that industry and commerce must be encouraged. They must be supported. What they need at the moment, probably more than anything else, is to be given some indication as to the future. I should very much like to see discussions open up as a matter of urgency between the Government and individual industries. I think it was the noble Lord, Lord Erroll of Hale, who said that it was better to talk to the industries individually than to the large associations because each industry has its particular problems. I strongly support that view. It is very nice to have words of encouragement but they do not solve difficulties. Industry at the moment lacks confidence. That lack of confidence, with all respect, can hardly be laid at the door of this Government. We, I regret to say, to a large extent inherited it.
My Lords, this is a very important debate. Once again may I thank the noble Lord, Lord Erroll of Hale, for giving us the opportunity to spend some time on it this afternoon. I would thank noble Lords for listening to me with patience. I have had a constant eye on that clock above me and I hope I have not transgressed. I have in fact gone only one minute beyond the time that I set myself.
4.59 p.m.
LORD KINGS NORTON: My Lords, I do not intend to follow noble Lords down any of the paths which they have trodden except to follow a rather narrow path on which the noble Lord, Lord Erroll of Hale, put no more than a somewhat critical foot, the path of mergers and takeovers.
The merging and taking over of companies is part of our pattern of industrial and commercial development, and short of a revolutionary change in our system it is likely to continue. It is one of the means we use for producing more efficient units and for creating enterprises big enough to engage in the major projects which are more and more characteristic, as time goes on, of our technological and industrial progress.
In this country we have refined the processes of merger and takeover in such a way that they are reasonably controlled in the national interest, and I think it is important that the means we have developed should continue to be refined and improved. While, if they are, industrial and commercial concerns will, I suppose, not feel any particular measure of encouragement—and encouragement is the nub of the Motion which the noble Lord, Lord Erroll, has moved to-day—there is little doubt that if the processes at present applicable to our commerce and industry are depreciated they will soon feel a positive discouragement; and there is a serious possibility of this happening.
Until recently, the Government Department concerned was the D.T.I., and the work it did will presumably in future be done by one of the Departments now formed out of it. I believe the duty will fall to the Department of Mrs. Shirley Williams, but perhaps the noble Lord, Lord Beswick, will confirm this when he comes to wind up. Formerly, when a merger or takeover was intended the D.T.I. took two or three weeks to decide whether it should be referred to the Monopolies Commission. If it were not to be, the arrangements for the merger terms, or the bid, went ahead. If it had to be referred, then the Monopolies Commission took two or three months perhaps—in complex cases sometimes a little longer—to decide whether or not to allow the deal to proceed. In any case, by the Fair Trading Act 1973, they were not
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allowed to take more than six months; and when the deal did go ahead the takeover panel kept a critical eye on the proceedings.
Noble Lords who read the financial Press in some detail will be aware that on June 19 last year G.K.N. notified the Commission of their intention to bid for the steel stockist company, Miles Druce. My Lords, that was nine months ago! The proposed takeover was referred to the European Court at Luxembourg. On March 20, the court gave a ruling and the decision was such that the matter is far from finished. There is more argument to come. In the Financial Times yesterday a Miles Druce shareholder was reported as prophesying another 12 months' jousting in the European courts.
Some of your Lordships may wonder why the possible merging of two British companies is a matter for a European court. It is because when we acceded to the Treaty of Rome we also acceded to the Treaty of Paris, which deals with the European Coal and Steel Community; and the intention to bring together two companies in the steel business, even if both are of the same nationality, is the business of the Community. I do not intend to argue whether or not that is a good thing; nor do I intend to argue the merits of the G.K.N. bid for Miles Druce. I do, however, intend to argue that the delay in reaching a conclusion is intolerable: it is expensive for those involved and is engaging talents which would be better employed in developing the businesses concerned.
There is yet a further reason for disquiet, my Lords. The Commission in Brussels has in draft a regulation which, if it passed the Council of Ministers, would extend the powers which Brussels and Luxembourg have at present over mergers and takeovers in the field of coal and steel over a vastly greater industrial and commercial field, so that an intended merger or takeover involving two important British companies would be liable to intolerable delays of the kind exemplified in the G.K.N./Miles Druce affair. This, I submit, is an appalling prospect.
The Motion which is before us to-day urges the Government to encourage British industry and commerce. As I said, I am assuming that one form of

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encouragement is the prevention of positive discouragement. Most certainly, if the development of mergers and takeovers here were to be further frustrated in the way I have indicated, very great discouragement and demoralisation indeed would result.
While I feel strongly about the importation of slow-motion European Community methods into industrial affairs here, I do see that there is some justification for the sort of control which we have got used to here, in the shape of the D.T.I. Monopolies Commission and takeover panel system, being applied when mergers across European frontiers are proposed. So I hope that the Foreign Secretary will include in his intended renegotiating package two proposals. One would be that mergers and takeovers in a country are left to the legal and financial processes of that country, and the other would be that the European Community processes for controlling international mergers and takeovers are modelled on our own.
I have stated those objectives in very simple terms. Inevitably, I know well that any agreement within the Community to improve the situation which I have described, and to avoid the situation which I fear, would be in more complex terms. But I am convinced that steps should be taken in the direction I have indicated, and I take some encouragement from the fact that the matter I have raised with your Lordships must have been one of the subjects discussed yesterday when M. Borschette and Dr. Schlieder from the Commission in Brussels visited the C.B.I. I hope that further encouragement will be forthcoming when the noble Lord, Lord Beswick, winds up.
I sincerely hope that noble Lords will not regard the matter I have raised as being wide of the Motion put forward by the noble Lord, Lord Erroll. I believe that industrial progress, here and in the Nine, depends on the collaboration of scientific, technological and industrial organisations, and that international industrial mergers will prove to be one of the most important means of knitting together the interests of the Nine. Procedures which stand in the way of this concentration of interests and of industrial efficiency, should, I suggest, be amended.
5.7 p.m.
LORD BERNSTEIN: My Lords, I too, must apologise to your Lordships for the fact that I shall have to leave shortly, because I am involved in a lecture at the Guildhall; but I shall read with interest later the points which are raised.
Having read about your Lordships' House in the colour supplement of the Observer last Sunday, I feel rather inhibited. I am not sure what class I fit into and what behaviour pattern I should adopt to-day. I am not one of the "young people" of whom the noble Lord, Lord Beswick, spoke; I am a Back-Bencher. But how to start? I suppose I could say "this is an argument which would not apply to your Lordships"; or I could say "with the greatest respect". The Observer said Members had to have politeness around them.
I have no complaint about the politeness I have received in your Lordships' House. I have met courtesy on all sides and I am delighted to be here. But politeness does not include avoiding the truth. It is generally and regretfully accepted that what counts is the impression of the truth and not the truth itself. I do not quite know from the point of view of a Back-Bencher where this debate fits into the responsibilities of your Lordships' House. I will try to speak in terms of the moderation which is now so fashionable, although there was not much moderation shown by the noble Lord, Lord Erroll.
The noble Lord, Lord Erroll of Hale, did not approach the debate in a moderate way. His approach seemed to me, talking about the hardening of the arteries—I have always been afraid of hardening my social arteries because that could be a serious matter—one of saying that the Government were on probation, had a rigid point of view, knew nothing about business and that a profit to them was an emotional word. I do not agree with any of that. The people I know in the Government and the Labour Party acknowledge that profits from business, honourably made and properly spent and used for development, are acceptable and worthy of respect.
The noble Lord, Lord Erroll of Hale, spoke as if everything in British industry and commerce was running on a planned

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level until about three weeks ago, and then it all changed when the Labour Government took office. The noble Lord did not give credit to the late Conservative Government for the catastrophic results achieved by them under their policies. No credit was given to the Labour Government for what they did in the two periods when they were in Office. The noble Lord, Lord Mais, made the points that I wanted to put to your Lordships.
I again ask, with respect: where does this debate fit in? The word "urgent" made me think of the debates on economic policies and economic affairs that have taken place in your Lordships' House over the past two or three years, when warnings of the storms to come were given by my noble friends Lord Diamond, Lord Beswick and Lord Balogh, to mention but a few. They pointed out that British industry could make no real progress under the Conservative Government in formulating an overall policy to deal with the problems. Who now remembers the lame ducks? Nobody on the other side mentioned them to-day. Who remembers the problems of the Upper Clyde Shipping Company? Who remembers how that matter was dealt with? A Statement was brought from the other place and read to your Lordships; it stated that the men in the shipyards were to be fired immediately. Three "Wise Men" issued a report which was not debated. It was accepted as urgent. The closedown of a great British industry of importance was a matter for urgent action. Alas for history! one of the "Wise Men" headed a company which lost £1 million in the same year. Some of the men in the shipyard, fortunately, doubted the wisdom of the three "Wise Men" and took action, and the shipyard is still operating.
Should this debate have been part of the debate that followed the Queen's Speech? Was it timed to follow yesterday's Budget? When did the noble Lord, Lord Erroll, decide that there was need for urgent policies to give encouragement to British industry? Was it three weeks ago, when a new Government was formed? The urgent need of policies to give encouragement has been suggested for years. The noble Lord, Lord Mais, said that industry requires encourage-
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ment. Industry has not had encouragement for 3½ years. It has certainly not had encouragement over the past few months. It was not only industry that decided that the Conservative Government did not have a policy; it was also the voters who decided by an overwhelming vote that they did not agree their policies.
The last Government made fatal mistakes; they also forgot Disraeli, and even Baldwin. Baldwin told everybody never to get involved with the Vatican; never to start a fight with the Treasury; and never to take on the miners. The Conservative Party should remember that; hence the votes against them. They inherited "power" from the Labour Government with every opportunity to go forward to greater success. The balance of payments were right. Industry was doing very well.
I remember the Industrial Relations Act going through this House. I had to stay up many nights because it was being fought tooth and nail by the Conservative Party here. I cannot remember any industrialist of any quality on this side of the House ever speaking on behalf of the Act. It is true that when the Division bells rang they crowded out of the bars, the Library, and so on, and swept those of us on the Opposition Benches off our feet, and they had an overwhelming majority. I remember people on the Cross-Benches warning the Government that they could not settle industrial relations by legal methods, but the Government took no notice. I remember one night three Members on the Cross-Benches, all lawyers, urging the Government to support an Amendment that they could understand if troubles arose and the clause came before them, but they did not succeed.
I am not worried about the future of industry as perhaps are some industrialists opposite. I do not think that the noble Lord, Lord Mais, is very worried, either. A few days ago the Financial Tunes reported that the London Chamber of Commerce and Industry said there existed a general confidence and that order books were much healthier than anticipated. This was after the miners' strike had been settled.
The noble Lord, Lord Polwarth, mentioned that the rates of interest affecting

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industry would not be chargeable. As I read the Chancellor's speech—and perhaps my noble friend Lord Beswick will confirm this—industry which uses borrowed money for the development of their businesses will be allowed to set normal interest charges against their profits. What the Budget has done (I always understood that we were not allowed to speak about the Budget, but it seems to be accepted that we can) is not to grant the benefits of deducting interest from income by people who use that money, as they have done for some years, as speculators in stocks, shares and commodities.
The Conservative Government, about 18 months before the last mini-Budget, decided that hire-purchase goods and rental goods should be freed from the controls that then existed. Three of the industries involved urged the Government to do this over a period of some months so that factories and distributive organisations could have stocks ready to deal with the problem. But they did it overnight. Good politics! Eighteen months later the minimum period for rentals and hire-purchase was raised to 42 weeks, again upsetting the plans of those who planned work in the factories and distribution. The present Government may not be in an invincible position, but they have in three weeks shown that they intend to carry out effective policies of meeting the challenges. I believe that their programme will appeal to the broad spectrum of sensible people in British industry and commerce. It may not appeal to the commodity speculators, the Stock Exchange and other speculators, but it will appeal to those proud to be a part of British industry and commerce, especially those who have built up their own businesses.
5.19 p.m.
LORD ORR-EWING: My Lords, I am glad that I am following the noble Lord, Lord Bernstein, because I am one of those people who pioneered Independent Television through the House of Commons, against tremendous Labour Opposition. I reflect that if he had not had the chance, through my actions, to build up his business with such great success, he might not be sitting on the Benches opposite, and we might not have had his wonderful wisdom—
LORD BERNSTEIN: My Lords, television is only one part of my business interests.
LORD ORR-EWING: My Lords, the noble Lord would be the first to say that it is a profitable part—but perhaps he is saying that it is not profitable. I sympathise with him if his Independent Television company has not been profitable over the years. I did not invest in it because I felt, having played a part in the creation of Independent Television, that I should not invest in an Independent Television company.
We are all grateful to the noble Lord, Lord Erroll of Hale, for raising a matter of considerable interest. As the noble Lord, Lord Mais, has made clear, wherever we sit in this House industrial efficiency must be of concern to us. We are equally grateful to the noble Lord, Lord Beswick, in opening when, talking of the policy of this Government, he said unite clearly that "British industry is to be encouraged." I took down those words.
My Lords, I want to say something quite shortly on three points: first, on the incentives for British industry and the need for investment; secondly, on the social contract; and thirdly, a word on one of the most important engineering enterprises which our country has ever undertaken from the point of view of prestige, and I think eventually earnings, and that is Concorde. I mention the last only because I believe the Government are still thinking about the future of this aircraft.
I think everyone will agree that over the years the United Kingdom profits from our manufacturing companies have not really been sufficient to allow for adequate reinvestment, modernisation and our resultant competition throughout the world. There is one fact which I have noticed during my Parliamentary life and that is that if there is a turndown in the profits of our industrial companies, almost inevitably about one year later there is a turndown in investment and after two years an increase in unemployment. This happened after the Selwyn Lloyd freeze of 1961, when we had unemployment in 1963. It happened when profit turned down in the 1964–66 period. More recently it has happened

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in the last five years. In 1968 the financial surplus of our industrial companies was just positive. In 1969 there was a £500 million loss. In 1970, there was a one billion pound loss. Incidentally, it is now common in this country to accept the American definition of "billion", and I refer to one thousand million. When I was in school a billion was a million million in this country, and a thousand million in the United States. I am using the U.S.A. term which seems to have become universal. By 1972 that loss had turned into a profit of £500 million. In 1973 we are told profits were buoyant, although I think that those profits may be rather false because there was considerable wage inflation towards the end. Prices were rigidly controlled, raw materials certainly had very high import prices—they had increased by 100 per cent., or 400 per cent. in the case of oil.
I cannot help believing that if we had inflationary accounting in our companies it would have given a rather different picture. I know the present Government have said that they were going to carry on the previous Government's intention of looking at inflation accounting and seeing whether accounting should not, on the recommendation of the professional institutions, go over to this method as giving a more realistic picture of the position and profits of our companies. Certainly the industrial costs in recent months, and last year, have been inflated by wage and salary rises and by the raw material price increases; and have been somewhat disrupted by late deliveries of sub-contractors and of components. It is true to say that two years after the last turndown in profits, unemployment began. If we are going to have a turndown of profits in the present climate, then I think we are going to have unemployment rising in this country at a quite serious pace.
I have been in touch with the Central Statistical Office because I wanted to get some idea of the increase in profits as compared with the increase in wages and salaries. I find that in the 1962–72 period wages and salaries in manufacturing industries went up from just under £6,000 million to nearly £12,000 million. In fact, it was just a 106 per cent. increase. If you take the increase in wages and
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salaries, the 15 per cent. increase on that 1972 figure—because the 1973 figure is not available—then it has gone from £12,000 million to nearly £13,500 million. If one looks at the profits for the same period one will find that they have increased in the ten years; that they are up by £2,000 million while salaries and wages are up by £6,000 million. So there is positively a lesser increase in both percentage and in real terms in profits. One has only to look at company records (which now give 10 years summaries fairly universally) to see how small the increase in dividends has been over that same period. A typical increase one finds is 6 per cent to 6¼ per cent. or 6.20 per cent., while profits were controlled; then one has perhaps an increase to 7 per cent. or 8 per cent. of dividend paid. So, as compared with our competitor countries we are not making big enough profits, we are not ploughing, back enough in investment. These matters have to be attended to.
I listened to the new Chancellor's speech in another place yesterday, and he said towards the end (OFFICIAL REPORT, col. 327) that he hoped his Budget would
"foster the confidence necessary for industrial investment."
My Lords, I hope he is right. But I cannot help feeling that some of the measures in that Budget are going to do the reverse. I will enumerate some. Corporation tax is to be increased from what had been proposed at 50 per cent. to 52 per cent. Moreover, industrial companies will have to pay half their corporation tax in advance. Secondly, industrial companies have to pay an increase in the stamp of 44p a week for every person they employ. This may not sound much, my Lords, but for a company of only 5,000 people, this means another £125,000 a year in labour costs.
Thirdly, there is to be a swingeing increase—I do not in any way object to this because I think you have to have reality in your nationalised industries accounts—in electricity charges of 30 per cent. This will fall as a charge on British industry. Steel is to go up yet again, this time by 25 per cent., and industrial coal is to go up by 48 per cent. That is a reflection, of course, on the miners' settlement. Above all, in addition to other taxes, we are to pay an extra tax

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of 5p per gallon on petrol. One would have thought that petrol, which is such an important factor in distribution costs for industry, had gone up enough without attracting an extra tax, but it is to go up by another 5p.
So prices are to be held down and profits squeezed. That was the policy of Her Majesty's Government, and it was stated and restated yesterday. In a question of confidence it tends to be a little uncertain for those of us who have to consider whether we are to invest in the future that there is to be yet another Budget in six months' or less time. We do not know whether that is to be further deflationary or inflationary. At the same time, I think it is sad that there are to be reduced incentives; in particular, that extra taxes are to be levied, as my noble friend Lord Erroll of Hale said, on those people who are so vitaly important in the management and leadership of industry. I refer to the skilled men, the foremen, the chargehands and the junior managers. These are very important if we are to meet our high standard of product punctually, and to give the deliveries our export customers expect.
Lastly (and I thought this was unnecessary because so much has been said during the Election campaign of the need to build bridges between management and the shop floor) all share incentive schemes, which reach down now to very junior management, are to be made null and void, and ruled out. So all these items, I submit, will be a drain on the cash resources and profit margins and must reduce investment. I reiterate that if investment is reduced, in the long term it must have repercussions on our competitive position and on our employment.
The noble Lord, Lord Mais, said in his speech that he wanted the maximum co-operation between trade unions and management, and he gave some illustrations of what could be done. The three-day week brought on by the miners' strike taught us, if anything, just what can be done in industry with co-operation at all levels. It really was wonderful to see what people did. The British are unique in this way: when they have a challenge of that kind they get down to solving problems and manage to turn out far more than anyone expects. I remember reading a C.B.I. statement saying that
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there was going to be a huge slash in industrial output. I remember the British Steel Corporation saying just before the Election that they expected only 50 per cent. of normal steel output. When the figures came out it was shown that steel output had in fact been cut by only 28 per cent. So almost in every way what happened in industry during the three-clay week period showed what cooperation can do.
I now come to the social contract—I see that the noble Lord, Lord Bernstein, has now unfortunately left us. On this question I am the first to say that I wish the Labour Government well. Every democratic nation that I have studied has some legal framework for its industrial relations. The previous Labour Government did their best to contrive some form of legal framework when they introduced In Place of Strife. They were pushed off this intention by the Left Wing and the trade union movement. I am sorry they were dissuaded. We in our turn made another effort. We took many of their clauses—about half of them, I think—and incorporated them in our Bill; and again that was a failure. Now we are to have a third effort by the Government, which was mentioned in their Manifesto—for greater clarification I carry a copy of it with me during this period of political life. We are to have a Social Contract.
But can we be sure that the contract will be honoured? I am sure that the wish to honour it is there, or can be there, so far as the T.U.C. are concerned. Certainly this Budget has given them all they have asked for, but are we now going to have the corollary? Are we going to have an acceptance, not just by the T.U.C. (because I am sure that that would probably be forthcoming) but by the unions under the T.U.C., the constituent members of the T.U.C.? Will they all honour this agreement? Will the A.U.E.W., which has about half of its National Committee of the extreme Left persuasion, or the N.U.M., which also has about half its National Executive Council on the extreme Left? Certainly the former of those two, under Mr. Hugh Scanlon, is already showing signs of restlessness to break out of the agreement and has threatened further bans on overtime working in the engineering industry. And if the agreement is honoured at that

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level, is it going to be honoured at district level; and if it is honoured at district level, is it going to be honoured at plant level? This is a tremendous problem and I admire the courage—because it is essential it should be so—of the Labour Government in taking it on. If the attempted solution is not successful, then I do not see how our nation is going to survive and remain competitive. If the present Government fail on this issue, I wonder whether we shall not have to await in a few years' time the formation of some National Government on an all-Party basis to tackle this desperately difficult problem.
For my third and last point I turn to Concorde. A statement was issued by the British Aircraft Corporation earlier to-day. It was sent to the Minister, Mr. Wedgwood Benn, and it says that the financial figures published in Hansard on Monday of last week do not line up with their estimates; in fact, they suggest that those figures are very pessimistic indeed. But even if those figures are taken, it is said that the cancellation of Concorde at this stage would cost £80 million. I am sure that this is too low an estimate. In the United States the S.S.T. was cancelled at a much earlier stage in its life—that was their supersonic transport and it had not reached a prototype stage—and that cost them not £80 million, which is our forecast for Concorde, but £290 million. When we look at the costs of the T.S.R.2 cancellation I think we realise that £80 million must be a gross underestimate. Have the claims of a thousand sub-contractors been taken into account? My company—and here I declare an interest; in my instance it is a small black box—and many engineering companies, many electronics companies, are concerned to furnish some supplies for Concorde. We are making small numbers off for the 16 aircraft under construction. Are we going to be compensated if all those products have to be thrown away? And what about the redundancy which will result?
The alternative, so we are told in the words of the Minister, is to go on to produce the 16 aircraft now under construction at a cost of £35 million extra, compared with cancellation. My Lords, it surely must be good business to go ahead with this venture. So many times
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in our industrial history since the war we have reached the very brink; we have carried out the research and development and produced a prototype. Then, somehow we lack the courage or the money, or the resolution or guts, and we drop it. Here we have an opportunity of sticking to something which is worth while. I would urge the Government, when they are considering this matter, as they have said they are going to reconsider it, not to be pushed off it by the United States. The United States aerospace industry is a highly competitive industry. They have a near monopoly of civil aircraft supply worldwide. They would like to have a supersonic transport, too. It has been published in a book, and confirmed by Mr. Julian Amery, that in the last case when a Labour Government came to power in 1964 they went to the United States and asked for favourable financial borrowing terms, and the United States reasonably said: "We do not really see why we should give you money to help finance competitive products to those we have on the stocks ourselves"—a perfectly arguable point. So as a result of that Concorde was written into the first White Paper which the Labour Government produced (I think it is more colloquially known as the Brown Paper because of its author's name) that this was a "prestige symbol" which should be cancelled. I would urge the Government on this occasion not to be persuaded by the United States into cancellation.
My Lords, a Rolls-Royce has become throughout the world, and remains, a symbol of British engineering perfection; and it is recognised as such. I believe that the Concorde can be a symbol, as it spans the oceans and arrives in the capitals of the world, of the vision of British engineering; a symbol of Anglo-French co-operation and of our ability, not only to conceive something which is first-rate, but to produce it, and to have the courage to do so. My Lords, I hope that the Government will carry on with Concorde.
5.38 p.m.
LORD BOWDEN: My Lords, after the rather gloomy forebodings of the noble Lord who has just sat down, I wonder whether the House would bear with me if I were to read a few remarks made by an eminent scientist whose name

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must be known to most of your Lordships. He said:
"We are entering now upon the most serious struggle for existence to which this country was ever committed. The latter years in this century will see us in an industrial war which is far more serious than the military wars which took place in the first part of the century. The situation is very grave."
The scientist was Thomas Henry Huxley, and the date 1878. We have in fact been here before.
I am extremely grateful to the noble Lord, Lord Erroll of Hale, for allowing us an opportunity to discuss these matters. And I want, with the permission of the House, to fly a rather curious kite. I want to persuade the Government that one of the most important tasks they could perform would be to send a mission to Brazil to discover how the accounts are cast there and how their Treasury operates its tax rules. Your Lordships may think this an extraordinary suggestion to make, but the reason is simple, and it is this. We have been thinking for many years that inflation is a curious anomaly which we have to struggle against and that if we wait long enough it will perhaps go away. We have never come properly to terms with the task of handling implications. The Brazilians, for several years now, have taken it for granted that inflation is here to stay. It has fluctuated in Brazil from 100 per cent. in one awful year to 50 per cent. Last year it was down to about 18 per cent., and it is still falling—in fact, this year the rate may well be lower than our own. The point I am making is that they have come to terms with it and they have devised a fiscal system which allows them to cope with it; we pretend it is not really here, that it is not part of our system and we ought to try to forget it, so we are suffering to an alarming extent from its consequences.
I should like to make a few observations which will I hope persuade your Lordships that this apparently extraordinary suggestion is in fact entirely reasonable. May I therefore make a few points about the consequences of inflation which have been noticeable in the last two years? It is currently and commonly said that the primary cause of inflation is the rise in wages and the rise in prices. I believe that this is only partially true, and I believe that what began as a defence
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against inflation has become a primary cause of it. I refer first of all to the extraordinary inflation in the price of houses. I will simply say that in the year which ended last December an ordinary Englishman living in his house earned more by doing so than he did by taking home his taxed income. To put the matter another way, the inflation in the book value of houses in this country—there are about 18 million of them—was in round figures about as great as the gross domestic product in its entirety. When one discusses this subject people say, "But of course people living in their houses are no better off." That is quite true. But when one is dealing with sums which are comparable to the nominal value of the gross domestic product these arguments cease to be tenable. As a result of inflation and our hedging against inflation we have in fact succeeded in what I can only call the ultimate economic miracle. We now find it possible to buy German motor cars, German machine tools, and anything else you care to name, and pay for them by increasing the price of houses in Richmond. This, as an economic enterprise, is not likely to be sustained for long.
I think we are, and have been for the last 20 years or more, engaging in a process fundamentally similar to that which created the enormous and feverish prosperity of the United States in the twenties. Your Lordships will remember that in those days America became enormously prosperous by inflating the price of common stock. People expected to buy and sell and make a profit continuously, and they thought that they had achieved the secret of universal inevitable prosperity. Furthermore, they developed a special system for doing it—buying and selling stock on margins and subsequently using the stock which had been bought as security for another loan.
We have achieved the same kind of feverish prosperity by inflating the price of practically everything except equities. By this I mean everything from houses to old wine, old masters—anything you care to name. And in my own village I find that almost every little shop has gone out of business and been replaced by someone selling either antiques or real estate. It is here that the money is being made. It is being made because

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we have never really come to terms with this process of inflation, which now dominates everything we do.
I find in my university, for example, that very few students want to come to the university to study those subjects which fit them for a place in productive industry. They will not study mechanical engineering; they know perfectly well that the jobs to be had in mechanical engineering are few and not very well paid. Chemical engineering has suffered even worse. We used to have in my university the largest department of chemical engineering in Europe. We used to admit 110 students every year: last year we admitted 37. Every major undergraduate university department of chemistry in this country is half empty to-day. The reason is simple: everyone realises that chemists do not do as well as property speculators. If I go to schools, as I frequently do to talk to headmasters they say. "Our students know that they do better outside universities and away from the conventional professions than they do in them. If they are ambitious they go into totally non-productive enterprises which happen to make money".
This, I think, is due in large measure to our fiscal system and our accounting system and it could be changed by the Chancellor of the Exchequer without, I believe, the intervention of Parliament simply by changing the conventions upon which people have to cast their accounts. May I take one particular example. One of my own staff did an analysis of the effect of installing a piece of substantial machine tool in one factory six years ago. The accounts which the firm produced this year show a 30 per cent. return on the capital invested. On the other hand, if they allowed properly inflated cost for the replacement of the tool when it wears out it is clear that the real profit made was zero. It is upon the 30 per cent. that taxes are levied it is, furthermore, upon the 30 per cent. that profits are paid. But the 30 per cent. is totally unreal.
There was a meeting in my office a month ago of many of the most eminent members of the machine tool trade. The machine tool trade is a very vital industry which of late has suffered from evil times. I asked them all what they
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paid on their stock. The figures were small. I then went round the room again and asked, "Is there any man here who would have made a profit at all if he had worked out the accounts on the replacement instead of on historical costs?" And the answer was, "No". In other words, my Lords, we are in a position in which British industry is being compelled by the Treasury regulations to pay out its capital assets as dividends and taxes. This has been going on for a very long time and I believe it is the real reason why British industry is bereft of the capital resources that it needs to replace machines which are wearing out. As the noble Lord, Lord Orr-Ewing, said a moment ago, inflation accounting is being discussed—
LORD ORR-EWING: I think it is now permissibly to do inflation accounting. In fact Tube Investments announced their results this very week in inflation accounting terms. Although it should not be encouraged from the Treasury, it is not at the moment prohibited by the Treasury.
LORD BOWDEN: I was coming to that point, but I thank the noble Lord very much for making it for me. May I come back for a moment, because it is crucially important, to my argument. As a result of this failure to invest over many years the profits made on ordinary common stock in big firms are extraordinarily I think that I.C.I. made 5½ per cent on its invested capital last year. The machine tool trade made about 3 per cent. the paper trade made about 2 per cent. This was at a time when one could get 15 per cent. or 20 per cent. by investing in short-term loans or even in Manchester Corporation stock.
Who is going to put money into industry if he can get three times as much by putting it into building societies or into gilt edge stock, which is absolutely guaranteed and which is paying 15 or 20 per cent.? In fact it has turned out, my Lords, that because of the inflation it has been possible to borrow money for mortgages at negative rates of interest. If you allow for taxation you made more on inflation than you paid on your mortgage. It has been quite impossible to persuade people to put money into industry on the scale necessary at a time

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when all the funds are going elsewhere. In fact, many large firms have sold off their assets, acquired a vast pool of liquid resources and used them on short-term loans to keep the manufacturing enterprises alive. You can hardly conceive of a more extraordinary and foolish way of doing business; yet several firms have survived for this and for no other reason.
There are other matters connected with this problem which are of vital importance. I was speaking the other day to the chairman of one of the largest manufacturers of textiles in the world. He told me that throughout the greater part of his business life he had decided that the best thing to do was to look after his men, to re-equip his firm and, generally speaking, to do what every good business man is in principle expected (hopefully) to do. He then discovered—and he said that he lay awake all night worrying about it—that as a result of this the dividends he had paid had been small and the capital assets of his firm were very much greater than its Stock Exchange valuation which was related solely to the dividends he was paying. He realised that he was ripe for a takeover bid which he could not have resisted. Someone might have made an enormous fortune at the expense of the total ruin of a large part of the textile trade of Lancashire. This is due to the impossibility of making allowance for the appreciation of the fixed assets and the other parts of the ordinary balance sheet of a company.
If a businessman does his accounts according to the present basis it does not pay to modernise a firm. Many a big firm has computed whether or not it should re-equip itself with new apparatus and new machines, and far too many have found that once they have written off old machines completely they cannot afford to re-equip with new. That is why many big factories in England are so ill-equipped; the costing system makes it pay to go on using equipment which logically should have been written off, and not re-equip with modern and sophisticated equipment. That is why accountants can ruin a firm.
All of these things are a consequence of the same failure and the same problem—the fact that we do not accept as a matter of course that inflation is with
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us to stay. We still assume that it is a minor aberration and that we can ignore it and shall then be able to forget it. In fact it has become the principal motivating force of a great deal of the financial world. Takeover bids depend upon it. The ill equipment of British industry is due to it. The enormous profits made by housing speculators are due to it. The plea I make to Her Majesty's Government is that we should attempt most urgently to consider not merely the system of inflation accounting which has been recommended to us by the chartered accountants but the far more sophisticated and far more highly developed and more effective system which is currently in use in Brazil. I have read the papers which our accountants have produced and they seem to me to be an admirable first step, but they did not seem to me in any way to cope with the problems as they really exist.
The best system in Europe, which is probably known to many noble Lords, is that currently in use by the Phillips company in Eindhoven, who have a most sophisticated way of handling their accounts. But no British firm has ever been able to introduce a totally different system of evaluating its assets so that it pays it to invest, to treat its men properly and to build up the resources which are needed for manufacture.
At the moment we have the most elaborate disincentive for doing all these things which could be devised. The rigidity of the Treasury's rulings and the fact of inflation can destroy us. I believe that the new change, which is towards inflation-accounting, and is tremendously to be welcomed, will not cope with the problems in their present form.
We must do more than we have hitherto done to allow for the proper assessment in the balance sheets of our great companies of their true wealth, both fixed assets and work in progress, which is extremely important, as well as the machine tools which are wearing out. The particular problem of work in progress is viciously difficult to handle in those concerns which manufacture capital goods, or anything which lakes a long time to build, for example Rolls-Royce aero engines or turbo-alternator

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sets, which may be in the shop two or three years.
The value of the work in progress is reassessed every year and a company which has six engines under construction this year and had six under construction last year in effect pays tax on the difference between the value to-day and last year. It is paying tax as a householder would pay were his house reassessed every year and were he required to pay income tax on the difference between the value this year and last. I repeat, the average Englishman nearly doubles his income in a curiously meaningless but nevertheless very important sense by living in his house, and one can imagine just what would happen if industrial conventions applied to ordinary householders.
We are in an extraordinary situation, and we have devised a fiscal system which almost inevitably bleeds industry of its precious capital resources. At the same time we are pumping money back into British industry via the Department of Trade and Industry, as it was once called (heaven knows what it will be in future!). It is interesting to discover that the total sum which is fed back into industry is about equal to the yield from Corporation tax. The Corporation tax is paid by people who make a profit and who would like to spend it on building up their industry. After going through the Treasury it is redistributed by civil servants, dedicated, hard-working men, none of whom really understand the problems of industry—they cannot hope to do so by the very nature of their training and their experience. I sometimes wonder, in a very sombre mood, whether we would not do better to abolish Corporation tax and the whole Department of Trade and Industry, balance our books and leave a large number of civil servants free for more profitable enterprises.
However, this was not the point I wished to make. I believe we are in fact in the position of a surgeon having a patient on the operating table who, having severed the patient's artery finds he is bleeding to death and is now force feeding him. We must do something very different and I really believe—and I repeat it—that odd though it may seem
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to us the most important lesson to be learned may come from Brazil.
5.57 p.m.
LORD HEWLETT: My Lords, in company with many other noble Lords I feel a real sense of appreciation towards my noble friend Lord Erroll of Hale for raising this subject of the Government's attitude to industry, and I congratulate him further on his impeccable timing. Many of us recall the noble Lord in another place as a most successful Minister of State at the Board of Trade, and later the President of the Board of Trade.
I wish also to make reference to the contribution of the noble Lord, Lord Beswick, the Deputy Leader of the House, who made a most conciliatory speech regarding the profits of industry. But, with respect, those of a very Left Wing persuasion in another place appointed to the Industry and Trade Ministries are the ones who cause alarm in the country and in industry at large. Certainly the noble Lord, Lord Beswick, by the assurances he gave last week, and this, caused just that sense of stability and confidence for which industry is looking. But, alas! this is not the guiding Chamber: it is the other Chamber which takes the decisions: and those who have been appointed to those offices frankly have to be remembered more for what they said from the Back Benches and from the country outside than what they may have been tempted to say in the last three weeks as brand new Ministers. I hope they will prove themselves wiser in office than they have been as Back-Benchers.
Yesterday there was afforded to the Chancellor of the Exchequer in another place the opportunity of superseding what he had said in an utterly divisive and disruptive speech at the Labour Party Conference in Blackpool last October. In my opinion we could have done with a far less partisan and a much more unifying Budget than he has in fact put forward. Above all, I would have begged him to consider giving some more serious incentive for industrial investment and increased productivity. I am not speaking of the interests of the shareholders alone, but of those who aspire to positions of greater responsibility on the shop floor, or in middle

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management. Quite frankly, I do not care where their efforts are; they ought to be channelled and encouraged in a positive manner.
My Lords, what do we see in this particular Socialist Budget? It aims, alas! almost wholly at redistribution instead of creation of wealth. When we need confidence born of stability we are informed that we can wait another six months for another Budget. This must be endured as a sort of second dose of medicine, and it will be administered at that time without any indication of why this should be necessary, other than for the creation of a wealth and a gift tax. But pity the poor patient, Great Britain Limited, who is waiting to know what else is in the medicine. It may be highly deflationary; it may be terribly inflationary. It may be neutral; there may be nothing there. But heavens above! once a year is enough to go through this turmoil of disorganisation and lack of confidence throughout industrial society. An emergency Budget is bad enough, but to have a scheduled emergency Budget for six months hence is a positive disincentive for industry to take a decision.
I would think more of the comments of the noble Lord, Lord Beswick, if he had been able to persuade his colleagues that this type of nervous approach to the whole problem is inhibiting the very progress that all of us in this Chamber, and I am sure in the other place, wish to achieve for this country.
THE MINISTER OF STATE, DEPARTMENT OF ENERGY (LORD BALOGH): My Lords, may I ask the noble Lord what particularly influential and persuasive incentives were given to British industry under the Conservative Government, especially in the last six months?
LORD HEWLETT: My Lords, in the last Budget—not the November emergency Budget which only affected public expenditure, but for industry itself—there were considerable investment allowances, a reduction of direct taxation, full benefit and accord and much encouragement given through the various Government Ministries towards exports, help in training in regard to export matters, something I seriously believe we have to
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achieve. One of the institutes of which I hear almost nothing said is the Institute of Export. I would strongly answer the noble Lord, Lord Shinwell, that here again I do not want the Government to run the institutes, but I do wish that serious encouragement could be given by Government Departments to see that there is better training in industrial exporting from this country. With respect to the noble Lord, Lord Balogh, what we least received from the Conservative Government was positive financial encouragement and incentive; what we received yesterday was two-thirds of four-fifths of the square root of—I must be careful, and say very little. Absolutely nothing in fact was given by way of incentive or encouragement to industry.
My Lords, in the course of my further remarks I will show why in my opinion there were positive disincentives given yesterday. Adjusted, encouraged additional investment—how right the noble Lord, Lord Bowden, was in the comments he has just concluded! In the presence of the noble Lord, Lord Balogh, I would say I hope we will not go to Hungary, on the past experience we have had from the economists, but maybe we should go to Brazil. I have been to Brazil on industrial work and must confess that I was very impressed with the manner in which they have been able to cope with phenomenal inflation. It really has been colossal. On one occasion I inquired what was the going interest rate (it was my first visit to Sao Paulo) and I was told "6 per cent.", which I thought was reasonable; but they added "per month". This is the kind of experience through which they have been, as the noble Lord, Lord Bowden, knows: Inflation rates at colossal percentages, far more than we could contemplate being able to tolerate. But I strongly support (if I may interpose remarks from my own speech to comment on his) the idea that we have much to learn from a country that has been able to cope with such hyper-inflation.
This is no Party political point. No matter which Government are in power, let us not be too proud to see whether a complete revolution in terms of our industrial accounting, and therefore in terms of the fiscal incidence of such things as a new Budget, may not create the wholly different set of values which, as the noble Lord was right to point out,

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is required. We must find a system which will not only give incentives, but will make it pay for industry to invest in new capital equipment, and not be proud of the clapped-out, longest lasting, broken down old things they have got, which they are still living off and which have been written down God knows how many times. This is not progress, but is merely tempting competition to put one out of business once and for all.
My Lords, I wonder why there has been such a lack of appreciation of the need for increased industrial investment in some sectors in this House. Frankly, I cannot see why, because the growth in the economy was so necessary as to cause it to be the one subject on which the T.U.C. pressed the last Government so strongly, and in my opinion so rightly. Only if we get positive, actual growth, and not simple accounting growth in its present form will we achieve the type of prosperity which would allow us to have far better standards of living, rates of pay, investment in industry, and so on. But certainly some Socialists, and certainly not the noble Lord, Lord Mais, who has just left the Chamber, feel that, like profit, the word "investment", and even the concept of risk-bearing, are not things to be admired or undertaken. This does apply.
I have only been in politics for 25 years and have always paid more attention to what the Opposition have said than to what has been said on my own side, because that is the only way to learn something. There has been this concept of anti-profit, and it is not so long ago that it was almost a household attitude of the Party of Her Majesty's present Government that profit as such is not desirable. But it is highly desirable; indeed, it is essential, and so is risk-bearing. One will not have risk-bearing unless one can offer adequate reward for the risk taken. In some cases, to some people's minds, this must be colossal: but if the risk is really large—and I am not speaking in speculative terms in commodities, but in terms of actual manufacturing risk, undertaking new processes for new industries—then there must be proper reward for the enterprise.
Those companies who have recently invested heavily have been told, if the Financial Times of the day before
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yesterday is to be believed, that there is pending an announcement that the profits of companies should be reduced not only in the distributive, but also in the manufacturing industries. Seriously, having followed, whether it be of one Party or the other I care not, Government policy of heavy investment in industry, are we to accept that the reward for this should be that automatically you are cut in terms of the profit? If that is the case, clearly it is a positive disincentive to invest.
My Lords, in yesterday's Budget we had not an S.E.T., but an E.T., an employment tax, or a poll tax if you like, the additional 44p per employee. This will look a sick thing indeed if, as has been predicted in many quarters, and not least in the United States, the world is threatened with widespread trade recession this autumn. I know the benefits of increased old-age pension and so on must be paid for, but I cannot for the life of me see why it should be industry which is "nobbled". It seems to me very much better that either we accept it in terms of indirect taxation, and V.A.T. adjustment, or even in terms of direct personal taxation. But to "clobber" industry at the time when it has undergone such a traumatic experience and come through so exceptionally well, seems to me to be foolish.
I echo the sentiments of my noble friend, who spoke, in my opinion, so well upon not only the aspects of Concorde but also the achievements of free enterprise in the three-day working week. My own experience was that we made 80 per cent. manufacture in 60 per cent. time—probably a little more. I know that some cynics would say that that just shows that nobody had been working hard when officially they were working 100 per cent., but I do not put that construction upon it. I take exactly the line of the noble Lord, Lord Orr-Ewing, in saying that this demonstrates that there is a fund of good will on all sides and in all parts of industry, and that if only we stopped messing industry about politically we would achieve a great deal more.
I do not myself believe that Government interference in the affairs and conduct of industry should be more than to set the parameters and then allow industry to make a success in its own way. I would put it this way: that I think the true duties of Government are

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to defend the nation and its interests, both at home and abroad; to try to maintain the value of its money, and to protect the aged and sick and those in need. From the positive standpoint Government ought to create the conditions in which industry and agriculture can prosper, not to try to do it for them but to create the very conditions; and that includes, in my opinion, not doing some of the things that were done yesterday. A fat lot of encouragement it is if you increase corporation tax, increase employer contributions by 44p, continue with restriction of dividends, enforce reductions of price, and a moratorium on price increases, which cannot now be made before intervals of one to three months! Do this Government or any other seriously believe that those of us who may work fifteen or seventeen hours a day in industry, more from a sense of pride and self-respect than for the actual reward, can be expected to do so indefinitely irrespective of positive disincentives?
I am sorry that the noble Lord, Lord Balogh, has gone from the Chamber because I promised I would deal with incentives, and I think that when he conies to read Hansard he will realise that I have not just touched on the matter. Would you believe it! there is now even to be a higher tax upon savings income, which is called unearned income. In many instances, the capital on which this interest is received represents the savings of a person in the whole of his or her lifetime. Yet, derogatorily, it is called "unearned income", as though it were the result of some swindle or hand-out. There is to be a gift tax and a wealth tax. For heaven's sake! what else will they think of in order to try to hit down the people who want to make a positive contribution, be it on the shop floor, in the management section, in the boardroom—I care not where. The whole attitude is so utterly negative. By September, with the wealth and gift tax, one may indeed feel that the voice was the voice of Denis Healey but the hand the hand of Karl Marx.
How right my noble friend Lord Erroll of Hale was to show how badly hit is the younger middle management in this Budget! For heaven's sake, this is the one section that we need to look to: younger management, on the shop floor
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as well as in the offices, the drawing offices, research or development departments, or wherever it may be. Those are the people who are going to make the future for industry in this country; upon whom we, in our dotage, are going to rely; for we are going one day to be the pensioners, and they had better do a better job than we are doing if we are to have any sort of existence. To say that it will be essential to have savings is so right. What will be the result of this confounded Budget for the younger man in industry, the highly qualified young executive type, management type? Alas! it will be the usual, the upsurge of the brain-drain which accompanies almost every Socialist Government Budget.
And, my Lords, the poor are not really benefiting. There are increased pensions and certain concessions, but we have the massive increases in electricity prices and coal prices to come. North Sea gas is to come up perhaps to the tune of 70 per cent. Surely we know that these are the very death knell of encouragement and happiness for the old-age pensioners. How much better it would have been if, instead of the overall totally unselective food price subsidy, there had been more positive actual help in large term to those genuinely in need! There is nothing improper about such a suggestion. The old phrase of "means test", and so forth, is frankly "old hat". We have a means test in income tax we have a means test in almost every tax we have to face.
As the noble Baroness, Lady Seear, said, it is yet again the fact that the true intention of the Budget has not been achieved. Its effect will not be to help the poor, still less to help industry; rather will it "clobber" it. Massive increases in taxation, raw material costs up, and we are still under the threat of an engineers' overtime ban and other major disruptions. Sometimes I feel almost desperate at the woeful lack of industrial knowledge and experience by the so-called professional politicians. Would that they had actually been employed in industry! I wonder if they could now be employed by industry. Frankly, I doubt it.
With the vast increases—and I am speaking only of the chemical industry; the petrochemical raw material prices inevitably following the huge upsurge in feedstock costs—who could be seriously suggesting the viability of a minimum

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three-month interval between manufacturing price increases? Do the Government want to shut plant and half industry altogether, at this of all times? I think not.
Constituents of some of our manufactures—and we are only a small company in business—include the following products: phenol, the price of which was in January, 1974, £103 per 1,000 kilos; in February, £130, in March £203; methyl oxitol, January to March, £190, £192, £233; xylene, £177, £185, £201. Or, take this for a beauty: aniline, early February, £166; late February, £170; early March, £224. In April?—God knows! Frankly, who on earth is going to say we can hold prices for three months and go on manufacturing with these increased raw material prices? How can an industry or an individual company do that? The answer is that it puts up the shutters on that particular plant until the new price period is allowed to start. The result is to force outside purchase, probably from abroad, with a loss of foreign currency, to keep one's customers going because one cannot afford to keep the plant going oneself.
Lest your Lordships think I am dealing purely with hard organic chemicals, let us deal with some natural products. In September 1973, the price of rape oil was £210 a thousand kilos; its price to-day is £410—an increase of £200 on £210. Flow on earth can any Government seriously suggest that industry can go on absorbing costs at that sort of rate, and accept at the same time increased taxation, increased Government costs and increased nationalisation supply costs in just the following little list: rail freight, steel, coal, electricity, and even postage; and crippling interest charges to boot? Come off it! my Lords, we cannot start making suggestions that a three-month interval between price increases is viable; it may be desirable, but that is Cloud Cuckoo-land. Let us get down to the realities. Some of us have actually to run a business and not just talk about it.
There had better be a degree of flexibility which allows a person as an industry to make a reasonable return on capital. There has to be positive incentive to invest money in industry, as the noble Lord, Lord Bowden, has emphasised very strongly, and many other noble
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Lords, too. Unless we get ourselves into such a situation as to not only encourage but actually effect large-scale industrial investment it will be too late. A far more enlightened attitude must be displayed by Her Majesty's Government towards both industry and agriculture. Britain cannot prosper unless this is shown. In such a disastrous situation of lowering investment rates, diminution of profits, there can be little or no "cake" about which to squabble.
6.20 p.m.
LORD SNOW: My Lords, I think that I had better lower the temperature a bit. I have not inflicted myself on your Lordships' House for a long time, partly because I was personally committed to other things and partly, I confess, because I found myself totally out of sympathy with the general air of optimism which I found surrounding me, for I have viewed the situation for years, and certainly as much now as ever, with the utmost sombreness. I have no doubt that we are in a desperate situation. I am using the word "desperate" deliberately.
We are a special case in a general way that is true of almost the whole of what we call the advanced, rich or industrial world. For various technical reasons we happen to be in a much more precarious situation than any other of the rich industrial nations. They all have inflation, they are all living with a kind of strange complex of inflationary recession, but we are at the most vulnerable, perhaps along with Italy and, I sometimes think, Japan. We are really under threat. By this I do not mean that the entire population of this island is going to be wiped out or have no means of earning a living; what I mean is that I find it extraordinarily hard to believe that Parliamentary democracy, as we know it, can conceivably survive ten years at the rate of inflation under which we are now living. I think that that is absolutely unthinkable. I agree with my noble friend Lord Bowden that we could probably learn something from Brazil, but if we do I am almost sure that we should learn that you would have to have a type of Brazilian Government to cope with the situation as well as the gimmicks of accountancy. I cannot conceive that Parliamentary democracy, in any form that is known in the world, is going to

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survive for long with an inflationary rate as it is at present. Hence my gloom, and the gloom that I have been feeling for several years.
I do not wish to give your Lordships the impression that I think that this Government are not the most suitable to try to tackle this set of problems. In fact, I believe that they are the only type of government which would stand the remotest chance. They are a very able Government, an exceptionally able Government. When I hear the noble Lord, Lord Hewlett, I confess that I think that he is not living on the same planet as most of his fellow countrymen. This is a Government of high intelligence, high ability, and from those I know, of very good judgment. Though I think that all those of your Lordships who know me know that I am comparatively capable of detachment, I must say that when some noble Lords opposite come and address us as though they have been supporters of a highly successful Government with an incomparable record for judgment, I really wonder what they can conceivably be intoxicated by. No Government in English history have ever made more misjudgments in three and a half years. It is not possible. An ordinary set of men, normally in any sort of Government, tend to guess or judge right about 50 per cent. of the time—that is about as good as statistical chance. It takes something like negative genius to be wrong about 95 per cent. of the time.
However, the time is too serious for this sort of Parliamentary ping-pong, and I should like to talk about the fears that I possess and to which I see no real answer. Obviously we have to try anything—any kind of gimmickry of the accountants' kind that my noble friend Lord Bowden suggests, and anything else. But the danger is that we are living in a very strange world; we are living in a sort of economic tempest, and at the same time a social tempest outside the frontiers of the rich world. This is going to make immense complications, at the best, for all of us, and probably something much more serious than complications. Remember that some of the predictions which some of us have made are coming only too true. The poor world is really growing, as we said it would grow, in population, and it is having the famines which, with
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deep regret, we have talked about for years. That is now happening in India and Ethiopia, and it will go on.
Some parts of the world which have recently been poor are also beginning to realise their power. If you listen to the statements of say, Sheikh Yamani, or the Shah of Persia, you can see how we are being regarded by people no longer poor—who in fact in certain strata have suddenly become immeasurably rich, but are still speaking like the underprivileged world—and they are going to exact their price. It is perfectly reasonable. Remember we talk of equality, and I am entirely for it. It is clearly part of a society which can begin to live together in peace. But remember equality does not stop at the frontiers of the rich world. Other people are beginning to talk about equality. The poor of India and Africa are beginning to say, "Fine, your unions object to a differential of, perhaps, ten times between skilled workers and management, but remember there is a differential of ten times between skilled workers and the ordinary Indian workers, and this disparity cannot exist for long."
There is going to be another kind of equality demanded by the overwhelming population of the world before very long. That will mean that ultimately the whole of the rich world is going to live very much more simply than it is living now. I cannot believe that in 50 years our descendants will not begin to think that the middle classes, and most of the working class in the rich world, lived more prosperously than large populations are ever going to live again. I should think that that is far more likely than not. When Mr. Harold Macmillan said, "You have never had it so good", he might also have changed the tense and said, "You will never have it so good again". It is a temporary phase in human history. It is awkward for us, we have had to live through it, but we have had materially not too bad a time. In fact, I believe that the real prescription for this country is a far more austere life, and far more effective work. If any politician really wanted to stir this country he would have to do another Churchillian adaptation of Garibaldi's, "Blood, toil, sweat and tears". That is the only maxim that has any conceivable meaning in the situation as I see it.

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Finally, we have become intoxicated with money. It is no reproach to any of us; it is part of the climate of our time and our society. But though we are rather prudish in talking about it, it is at the back of our minds to an extent which in other societies seems as abnormal as complete preoccupation with sex. We are obsessive about money in all sorts of ways, and we cannot really believe that there is any other motive which makes men perform at all. I was dis-stressed during the Election to hear almost exactly the same point made by the then Prime Minister as was made by the noble Lord, Lord Erroll of Hale, about the necessity of giving incentives to people at the top of large companies; that a chairman who was receiving £55,000 a year was about to receive £65,000 a year, and that this was a necessary reward for responsibility. This is sheer nonsense. People do these jobs, on the whole, because they like them. Does anyone in this House believe that if the Prime Minister's salary was reduced by half, reduced to, say, £10,000 or £8.000 a year, there would be any shortage of applicants from the House of Commons? It is a great reproach to our official life, a great reproach to people in high places, that they willingly accept this kind of argument for increasing their own salary. This is a kind of corruption that of course inflation brings. It is a very natural consequence of inflation, and it has done us great harm.
On the other side, it is extremely foolish that it should be regarded as a natural right of man that everyone's standard of living so-called—meaning their purchasing power—should automatically advance year by year. No such extraordinary axiom has ever been thought of by comparatively rational man in the whole of human society; it is utterly new. It would not have occurred even forty years ago, but now it is regarded as a right of man. Unless we break this obsession, this preoccupation and this lack of reality, we shall get nowhere.
In conclusion, there are immense political rewards for anyone with imagination who can suggest to a population like ourselves that there may be a purpose and a driving force other than money. This is what great revolutions produce. It is what Hitler produced: it is what the
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Russian revolution produced, and it is, above all, what the Chinese revolution produced. Anyone who can do that will give us a purpose which has been lost for a long time, because of the chances of history and the extreme materialism into which our sort of society has descended. If that purpose could be achieved, it might allow us to look more respectable than we are now.
LORD HEWLETT: My Lords, before the noble Lord sits down perhaps I may ask a question. He made a reference to me at the opening of his speech and said that I appeared to be living on another planet. I do not know whether there is anything more earthly than the chemical industry or Manchester. The noble Lord did not reply to any of the points that I made. I wonder whether he can elucidate on how I can be from another planet, or did he just not understand what I said?
LORD SNOW: My Lords, I believe that I understood the noble Lord very well. That is why I said that he might be living on another planet. He has absolutely no idea of what the majority of people in this country, as they proved by their votes, think of the kind of views that he expressed.
LORD HEWLETT: No, my Lords—
SEVERAL NOBLE LORDS: Order!
6.32 p.m.
LORD GRANVILLE OF EYE: My Lords, I shall not attempt to follow the very interesting speech of my noble friend Lord Snow, with many of whose arguments I found myself in agreement on the very broad canvas which he painted. We are indebted to the noble Lord, Lord Erroll of Hale, for introducing this subject although we debated it last week. I always listen with the greatest interest to my noble friend the Deputy Leader of the House on this subject, and I thought he threw out a challenge to the manufacturing industries of this country to try to help our balance of payments position by exporting more, particularly to the Continent.
I hope very much that the manufacturing industries of this country, which are complex and quite varied, will take notice of this challenge and will attempt to meet it. I say that because when we entered the E.E.C. we gave the United

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Kingdom consumers' market to the Continent on a plate. The E.E.C. countries were ready but we were not, and in consequence they have a head start and have been exporting very large quantities of consumer goods to the retail markets of this country, as is shown by the number of container lorries on the roads.
I am not a pessimist about our future, but I was a little surprised at the complacency which was shown in the debate and in the Press, and which one has met in the country. I do not wish to go back to last week's debate in this House, but there seems to be an inexplicable complacency about the results of the three-day week, about the miners' stoppage and about the oil price increases. As the noble Lord, Lord Hewlett, said, not only are there fantastic increases in the prices of essential raw materials for industry; they are also in short supply. Industries which would like to get back in full swing after the three-day week are finding it extremely difficult to get the vital raw materials which they need for the manufacture of their end-products.
Many people say, "We have these industrial upsets, we have strikes and so on, but we quickly recover." But, my Lords, you cannot allow a jugular vein to be cut for three months without results. These have yet to be seen. Somebody, at some time, will have to pick up the bill, be it industry, consumers, the Government or the Treasury. We have not yet seen the effects in industry, but when we do there will not be so much complacency in the country. I do not ponder so much on why we go in for industrial suicide in this desperate and tragic period, as about how we are to get over it and, one hopes, prevent it from happening again in all its worst aspects, because we in this island just cannot go on behaving like this and still exist.
I should like to make just one reference to the mining dispute, which I feel was a tragedy. Anyone who has had anything to do with the mining industry and with the mechanisation of it, as I have, will realise that for long the mines have been mechanised, and I think that the previous Government intended to invest a further £1,000 million in the final mechanisation of some of them. I should have treated the miners as mechanics. I should have used that sum of money to
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mechanise this industry completely, and I should have introduced incentive schemes and paid the miners by results, as is done with car workers. If they earned £90 or £100 a week, what would it matter? The mining industry is a vital basic industry of this country which must be efficient, and we must modernise it very quickly if we are to succeed in that respect.
As many noble Lords have said, our recovery from this unfortunate stoppage will depend very much on productivity. If we cannot get increased productivity from the industries of this country and export a great proportion of it, we shall never get over our problem. One of the great disappointments is that the previous Government could not get investment in industry. I have no idea why that was. I do not know whether the City did not have confidence in the set-up or what it was, but, as the noble Lord, Lord Bowden, suggested, there was a lack of investment in industry. We cannot as a nation go on living beyond our means, which is what we have been doing. We have grossly swollen, exaggerated overheads as running costs against our exports.
If I may use a crude colloquialism, there are still too many chasing the fast buck and quick results, and I regret to say that certain sections of our industry have too big a burden of pilferage and stock losses. One asks oneself why this happens. In some industries this burden amounts to 1·5 per cent. of costs. I believe that one of the reasons for it is that the media have created a new universal taste. They have created consumer demand and, naturally, everyone wants more.
I emphasise that as a nation we can afford this standard of living, this refinement of living, only if we can export more of our manufactured goods. If we cannot, we shall have to reduce our standard of living. There is no alternative. All Governments consult the T.U.C. and the C.B.I., and I was glad to note that my noble friend the Deputy Leader of the House referred to-day to the small and medium-sized businesses (I think there was also a reference by the Chancellor of the Exchequer in his Budget speech) because these smaller businesses have had a difficult time as a result of the three-day week. Although it is necessary for Governments to talk

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to the C.B.I. and the T.U.C. in matters of negotiation, the bulk of the industry of this country comprises medium-sized and small businesses, and these people are wondering when they are to be consulted. We have headlines of the trade unions saying this and the T.U.C. saying that, with Ministers adding their own comments, and these people wonder when they are to be consulted. They are the majority of the manufacturing interests of this country and are, therefore, our business backbone. This leads me to suggest that if we are to establish a revival we must have incentives for middle management. One cannot exist in competition with the great industrial countries of the world unless middle management is right. It is fine to have the top men and the senior executives—they go to schools and to the Financial Times symposium, but the people who carry the heat and burden of the day in British industry are those in middle management.
I regret very much the lack of tax incentive schemes in the Budget. These incentive schemes were taken up not only by senior and middle management but even by workers on the floor. So, my Lords, we in industry always come back to this problem of industrial relations. Every year I attend the European managerial symposium at Davos. I meet overseas managers, industrialists, and economists, and there are two things they will always mention. One is "the English disease", and the other is: "What about your boardroom and shop floor co-operation?". They say, in the most friendly way, "It is too bad that you have a union and management setup that produces spasmodic industrial war. Why don't you do something about it?". That is their view. They say that we have to take the shop floor to the boardroom and not leave it to the personnel managers who must become the new élite in industry. We had also better look at what the "back-room boys" are doing about "holidays from growth". If you discuss this and listen to the debates in Brussels, and to some of the Commissioners, you find that research and discussions have been going on for a long time and have reached an advanced state of whether or not there should be a "holiday from growth", whether we can do with three or four
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working days a week, and whether we should call a halt in the rat race, sit back and take a "holiday from growth" and enjoy what we have already. This is beginning to get into the thinking of the "backroom boys", and it is a subject that will be transferred to the boardroom tables before long. It may be that it is a fait accompli already and we do not realise it. It may be that we had a revolution and never noticed it. It may be that people have already made up their minds that they do not want to work hard or so long, or that their wives are making up their minds for them.
My Lords, I have no idea when this country will be facing another General Election, but the worst influence (I think the noble Lord, Lord Hewlett, referred to this) in industry is uncertainty. No-one can plan ahead in an atmosphere and conditions of uncertainty. The best stimulus for revival in this country to enable it to meet its future is an injection of confidence, the word you cannot replace with anything else, as we found throughout the difficult days of 1930 to 1931. The worst fear is that of uncontrolled inflation or, what some of us remember, deflation, which you cannot stop or do anything about, and unemployment when nobody invests and nobody spends. As many speakers in the debate have suggested, I believe there is little time left to us to try to bridge the gap at the present time. Everyone says, "Well, if we can exist until the North Sea renaissance comes along and we have a Klondyke bonanza, that is all we have to do." But we have to face the next year and the next two years. It has been remarked that this is perhaps the best Government suited to tackle such a problem. In the tremendous job that the Government have ahead of them, I believe that we should all wish them well.
6.47 p.m.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, I must start by thanking my noble friend Lord Erroll of Hale, who moved his Motion with the clarity and conviction we might expect of somebody with his experience and involvement in industry. However, I do not think I can possibly comment on the number of distinguished speeches we have heard this afternoon. I shall try to confine myself to restating some of

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the principles which I believe govern our approach to the difficult situation in which we find ourselves, although I must also say that I think almost everything has been stated probably better and certainly by people who know more about this than I.
We are an industrial country, hence the importance of the debate. My noble friend Lord Erroll gave us a vigorous defence of profit. In this he was rather surprisingly supported from the other side of the House by the distinguished noble Lord, Lord Mais. At this juncture, I might point out that the recent profits made by industry, which some people have thought excessive, are the result of investment made two years ago, because that period is the lag of the profit arriving from the investment made in anticipation. The corollary of this point was made by the noble Lord, Lord Orr-Ewing. Investment has been said by many noble Lords to be the key to our industrial success. Without investment we cannot have increased productivity and growth on which to finance the welfare and the rising standard of living to which everybody aspires—in a word, the prosperity of this country. I am not in any way disputing the gloomy forecast made by the noble Lord, Lord Snow; indeed I think it is fair to say that there is a movement abroad of a number of people who feel that we would be better off if we lived simpler lives.
LORD SNOW: My Lords, may I interrupt the noble Lord? I stand by what I said in that respect, but this does not mean that, for instance, I think industry ought not to make profits. I think it is quite essential that they should; but that is rather a different point from the top managers of industry rewarding themselves extremely handsomely. The actual operations must make a profit. Let us realise that in some ways we have to be very tough-minded even if we ride about on bicycles.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, the point I had in mind was that I thought the noble Lord was questioning whether we were right to go on aspiring towards growth and increased welfare across the land.
LORD SNOW: No, not at all.
LORD STRATHCONA AND MOUNT ROYAL: I thank the noble Lord.
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Many noble Lords have said that the prerequisite for investment is confidence, so the touchstone by which we must judge the Government's actions will be whether these will engender confidence which will produce investment. This was the point made so eloquently by the noble Baroness, Lady Seear, and, again, by the noble Lord, Lord Mais. Many noble Lords touched on the terrifying problem of inflation. There was a wonderful moment when I envisaged the noble Lord, Lord Bowden, I think it was, sending Mr. Wedgwood Benn for what I hoped might be a prolonged study of the situation in Brazil, and I am not really deterred from this suggestion one iota by the misgivings expressed by the noble Lord, Lord Snow, about the type of Government you would have to have.
The worry about this Budget is the fear that an attempt is being made to disguise the effects of inflation by keeping down costs to the consumer by means of subsidies, at least in the short term. Again, this was a point admirably made by the noble Baroness, Lady Seear. Indeed, we have had a great deal of help from the Liberal Benches this afternoon. Furthermore, let us make no mistake: taxing the rich and attacking capital will aggravate matters, simply by transferring the spending power from the saver to the spender—and I do not think one has to be an economist, which I certainly would not claim to be, to understand that. One must therefore ask the Government: have the anti-inflation measures been swept under the carpet? There has been a total silence on this issue since the miners received more money; that is, there has been a silence apart from the announcement of increased prices for coal, oil and electricity. After all, my Lords, this was the issue on which we went to the country and which landed us into the situation in which we now find ourselves.
At this point, perhaps I may say a word or two about industrial relations, to which a number of noble Lords have referred. It would be ridiculous, f think, not to acknowledge that the Industrial Relations Act 1971 was hampered in its operation—indeed, it was emasculated—by the refusal of the powerful trade unions to talk about amending the Act when they found it wanting, even when they were making very full use of the provisions that suited them. At the same time they lost no opportunity to represent the

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Act, not as a legal framework for the conduct of disputes but as an attack on their legitimacy and their interests. I believe this was also absurd. Indeed, I believe it would be a great pity, as my noble friend and Leader expressed it to me, to treat the Act like King Charles's head—Away with it! What we want now in this new Parliament is to cooperate with any Bill which ensures a framework of law for the fair and orderly conduct of industrial relations.
We have always acknowledged the value of the last Labour Government's work in this field. Indeed, as one noble Lord said, a number of the clauses in our Bill were taken direct from their Bill, even though we deplored their taking to their heels at the first whiff of opposition fire from the unions. But we should add that the proposed legislation as we understand it so far contains some very worrying items. I am thinking in particular of the proposed restoration of legal immunity for those inducing breaches of contract; and I hope I am wrong in thinking that it was suggested that there was to be an extension of picketing rights into areas which would raise grave legal problems and, I should have thought, could not help involving intimidation on a scale which we had never seen before. We are worried that the Government's pursuit of their social contract, which we applaud, may not only dictate inflationary economic decisions but also make them turn a blind eye to the responsibilities, as against the powers, of organised groups in our society. That would be unfair to the vast majority who were not so organised or so protected. Indeed, some of the activities of these groups have to be recognised as being antagonistic to the cherished rights of the individual. These proposals would be partial in law and inflationary in the economy. Obviously, we shall maintain an open mind, but we shall have to look most carefully at any proposals brought before this House which lead us in this direction.
My Lords, this leads me on to a favourite hobbyhorse of mine, because I believe that the one area where industrial relations are handled so much better than anywhere else is in the smaller firms. We have always had a nagging suspicion that Labour Governments have little love for smaller firms because the
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trade unions have no affection for them since they, the trade unions, are poorly represented in those sort of undertakings. I was therefore very encouraged to see a quote from an article in The Times by Mr. Wedgwood Benn, which has already been referred to on more than one occasion this evening, when he said:
"I recognise small companies do very well."
That is a promising start from someone who has always been identified in the past with what I might call the "bigger is better" syndrome.
In connection with small companies, I think it is worth repeating statistics which have been mentioned before in this House. Something like 93 per cent. of companies are, as defined by Bolton, small firms. They produce one-fifth of the G.N.P., employing one-third of the workforce—some 6 million people. This is more than twice the number employed in the public sector. They also produce a higher return on investment across the board than their larger compatriots. The last Government showed their concern for these companies by appointing a special Minister, who the other day made a speech in another place in the debate on the Queen's Speech. So far, my Lords, I am not aware that this Government have announced the appointment of a successor to the Minister for small firms, and this is perhaps something which the Minister will be able to deal with when he comes to reply. The last Government went a long way towards instituting the reforms suggested by Bolton; and may I here applaud the noble Lord, Lord Beswick, and agree totally with him, when he pointed out that it was the previous Labour Government which called for the Bolton Report.
The last Government eased the problems of non-disclosure under the Companies Act, and the underlying thought here is that the legal requirements of a large company with a number of totally separated shareholders is totally different from the information required in a comparatively small unit where many of the shareholders will be members of the family. There was an attempt to reduce the impact of form-filling and mitigation of tax at the lower levels.
This Budget does positive harm to all industry. A number of noble Lords, including my noble friend Lord Hewlett, had a long list of impositions which

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this Government are going to impose upon industry. At least, we should be thankful that the increase of corporation tax will be reduced for the smaller firms and I shall be interested to hear whether the Minister can tell us how small firms in this connection will be defined. It is not always an easy problem. It is also worth remembering (perhaps a somewhat jingoistic point) that big business is international and small business is essentially British. I do not suppose that very many small firms pay their directors in the Cayman Islands.
Once again we return to the point that investment in the end has to come from profits, and this is most particularly true of the small firms who do not have ready access to the borrowings available for their larger competitors. The Chancellor said that he is aware of the cash flow and credit problems which will arise from the delayed effects of the three-day week as they work through the economy. I hope that in this connection he will look sympathetically at the proposal which has been put forward by the Smaller Businesses Association for a credit guarantee scheme, analogous to the arrangements which are made for the export credit guarantee. That would help to alleviate the needs of some of the small firms and above all would ensure them continuity in their investment plans. As a number of noble Lords have said, the resilience of the small companies was shown by the remarkable way in which they reacted to the three-day week.
There are a couple of other points upon which I should like to touch. The noble Lord, Lord Beswick, mentioned in his speech what he called the "planning agreement with the laudable aim of giving firms a better opportunity. I am not quite clear, my Lords, how this planning agreement is related to the existing organisations such as Neddy. The other point which the noble Lord, Lord Beswick, mentioned was the Companies Act and his exchange with the noble Earl, Lord Limerick. He did indeed give a rather disappointing reply to my noble friend on that occasion. I must regret that there is no intention to reorganise some necessary workmanlike and broadly uncontroversial measures on which so much effort and Government time had already been spent.
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My Lords, I think we can say that so far as industry is concerned the Budget speech was far from reassuring. The expression of the noble Baroness, Lady Seear, that industry had been "clobbered", has been taken up by a number of other noble Lords. The C.B.I. has gone on record as saying that already the Stage 3 control of prices is biting very hard. In spite of that, I feel sure that the attitude of industry is still, as was said by Paul Chambers in 1964:
"So we … greet the new Government certainly without hostility, and with every desire to co-operate in measures designed to raise productivity, improve living standards and to achieve progress with long-term stability. Where we disagree we will say so, I hope plainly and constructively."
There is much common ground and to the extent that the Government devote their efforts to tilling this fertile area to yield the maximum industrial crop they will command support from these Benches. Let us therefore hope that they will not be lured by some of the signposts erected by some of their wilder men, which I fear might lead us over Government-erected barriers to progress to the and lands of negative egalitarianism.
7.6 p.m.
LORD BESWICK: My Lords, with the permission of the House, if I have it, I shall try to answer some of the points which have been raised, although I am sure that noble Lords, looking at the clock, will not expect me to answer all the many questions which have been posed. I hope that my noble friend—and I hope I can call him that—the noble Lord, Lord Erroll of Hale, is satisfied with the response that he has had to the debate which he has initiated. It has been extraordinarily interesting.
I said to him that in winding up I would answer some of the points which he raised, and the first point concerned small firms, a question which was amplified by the noble Lord, Lord Strathcona and Mount Royal. May I say that apart from the last four words I wholly agreed with the last sentence with which the noble Lord wound up and I appreciated the spirit contained in that last sentence. Now as for small firms, I was asked by the noble Lord, Lord Strathcona and Mount Royal, what were the Ministerial responsibilities in the present Department

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of Industry. If he turns to the Hansard of the House of Commons of March 25, columns 39 and 40 in the Written Answers, he will find there spelled out that, under my right honourable friend the Secretary of State, I am responsible, with the Under-Secretary of State, Mr. Meacher, for specific industries including iron and steel, aerospace and shipping. The Minister of State, Mr. Heffer, will take responsibility for the Industry Act, regional industrial policy, and small firms; and the Under-Secretary of State, Mr. MacKenzie, will be working with him. The answer to his question therefore is that Mr. Heffer and Mr. MacKenzie will have that direct responsibility that he thinks should be set out.
I am glad that the noble Lord acknowledged that it was a Labour Government which set up the Bolton Committee. I do not know why certain noble Lords should think that there is on the part of the Labour Government or Labour Party people an antagonism towards small firms. I suppose that if there was a count we would probably have as many people working in small firms as there are in large firms. I agree with him that in some of these small firms there is often a wonderful spirit of industrial relations. Following the Report of the Bolton Committee Small Firms Information Centres were set up, and it is interesting to observe the use that has been made of those Centres. Since they were set up they have helped 11,700 inquirers with over 20,000 inquiries, and even though publicity for their work has recently dropped off they are continuing to receive some 500 inquiries a week, ranging over management problems, financial and control problems, technical problems, and help needed with Government regulations, policies and State agencies.
Moreover, it is not simply the action that was taken by the last Labour Government. The noble Lord will no doubt recall that in the Budget my right honourable friend made a specific reference to the relief which he has given to small companies, and I think the noble Lord, Lord Strathcona and Mount Royal, referred to this. A company whose profits do not exceed £15,000 pays tax at a special rate—42 per cent. as against the normal rate of 52 per cent.—and there is a marginal relief given on profits
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up to £25,000. Therefore I hope we shall hear no more at all about the conflict between the Labour Government and small firms.
LORD STRATHCONA AND MOUNT ROYAL: My Lords, is the noble Lord correct in saying that the small firms bureaux were set up by the Labour Government? I rather thought they were set up by the last Conservative Government; but of course I stand to be corrected.
LORD BESWICK: My Lords, I did not say that: there is no conflict between us. What I said was that the Bolton Committee was set up by the Labour Government and it was following the report made by that Committee that the centres were established.
I was asked by the noble Lords, Lord Erroll and Lord Kings Norton, about the situation in the nuclear energy industry. I am going to read what I am advised is the position, but the language is not mine. We can expect the contribution of nuclear power to our energy needs to increase further in the coming years. Provided safety and reliability can be assured, it will pay us to rely more on nuclear power for electricity generation. We need to decide on the size and shape of our nuclear programme and, interlinking with this, on which thermal reactors should form the basis of that programme. The need for early decisions is balanced by the need to get the decisions right. I have tried to find out when that decision will be made. I am afraid I have not succeeded, but I am told that it will be in the comparatively near future.
I was asked by the noble Lord, Lord Kings Norton, and I think by the noble Lord, Lord Erroll, about the situation on mergers. The position at the moment is clearly unsatisfactory. The Commission's powers in this field are set out in the Treaty of Paris; and to the noble Lord who asked why British companies are now regulated by a body on the Continent I must answer that neither the noble Lord, Lord Kings Norton, nor I was able to set aside or stop certain legislation which passed through this House under the previous Government. That legislation means that Article 66 gives the Commission certain powers to regulate mergers. It is true that, by comparison with the system used in the

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United Kingdom, the procedure appears to work slowly. Even recognising that it is frequently difficult to reach a fair and balanced view in such cases, and that there may be special procedural difficulties (such as the need to translate documents into other languages), there is still unaccountable delay. This point, among others, has been kept very much in mind when considering the more general draft Regulation for controlling mergers which the Commission have recently issued.
Representative groups from industry, the C.B.I. and the City have voiced their concern about it. Consultation will be widened, I promise noble Lords, to ensure that the United Kingdom will be able to present a representative view on all the issues raised by this draft Regulation in forthcoming discussions with the Commission. I will see that in the general discussions about renegotiation account is taken of the point made by the noble Lord, Lord Kings Norton. As he said, Commissioner Borschette and the Director-General of Competition visited London yesterday at the C.B.I.s invitation to hear at first hand a presentation on the British system for regulating mergers. They have well in mind the need for decisions to be reached as quickly and responsibly as is possible. I say that about the general position. I think the noble Lord will accept that it would be difficult for me to say more about the proposed merger of G.K.N. and Miles Druce.
The noble Lord, Lord Bernstein, I was pleased to hear, asked noble Lords opposite whether they realised when they were criticising the Government for the present situation, that we had been in power for only three weeks. It is quite true that the Chancellor's decision to withdraw tax relief on interest on private loans is not directed against industry. It is a fact that those private loans have been a material factor in the money supply of this country. If we are serious in our campaign against inflation, it is inevitable that tax relief for those loans should be stopped.
My noble friend Lord Bowden suggested that we might have a lot to learn from Brazil. I have a great delight in watching Brazilian footballers when the opportunity arises, but I am not absolutely sure that we can learn a lot from Brazil so far as our own inflationary problems are concerned. There are cer-
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tain differences between that country and our own—for example, I gather they devalue their currency roughly every forty days; they are not averse to revolutions; they have more material resources and more manpower, and their political system is distinctly different from ours. Though it has advantages in some respects it has disadvantages in others, and I would not have thought that we should necessarily copy what they do.
I was fascinated by what my noble friend said concerning the difficulties of the manufacturers of machine tools who went to see him; but. I do feel, with the noble Lord, Lord Orr-Ewing, that he would do well to advise them to consult their accountants again, because there are now methods of inflationary accounting which would obviate the kinds of difficulties that he mentioned.
LORD BOWDEN: My Lords, may I interrupt for one moment? I hope I did not give my noble friend the impression that I admired the Brazilian political system. What I said was that they have learned to live with inflation and they accept it as inevitable. Our problem is that we regard it as a temporary aberration and suppose that it will eventually go away again. We have never learned to cope with it. I believe that is true. As for the machine tool trade, the people there, as you know, are in very deep trouble and, in fact, they could not pay a dividend at all if they kept accounts properly.
LORD BESWICK: My Lords, I am much obliged to my noble friend. I was glad to agree with the noble Lord, Lord Polwarth, when he said that Scotland was an asset and not a liability; but I was surprised to hear him say that nothing was said in the Chancellor's speech about regional problems—because the Chancellor did go out of his way to say that the Regional Employment Premium was being maintained. I was grateful to the noble Lord for paying a tribute to what was being done by officials of the Department of Industry in Glasgow at the present time.
LORD POLWARTH: My Lords, I feel that perhaps the noble Lord misunderstood me slightly. I do not think I said that nothing had been mentioned in the Chancellor's speech about the continuation of regional policies but that nothing

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in the speech seemed to offer much encouragement to industry as a whole.
LORD BESWICK: My Lords, I shall refer to that point again later. I may have been mistaken, but I thought the noble Lord made a special point that we had not put sufficient emphasis on the regional problem. The noble Lord went on to speak about the investment plans of the British Steel Corporation. There is a problem here. They have a most important plan and it is essential that they get on with it. Nevertheless, if we are concerned about regional problems, there are cases where the proposed closures do seem to bear particularly severely upon certain regions. It is essential, therefore, that in particular cases we have a look again at what it is proposed to do to alleviate the unemployment problem which might otherwise be created.
The noble Lord, Lord Orr-Ewing, spoke about figures which had been published regarding the Concorde aircraft. I heard what he said with great interest, and read what he wrote in the Daily Telegraph. He may well be right about that figure of £80 million. It is being looked at again in the light of the many comments which have been made since the figure was published, and what he said about it will also be taken into account. I was interested in what he said about profits, and he will not expect me to repeat what I said at the beginning. I agree with him in so far as he said that if there were an inflationary technique of accounting some of the balance sheets of companies would present a very different picture indeed. I could not understand what he meant when he spoke about the tax on petrol. Here again noble Lords opposite are, I fear, too ready to believe that the Labour Government is out to hit industry. The V.A.T. on petrol will make no difference either to industrial lorries or to buses and bus fares.
My noble friend Lord Mais spoke about steel imported into this country, and about steel which had possibly previously been exported at a greatly lower figure from this country. This is a problem about which we have heard a good deal. I gather when we come down to getting individual cases it is much more difficult to establish the facts. If the noble Lord has any particular facts I
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shall be glad to hear from him about them; and if there are any importers who are overcharging, the Price Commission will come into the matter. It would be a good thing to put the facts before that Commission. The noble Lord will probably agree that some of the problems to which he referred will disappear now that there is this increase in the list prices of the British Steel Corporation's products.
The noble Lord, Lord Snow, spoke about a desperate situation that was facing us, and I and my noble friends on this side of the House are immensely grateful that he emphasised that this desperate situation, despite what was said by the noble Lord, Lord Hewlett, had not been brought about by Her Majesty's present Government. With his infinitely better grasp of the English language, he put the facts better than I ever could and said that the solution to our problems lies in industry, and in hard work, and not until we accept that are we on the way to recovery. He knows I agreed with him when he spoke of the obsession about economic growth. There is a problem here which human beings in this country and elsewhere are beginning to understand: we need a little more genuine human sympathy than we have hitherto displayed in a mad rush for material possessions.
The noble Lord, Lord Granville of Eye, with his practical experience of industry, complemented what was said by the noble Lord, Lord Snow. He too insisted on the truth that productive industry rather than the slick speculator is where our encouragement should go, I agree with what my noble friend Lord Mais said about confidence and genuine consultation, and the contribution which can be made by the workers in a company if they are given an opportunity to make that contribution. It was good to have the benefit of his practical experience. The noble Lord, Lord Granville of Eye, again complemented what was said by his noble friend.
The noble Baroness, Lady Seear, and several noble Lords, the Lords Erroll of Hale, Polwarth, Orr-Ewing and Hewlett, seemed to think that the taxation announced by the Chancellor of the Exchequer was going to be almost suffocating in its incidence. I think they are exaggerating the effect of the 2 per cent. increase in corporation tax, for

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example. I cannot think that they are looking at this problem with an objective mind. After all, I am entitled to say that the previous Government tried cutting taxation. What happened then? When taxes were cut, was the money then made available to the private individual always spent in investment? Are noble Lords absolutely satisfied that the savings of the people to whom they referred went in productive industrial investment? I think my noble friend Lord Bowden had much more of the truth when he said that too many of those people were concerned with things like Georgian silver teapots, or vintage wines, or land, or real estate of one kind and another. Too much of the money that was saved was going into those directions. I cannot think that it can be claimed that under a more benign Chancellor of the Exchequer everything was all right. The last Government had as a target for industrial investment an increase of between 12 per cent. and 14 per cent. for the current year. That figure will not be reached—even without the three day week it would scarcely have been reached. Even if it had been reached, it would only have brought us back to the figure which the Labour Government achieved in 1970–71.
Let us look at the other vital issue in this problem—the balance of payments and the gap between what we sell and what we bring in from abroad. When there was a Conservative Chancellor of the Exchequer, when they were cutting taxes, were we narrowing the gap between imports and exports? The fact is that we were not. What we were doing with this money was buying motor cars, possibly foreign motor cars, colour television sets, buying luxuries of one kind and another from abroad. That policy did not help; it brought us to the position where we had to take unpopular measures. I listened to what noble Lords said last week. Almost everyone was saying that the social policies of this Government were not being paid for; we were not taking enough out of the economy. They were afraid that demand would build up and inflationary pressure would not be released. We have done something and now in every case we are told that we are doing the wrong thing. Someone said, "To tax and to please is not given to mankind." One has to recognise that. Nevertheless, I ask noble Lords to see
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sometimes that the problems that are confronting us are not the making of the present Government. If the noble Lord, Lord Hewlett, wishes to interrupt—
LORD HEWLETT: No, I am transfixed; I could not get up.
LORD BESWICK: My Lords, I finish by saying this. The noble Lord, Lord Snow, touched on something in which I believe very deeply: incentives need not always be considered in terms of material goods. There are many fine things that are done, some of the finest things in human affairs, that are not done for material gain at all. One has only to look back at one's own war experiences to realise how true that is. We are trying a "social compact" as it has been called. We have said we are trying to do certain things and, on the other side, we expect certain things to be done for us. Whether it is going to work out in the way we hope, we do not know. But all I can say is the other way did not work out too well, either. So we are going to try. If we are to succeed it will be on the basis that everybody—members of the trade unions and members of the boardroom, all of us—will have to think a little more about what we can give as well as what we can take. It is in that spirit again that I hope this House will conduct its discussions in the future.
7.30 p.m.
LORD ERROLL OF HALE: My Lords, since there is further business before your Lordships' House, I will be very brief. I should like to thank those noble Lords who have taken part in this debate which I initiated, both for the excellence of their speeches and for their kind references to me for having introduced the topic. In particular, I should like to thank my noble friend for making two very interesting speeches and also for welcoming me back to the debates here after an absence of several years. I should say that I think the debate has proved of great value to those of us who have taken part in it, as showing how much thinking the Government are doing on the matters which we have raised. Of course one could not expect full answers to every point raised. For my part, I was very impressed with the amount of detailed information which my noble friend was able to give to your Lordships. For that I should like to extend to him

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my personal thanks; and to all of my colleagues, my thanks, too, for having taken part in what has been a most interesting afternoon. I therefore beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

THE CASE OF MR. LUKE DOUGHERTY
7.32 p.m.
LORD HAILSHAM OF SAINT MARYLEBONE LORD HAILSHAM OF SAINT MARYLEBONE rose to ask Her Majesty's Government: Whether they will make a Statement on the action they propose to take as the result of the successful appeal against conviction of Mr. Luke Clement Dougherty. The noble Lord said: My Lords, I rise to ask the Question which stands in my name on the Order Paper relating to the case of Mr. Dougherty. I do so in no critical spirit because, of course, none of the events to which it relates happened during the tenure of office of the present Administration. Though the case in question raises, as I shall seek to show, some questions of principle which I think call for some statement from Her Majesty's Government, they did in fact take place without any action either of this Government or of the Government of which I was a Member. I ventured to put down an Unstarred Question because I felt that a little further probing than one could do at the beginning of your Lordships' proceedings was necessary.
My Lords, the simple fact which gives rise to the question I have raised, and which the Lord Chief Justice described as, disturbing", is that Mr. Dougherty spent nine months in gaol for a crime which he did not commit. It sometimes happens, and perhaps not infrequently, that a guilty man gets off on appeal owing to some technicality, a loophole in the law or some misdirection by the trial judge; or that he gets off on appeal originally because there is some doubt as to whether or not he is guilty. But this is not one of these cases. At least, I hope that the noble and learned Lord on the Woolsack, who I understand is likely to reply, will confirm what I say, that this is not one of these cases. Mr. Dougherty was innocent, and his inno-
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cence has been established, I believe, beyond doubt.
The crime of which Mr. Dougherty was accused was shoplifting. It sometimes happens that persons accused of shoplifting bring the accusation on themselves by foolish conduct or by foolish words before or during the event which are the subject matter of the charge. This again was not one of those cases, as I understand it. Mr. Dougherty was not present at all at the scene and time of the alleged offence. I understand that the offence was at Durham; he was in fact enjoying an innocent outing at Whitley Bay with a coach-load of other people. He was therefore not in any way responsible for bringing the prosecution on himself.
Mr. Dougherty's defence was therefore an alibi. It is fair to say that all alibis are suspect. They are, I suppose, more frequently the subject of concerted perjury than any other defence. Some people who put them forward justly incurred suspicion by withholding them until the last possible moment. Indeed, as the noble and learned Lord knows, Parliament thought it necessary to legislate against the production of an alibi at the last moment, popularly known in the profession as the "sprung alibi". But again this was not, as I understand it, one of those cases. Mr. Dougherty put forward his alibi at the earliest possible moment and said exactly what he had been doing. I must emphasise, my Lords, that so far as I can see—and again I stand subject to correction by the noble and learned Lord—it was open to the prosecution to check that alibi before taking the matter to trial. If they had done so, there were a whole coachload of people who could have confirmed it—or, at any rate, most of them could have confirmed it.
The first question I should like to put to the noble and learned Lord is why the prosecution did not check that alibi. What is the good of Parliament legislating that "sprung alibis" are not to be produced if, in fact, when the prosecution is told what the defence is, and the defence is an alibi and that the alibi is such-and-such, the prosecution do not bother to check it? Perhaps the noble and learned Lord will tell me that. I am bound to point out (I do not know if the noble and learned Lord will agree) that if in England and in Wales we had a prosecution system of

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professional prosecutors, like the sheriff, substitute in Scotland, or the district attorney in the United States, it is possible that the alibi would have been checked by a professional prosecutor. I should like to know whether the Government have any comment on the suggestions which have been made from time to time that we should look again at our system of prosecution in this country.
Instead of checking the alibi, as I personally would have thought they ought to have done, the prosecution asked the store detectives, who had made the complaint, to identify the alleged criminal from the criminal record photos. Mr. Dougherty, as it happened, had a record and so his photo was there. It was there, I should suspect (although again I put this interrogatively), in black and white. Unfortunately, the store detectives identified this photograph as that of the offender. I should like to know whether it has ever been considered whether C.R.O. photographs should be in colour. I understand that the real criminal, if there was one, had ginger hair and that Mr. Dougherty has black hair, or vice-versa. So if there had been a coloured photograph of him, it would certainly, I should have thought, made it more easy to identify correctly than was possible with a black and white photograph.
The prosecution then arranged, at the request, I understand, of Mr. Dougherty, for an identity parade. Unfortunately, for reasons which I understand were perfectly adequate, Mr. Dougherty was not able to attend the appointment. Instead of arranging another appointment, the prosecutors simply went to trial and made arrangements for identification by seating Mr. Dougherty among the jury. I should have thought that that action in itself was open to criticism as a method of identification—and as practised, because one does not want the accused, as a rule, to be seated in the jury box among the jurors who are to try him. It is inconvenient for the jurors, and may lend itself to abuse. Yet that is what was done.
My Lords, what rendered the situation much worse, so I understand, was that the whole process of identification by this means was in fact a charade, because the two store detectives were allowed to watch the seating of the defendant
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through a glass panel in the court door, They were thus in no difficulty in providing the identification. I should like to ask: how did that happen? Did anyone tell the court or the jury that this extraordinary impropriety had taken place? One does not want to animadvert either on the conduct of the prosecution or on the conduct of the store detectives, but how can that have been proper? The object of the exercise was to let the jury think that there was a proper method of identification taking place and that the store detectives were trying to find the real man, not knowing where he was. Did the store detectives give evidence? Did they tell the court that the whole thing had been stultified by their seeing the man put in the jury box so that they knew exactly who was under suspicion? And, if not, were they not in some way guilty of really a contempt of court, of almost a conspiracy to defeat the ends of justice? When did the authorities first learn that this extraordinary thing had happened, and what did they do when they had found out? These are questions which I feel I am bound to ask. Somebody must have known sooner or later that the court had been misled. Why did the prosecution let it happen in the first place? Was it negligence, or what was it?
Then comes a series of events for which I do not think the prosecution can be blamed. The accused had, I believe, given a list of five potential alibi witnesses, and in the event he called and it may have been that he was able to call, only two. These were respectively, I understand, his mistress and his best friend, who also had a criminal record. It is not perhaps surprising that in face of the positive identification the jury believed—
LORD GARDINER: My Lords, I am sure the noble and learned Lord will excuse me if I say that the friend had no criminal record; he is thinking of another witness.
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, I am very much obliged to the noble and learned Lord; I am glad to be put right on such an important point. It is very important that it should be put right. But the point I am making is still the same: that the only witnesses that the accused man was

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able to call were witnesses who might be thought to have an interest in the result of the case, a bias in favour of the accused. This of course was not the fault of the prosecution, and it no doubt assisted the jury to accept the evidence of identification at its face value. At any rate, the result was that Mr. Dougherty was convicted and sentenced for an offence which he did not commit and a suspended sentence which had been imposed upon him, I gather, for an earlier offence, which I believe he did commit, was activated against him. This situation can only give rise to a demand for a statement as to what is going to be done about it.
The prosecution were in a position to have known the truth from the start, for the reasons I have given. I understand that he appealed against conviction and that that appeal was in the first place turned down. I think I can understand how that happened, owing to the difficulty of upsetting a jury verdict by fresh evidence in cases where the evidence could have been provided by greater diligence on the original trial. But I think it probably unfortunate, if I am correctly informed, that the legal aid certificate which was granted for the first appeal allowed for counsel only and not for solicitors and counsel; because where fresh evidence is the issue, and where, as in this case, it would have been necessary to interview at any rate a substantial number of those who were present at Whitley Bay from the coachload, I should have thought a solicitor's intervention was almost essential; and I should have thought it ought to be a general rule that solicitors are instructed in such cases as well as counsel.
The end of it was that the organisation known as Justice took the matter up with great public spirit—and I see in his place the noble and learned Lord, Lord Gardiner, who I know has a great interest in the work of Justice—and instructed solicitors and counsel for what I think was the second and subsequent appeal. They did a public service and I hope at least they have been indemnified. I notice that the Lord Chief Justice said in the course of the appeal that this was a disturbing case and that some sort of inquiry as to the situation on appeal is taking place internally in the Judiciary.
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This is not specifically the noble and learned Lord's ministerial responsibility, but if he could tell us more about that inquiry, and if he could tell us whether the result will be known, how it will be known, and when it is likely to be known, I should of course be grateful.
Lastly, there is the question of compensation. I assume that Mr. Dougherty will be compensated, or has been compensated, but I should like the noble and learned Lord to tell us what the position is and the kind of scale upon which compensation in these cases is contemplated. One hopes they are very rare. My Lords, this is a late hour. I had other things I wanted to say, but I felt quite clear in my own mind when I read the account of this case in the paper both that the Government ought to make a statement and that this House, with the noble and learned Lord on the Woolsack, was probably the best place where they should be asked to do so. I hope that I have not taken up the time of the House too long.
7.46 p.m.
LORD GARDINER: My Lords, may I first very respectfully congratulate my noble and learned friend on the Woolsack on his speech in the debate in reply to the gracious Speech from the Throne. Those who took part in the debate took advantage of the opportunity to offer their congratulations. For the first time I think in ten years. I did not take part on the Home Affairs day and was therefore deprived of that opportunity.
My Lords, may I first say this, as Chairman of Justice? Justice is an all-Party body of lawyers whose function it is to make recommendations for what they consider would be improvements in the administration of justice. They do not and cannot ordinarily take on individual cases. They have not the money and they have not the staff. We have an admirable secretary and assistant secretary and, when we can afford it and can get one, a typist. That is the staff. Their function is to serve the council, the executive committee, and the many committees of Justice, which are always at work. I venture to ask permission to say this because in this exceptional case, where we found someone in prison who it was clear to us could not have committed the crime, and who had no one to advise him or to help him, naturally men of good

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conscience could do nothing else than to put their hand into their personal pocket and say: "We will guarantee the cost and take the staff off their ordinary work to help." But since this happened, both Justice and I have been absolutely inundated with letters from all over the country from people who say they were wrongly convicted; and I am grateful for the opportunity to make it plain that ordinarily we cannot take on individual cases.
The importance of the Dougherty case I think is simply this. A great many things went wrong and nearly all these things are matters in the field of the administration of the criminal law upon which Justice has already published reports or got out memoranda, and made recommendations, which, if they had been accepted and implemented, would have prevented these matters from arising.
May I first take legal aid? The system of criminal legal aid always seems to me vastly inferior to civil legal aid. In the first place, there is no unified scheme for allocating solicitors in a case of criminal legal aid. A number of solicitors have complained fairly recently that, having intimated to the local court that they are prepared to take legal aid cases, the cases all seem to go to other solicitors. There seems to be no unified practice. Justice has discussed this matter with the Law Society. Nothing in particular has been done. In some cases the clerk of the court gives the man who has been granted legal aid a list of local solicitors from which to choose, sometimes with advice, sometimes without advice. In this case, Mr. Dougherty was simply told, "This is your legal aid solicitor", and he had no alternative.
The next difficulty under this head (and I do not in the least blame him for this) was that the solicitor, when Mr. Dougherty said that he wanted all the 20 adults on this coach (it was a children's outing to the sea and Mr. Dougherty and one other man were the only fathers; all the rest were mums) said, "I will call this a legal aid case; it is public money and I shall be criticised if I call 20 witnesses, you had better choose your best five." No guidance seems to have been given to Mr. Dougherty about the five. Of course he would have done better to find out from the parent who organised the outing the names and addresses of
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those he had not previously met and who would have been more convincing as witnesses; but that did not happen. He was not told to make sure that those he called were of good character. He was told to choose his best five, and so he did.
There were no proofs taken from these witnesses. The proofs (if that is the right word) supplied to counsel were merely Mr. Dougherty's account of what tile witnesses would say; and we all know the dangers of that. No witness summonses were sent to the witnesses. Mr. Dougherty was left to bring them to court. In the result, he chose five. One of them did not come because she was afraid, having a conviction herself. As your Lordships will remember from our discussions on my Rehabilitation of Offenders Bill, it is the law that in any case, criminal or civil, any witness can be asked about any conviction h or she has, however old and however irrelevant.
In the Report of the Committee of which I had the honour to be Chairman we pointed out in how many cases the truth was not given in evidence because people were afraid to go into the witness box. The woman who organised the coach outing wanted to take her husband to the hospital that day, and she was told by the police that if she made a statement she need not go to court. So only three of the five attended. Of these, one woman had a previous conviction, so counsel said, "I cannot call her"—the same point again. That left him with only two, the other father and the woman with whom he is now living. He is a man who is separated from his wife. They have six children, and by amicable agreement his wife has charge of three and he looks after the other three. Of course, to call the woman with whom he was living is not very impressive from a jury point of view.
So, my Lords, I suggest two remedies arising out of this. First, ought not encouragement to be given, perhaps by the noble and learned Lord on the Woolsack, to the Society of Clerks to Justices and the Law Society to get together and work out some uniform scheme as to the method by which solicitors are selected in criminal legal aid cases. Number two, and better still, ought we not to do what Justice has advocated for a long time; that is, provide that in every court there

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should be a duty solicitor. This is the practice in Scotland. Under their Legal Aid Scheme every sheriff court is attended by a duty solicitor, drawn from a rota of the local solicitors, and anybody who may walk in at the front door of the court and who has not a lawyer is at once asked to see the duty solicitor. Very often such people have never been in court before; they do not understand the procedure; they do not know what is going on, and under this system they can immediately get advice from the duty solicitor. The system has already been tried in one or two towns in England where I am told that it works extremely well. Would the Government consider whether we should not have such a system here?
Regarding the police, anything I say about the police conduct is subject to an inquiry which is being undertaken by an independent chief constable, the Chief Constable of Northumberland. The information which Justice has is that the Chief Constable of Northumberland is carrying out a wholly independent and very careful investigation, so anything I say is subject to that. I make the following points. First, there was no identification parade, for whatever reason, although Mr. Dougherty asked for one. Secondly, as to police photographs, the Home Office advisory memorandum was not complied with. That document says in paragraph 18:
"Photographs of suspects should never be shown to witnesses for the purpose of identification if circumstances allow of a personal identification."
And then, in paragraph 20:
"If a witness makes a positive identification from photographs, other witnesses should not be shown photographs but should be asked to attend an identification parade."
In this case, as I understand it, photographs were shown to both witnesses in the same room on the same occasion. Thirdly, as I understand it, the original statements from the two store detectives, or the two employees at the shop, were to the effect that the theft (it was not a complete theft: a roll of coating material was lifted and was later thrown down on the ground) was carried out by a group of three, of whom an old lady with a stick was one. When the police decided that it was Mr. Dougherty, these statements were withdrawn and there were
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substituted statements in which the witnesses of the shop spoke about only one man, Mr. Dougherty.
Then, my Lords, I agree with the noble and learned Lord, Lord Hailsham of Saint Marylebone, that there was no adequate inquiry into the alibi. They did, I think, see two or three of those on the coach who corroborated Mr. Dougherty. They never, I think, saw any others, and in spite of the fact that those they did see corroborated Mr. Dougherty, they went ahead and prosecuted.
As to the remedies here, No. 3 (I say "No. 3" because I am collecting points with which I hope the noble and learned Lord on the Woolsack may choose to deal, and under the heading of legal aid I have already raised two) is not the right remedy—what Justice has been pressing for for years, in their Report called The Prosecution Process in England and Wales. Our police are in some ways the least controlled and the most powerful in Europe—and when I say that what I have in mind is this. First, as to their being the least controlled, I do not know any police force in Europe, other than ours, which is not under the control of a Minister responsible to Parliament. I believe I am right in saying that it was simply because of the excesses of the French police at the time of the French Revolution that when we decided to have a police force we thought we would create a hundred or two hundred separate police forces. I do not mean to say that they are not highly disciplined, but they are responsible only to their chief constable, except to the extent that the Home Secretary through the Commissioner of the Metropolitan Police, has some influence on the Metropolitan Police; otherwise they are independent.
I remember when I was a member of the Committee of which the noble and learned Lord, Lord Evershed, was Chairman, on the Practice and Procedure of the Supreme Court, we found a great many things wasted in actions for damages for personal injuries on the roads because the policeman would not produce his notebook until he was subpoenaed at the trial. In a traffic accident case, of course, he is a completely independent witness, and very often if only both parties had known from the start what the policeman had in his notebook as to the position of the vehicles

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and what the drivers said to him immediately after the accident the action would never have been brought. We suggested to the Home Secretary that the police should produce the notebook to both parties immediately after the issue of the writ. But naturally the Home Secretary has said, "I do not control the police. All I can do is to put your recommendation to the next meeting of chief constables, and every chief constable will have to decide for himself." As I have said, I think this situation obtains nowhere else.
Then, my Lords, when I said that our police are the most powerful what I had in mind was simply that in this country the police investigate a crime reported to them; they interrogate suspects; they decide whether or not there is to be a prosecution; if there is to be a prosecution who is to be prosecuted and—most important—what the charge is to be; who will be called as witnesses. And, except for those relatively few cases undertaken by the Director of Public Prosecutions, they prosecute. So far as I know, this does not happen anywhere else. The very well reasoned report by Justice on the prosecution process gives a detailed account of the independent prosecuting authority in Germany, of the independent prosecuting authority in Holland; and there came to London at our request a distinguished French judge to explain to us that although under the Napoleonic law they have not an independent prosecuting authority, as soon as the prosecution starts the police are under the direct instructions of the juge d'instruction who decides all these matters—whether bail is to be opposed, and so on.
In Scotland of course the police make inquiries into a crime reported to them and they interrogate suspects, but they do not decide whether there is to be a prosecution; they do not decide who is to be prosecuted or what the charge is to be, and they do not prosecute. All that is done by the Procurator-Fiscal, an entirely independent prosecuting authority. Your Lordships may remember that since this report was published—and it was published between three and four years ago, when the noble and learned Lord, Lord Shawcross, was the Chairman of Justice—the committee of which the noble Lord, Lord Hunt, was chairman recommended that the Scot-
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tish system should be applied to Northern Ireland; and the last Government complied with that recommendation, except for very small cases. So I think we remain the only country in Europe in which the police have these enormous powers in certain cases being not only the prosecutors but also the principal witnesses.
About once a year I have tabled a Question on this matter to the noble and learned Lord, Lord Hailsham of Saint Marylebone, who said either that the Government were considering the matter or that they did not propose to make this change at the present time. I express the hope that the Justice report may be more sympathetically considered (particularly after the Dougherty case) by the present Government, and I should like to inquire what the views of the noble and learned Lord, the Lord Chancellor, may be.
I would suggest that the next remedy in relation to the police is that we must try to persuade the Home Office, not only on this point but on others, that we live under the rule of law. If we live under the rule of law then either there is a law about something or there is not: if there is a law then it ought to be obeyed and enforced; if there is not, it is a matter for our own judgment. This applies not only in the field of the law of immigration. I have expressed the view before that our immigration law is the most illiberal immigration law in Europe; but this is really because the Home Office like everything to be decided at the discretion of officials, immigration officers or civil servants, as indeed nearly the whole of the practical side of our immigration law is, and they have an absolute passion for advisory circulars. I do not know how many of your Lordships may have seen a two and a half hour programme on the B.B.C. dealing among other things with legal aid, in which one of the points that transpired and was the subject of research work was the astonishing difference between the chance of getting legal aid in one magistrates' court or another. There are magistrates' courts in which the chance of getting legal aid may be 70 or 80 per cent., whereas there are other courts in which the chance of getting legal aid is less than 5 per cent.
Your Lordships may remember that the noble and learned Lord, Lord Widgery, was chairman of a committee

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which recommended that certain criteria for deciding criminal legal aid should be set out. I remember in connection with the Criminal Justice Bill of the last Government that some of my noble colleagues and I tried to get these criteria incorporated into the Act because we said if there are to be these criteria they ought to be put into an Act. The Home Office as usual said, "You leave it to us; we will do it by means of an advisory memorandum". The difficulty about that is that the Home Secretary cannot make the law. These Home Office advisory memoranda to justices of the peace meet with a different fate in different courts. In some courts the clerk gives the justices on that bench a copy; in other courts the clerk gives each justice his own summary of what he thinks the Home Office memorandum amounts to, and I am afraid that in a few courts they never leave the clerk's table. But what must be clearly recognised is that any bench of magistrates, and indeed any magistrate sitting in any court anywhere in the country, is entitled to say, "I have read this Home Office advisory memorandum. I entirely disagree with it and I do not propose to do anything of the kind".
There is no sanction, and indeed according to the Home Office document itself the sanction is dealt with on the front of the document, where it says:
"The memorandum has been prepared in consultation with the Lord Chief Justice and the Secretary of State understands that failure to observe its provisions may well result"—
in what?—
"in the judge, in his summing up to the jury, commenting on the reliability of the evidence obtained".
Of course, that is not likely to deter any police officer. There ought to be rules, both as to identification parades and as to police photographs, and when they have been decided then in my view they ought to be passed into law.
I will not trouble your Lordships with the details of the many Justice proposals about this. They put in two separate memoranda to the Criminal Law Revision Committee dealing with the whole question of the conditions which should obtain on identification parades and police photographs. Even the Criminal Law Revision Committee have expressed the opinion that mistaken identification is" by far the greatest cause of actual or
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possible wrong conviction", notwithstanding that their report did not cover any of the recommendations which had been made by Justice.
The other point in relation to the police is this: there is no clear law as to whether or not whoever is prosecuting and has in his possession a statement which he does not propose to use himself but which is helpful to the defence, should produce that statement to the defence. There is a dictum which I believe is obiter by the noble and learned Lord, Lord Denning, that this is a requirement of the law. There is a decision of the Court of Appeal that it is not. Certainly when I was brought up and, I hope, properly trained at the Bar, I was told that if I was prosecuting it was my duty to see that any information which the prosecution had and was not going to use was passed to the defence, and I should like to ask the noble and learned Lord on the Woolsack whether at least that ought to be clarified so that we know the position.
It was said in the second appeal that the case had never been committed by the justices. As this has given rise to some misunderstanding and I observe from a letter in The Times that the Bench of magistrates in question felt that this was a reflection on them, may I say that I understand that counsel intended no such thing. He was not attributing blame to anyone. It was a consequence of the Section 1 procedure. Although Mr. Dougherty was at the magistrates' court, witnesses were not asked to identify him there. So strictly speaking there was no evidence, on committal for trial, that Mr. Dougherty was the man who committed the crime, because there was no identification. Apparently it was a consequence of the Section 1 procedure; no objection was taken by Mr. Dougherty's solicitors.
My Lords, may we now turn to the trial. This raised again the whole question on which Justice has expressed many views, the dock identification. One has to distinguish between different cases. Of course, if the accused is the brother-in-law of the witness and has known him for twenty years, there is no objection to his being identified in court. But as every practitioner knows, in the ordinary way if the witness has been describing something which was supposed to have been done by some man whose face she

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has glimpsed and then she is asked, "Would you look round the court to see if you can see him there", of course she looks straight at the dock and says, "That's him" because, among other things, she reckons he would not be in the dock being prosecuted by the police if it were not him. This is completely unsatisfactory, as everyone realises.
The course taken in this case is not at all unusual. It is not unusual for counsel, in the absence of the jury and witnesses, to ask the judge to agree to the accused leaving the dock and sitting somewhere else. In this case, the judge acceded to that request, and the accused was put to sit among the jury. The trouble was—and I do not think it was bad faith by the witnesses or anyone else—the solicitor's clerk noticed that in the room in which the witnesses were there was a glass window separating that room from the court, and the witnesses, as they readily agreed as soon as asked, had seen Mr. Dougherty sitting in the dock, had seen him taken out of the dock and put among the jury. So the whole thing was really rather a farce. It was submitted to the judge that in these circumstances the case could not go on.
My Lords, what is unsatisfactory about this. I think, is this. Although this was the main argument on the first appeal, the Court of Appeal has never laid down how far, or in what circumstances, an identification which is simply a dock identification ought or ought not to result in a conviction being allowed to stand. This is really part of the whole problem of identification. Therefore, No. 6 on my list for the noble and learned Lord on the Woolsack is to say that this is not, as we all know, a very easy question. As I have said, there are some cases in which there can be no reasonable objection to a dock identification, but the whole problem of identity parades and their conditions, the production of police photographs and their conditions, and of dock identification ought to be considered by a committee; not, please, a committee of all judges, but representing one or two ordinary people.
The danger of identification is that anyone in this country may be wrongly convicted on the evidence of a witness who is perfectly sincere, perfectly convinced that the accused is the man they saw, and whose sincerity communicates
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itself to the members of the jury who therefore accept the evidence. It is not an easy field, but I submit it is unsatisfactory that there is no clear authority from the Court of Appeal as to what is the law about dock identification. It may be that the noble and learned Lord the Lord Chief Justice may feel that it is a difficult subject which really ought to be dealt with by legislation rather than by decision of the Court of Appeal. One can understand that, but one way or the other, the time has at last come when these problems of identification should be seriously considered by a committee.
My Lords, lastly I turn to the Court of Appeal. The first trouble here (there is nothing new about it; Justice has been complaining about it for a considerable time) is the difficulty in getting the Court, when it grants legal aid, not to say "Counsel only". Here was a case in which not only Mr. Dougherty's lawyers but Justice itself pressed the Court to give legal aid. I would hope that some representations might be made so that the Court may be more liberal in its practice. This is a point already taken up by the noble and learned Lord, Lord Hail-sham of Saint Marylebone.
My Lords, I regret to say that there was an unfortunate letter written by the office of the Registrar of the Court of Appeal. I have deliberately said "by the office of", because I am well aware that the letter was not written by the Registrar himself. He did not see it. Indeed, I should like to say publicly that Justice, with all its experience, has a very high regard indeed for the Registrar of the Court of Appeal and his manifest desire that justice should be done. What happened was this. Counsel advised about an appeal. Counsel's advice was, in my opinion, perfectly proper. He said: "There are here two entirely different cases. One is what happened about the dock identification. I think we have got a run on that. It may depend on which judges are sitting, but I think we have an arguable case. If Mr. Dougherty also wants to take the point that he was on this coach at the time, and this could be proved by independent witnesses, then I ought not to appear for him, because clearly in that case he may be asked, 'Why were not these witnesses called at the trial?' and he may want, as he is quite entitled

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to do, to say that the blame is really with his counsel and solicitors at the trial. Or if he wants to take this point, then I think on this he ought to be separately advised." My Lords, in my opinion that is a perfectly proper opinion to give.
A letter was then sent to Mr. Dougherty from the Court of Appeal which said in substance: You will be glad to hear that your appeal can be heard before the end of July, but that will only be so if you are content to rely simply on the question of the dock identification. Of course, if you insist on wanting to call witnesses who were on the coach, well, first of all the Court will have to agree to your having a solicitor as well as counsel. Counsel and solicitors will have to be appointed. We shall have to get a full transcript of all the evidence of the trial (and goodness knows how long that will take) and it may take months. Now you decide. Mr. Dougherty had by then practically completed the whole of his sentence for this particular offence. Of course, he thought: "Well, what is the good, if I serve the whole of my sentence in relation to this offence before the appeal is heard?" In those circumstances—I think under a good deal of pressure—he consented only to take the point about the dock identification.
My Lords, I think the third thing that went wrong was that the court is much too reluctant to let in fresh evidence. Let me be clear. The rule that ordinarily they will not allow evidence to be called which could have been called at the trial is perfectly sensible, as otherwise one might get counsel and solicitors saying: "Well, we need not call all our witnesses at the trial because if anything goes wrong, we can always call them in the Court of Appeal." That would obviously be wrong. But while I approve of the rule in general, it is, I think, applied far too rigidly. The second Court of Appeal agreed that the first Court of Appeal, which said they had no power to call fresh evidence, was wrong in law. What I find difficult to understand is this. Justice had forwarded to the Court short statements from ten of the people on the coach. The Court of Appeal knew that. They still dismissed the appeal.
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My Lords, I agree with the noble and learned Lord, Lord Hailsham of Saint Marylebone, that of course there are cases in which a conviction has to be set aside because a judge made a mistake in summing up, or went wrong in the law and the man who is in fact obviously guilty, gets off. But I should have thought that the Court of Appeal ought to draw a sharp distinction between those cases and cases in which the basis of appeal is: "It was not me at all; it was somebody else." I still think it surprising that all they said about these statements was that counsel had not pressed the point. But they had got the letter from the registrar, too, and they did not follow up at all the question why counsel, being in a position to call 10 witnesses to prove the man was somewhere else, was not pressing the point.
The remedy for this is the suggestion that the Court of Appeal are far too rigid; they always seem terrified of being involved in an argument as to whether it was the client's fault that the witnesses were not called at the trial or whether it was perhaps the solicitor's fault. As Justice has observed before, the practical outcome is that a man who is wrongfully convicted because his solicitor was negligent has, at present, to bear the brunt of it.
My last question for the noble and learned Lord on the Woolsack is also one raised by the noble and learned Lord, Lord Hailsham of Saint Marylebone, and that is the question of compensation. There is no law about this. As always with the Home Office, it is to be decided by a civil servant, and it is purely discretionary and it is ex gratia. If whoever decides says £500, it is £500. I think this is wrong. It is, I agree, arguable that the Home Office should say whether in all the circumstances they consider it a case for compensation or not, but if it is a case for compensation then I should have thought it should be assessed on the basis of common law damages. It could be very well assessed, I think, by the Criminal Injuries Compensation Board. They are used to assessing money of this kind on a common law basis, and they do it, I think, to everybody's satisfaction. There are always many things to be taken into account, but it is for them to say which factors in which case. Mr. Dougherty's three children had to be

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taken into care. In many cases, of course, the man loses his job.
I should like to ask the noble and learned Lord on the Woolsack whether he thinks there is a case for saying, even if the compensation is to be purely ex gratia, it should not be left to an official to assess, against whose decision there is no appeal. It should be assessed by some independent body which is used to assessing damages on a common law footing, according to the circumstances of the case.
I venture to end as I began. There is nothing really which happened and which went wrong in this case which has not gone wrong before in circumstances of which Justice is well aware. Most of these points have been the subject of repeated reports by Justice, memoranda to committees. It is hoped that, in view of the publicity which this case has attached to it, the attitude towards these recommendations may be reconsidered, and such as are thought fit to be implemented may be implemented.
8.24 p.m.
VISCOUNT BARRINGTON: My Lords, persons who live in glass houses should not throw stones, and Liberal Back-Benchers who are laymen should not intervene on an Unstarred Question between two Lord Chancellors, and particularly between three Lord Chancellors, or ex-Lord Chancellors, without knowing enough about the subject. But if I may be allowed, for only two minutes, to put a point of view, not of this Liberal Party but of one Liberal Back-Bencher, it is that this is an extremely important subject and it would be a great pity if no views on it were heard from these Benches. We on these Benches were complimented by the noble Lord, Lord Strathcona and Mount Royal, on giving some support to the Party on my left on the question of not sweeping inflation under the carpet. This is a question of sweeping not inflation but injustice under the carpet, as it might be if it were not fully debated, as it is being tonight; and I believe that that is really the ony thing that can be said about it by anyone who does not know a great deal of the legal difficulties.
It is clear that there has been, through nobody's fault or anybody's fault, a multiple, apparent miscarriage of justice. What the compensation suitable for that
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is, I do not know. But I do suggest—and I hope and believe that the noble and learned Lord on the Woolsack will support me here—that if there is doubt there should be liberal compensation, that in a case where so many things have gone wrong unexpectedly the compensation should err, if anything, in the direction of liberality. I mention this only because the word "liberal" has been used quite often in this debate—of course, as usual, with a small "1".
8.27 p.m.
THE LORD CHANCELLOR (LORD ELWYN-JONES): My Lords, I am sure that the House will be most grateful to the noble and learned Lord, Lord Hailsham of Saint Marylebone, for having taken this early opportunity to raise the critically important issues which the Dougherty case requires us, and all who are interested in the administration of justice, to consider. I am sure also that noble Lords would wish to compliment my noble and learned friend Lord Gardiner and his colleagues in Justice for the fact that, thanks to their initiative, at any rate at the end of the day, something could be done to remedy, or at any rate mitigate, the miscarriage of justice which admittedly arose in this case.
May I say at the outset, in relation to what has just been said by the noble Viscount, Lord Barrington, and by both noble and learned Lords in regard to the question of compensation, that as the noble and learned Lord who opened the debate said, it was unhappily the case that this man was wrongly kept in prison for nine months. My right honourable friend the Home Secretary has considered the circumstances of the case very carefully, and I am glad to tell the House that it has been decided to grant an ex gratia payment to Mr. Dougherty out of public funds in consideration of the hardship that he has suffered. Before deciding on the amount of the payment my right honourable friend will, in accordance with the normal practice which is followed where such payments are made, refer the case to an independent assessor for advice. Those who will be acting for Mr. Dougherty will have the opportunity of putting matters to the assessor and providing any information which they may deem to be relevant. It will take a little time before a payment can be made, but I can assure the House

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that no avoidable delay will take place in regard to remedying this aspect of the matter.
In relation to what my noble and learned friend Lord Gardiner has said, while the matter will not necessarily be considered in accordance with the principles under which the Criminal Injuries Compensation Board operates, he will, I know, be reassured to know that the assessor who is to make the assessment in this case is Sir Walker Carter, who, as your Lordships will know, was a distinguished Official Referee of the Supreme Court for many years, and has been Chairman of the Criminal Injuries Compensation Board since it was set up in 1964. There is, therefore, little room for doubt that an appropriate assessment will be made.
A multiplicity of questions has been raised in the course of this debate. I shall do my best to answer as many of them as I can, and I shall have to ask for forbearance as to the time that this will take and as to any omissions for which I may, by inadvertence, be responsible. Perhaps I should start with the handling of the case by the Durham police. I do not need to say that the decision whether to prosecute Mr. Dougherty had nothing to do with the Home Secretary or, in this case, with the Director of Public Prosecutions; it was a decision of the chief constable. I shall have a word to say in a moment about the matters that have been raised in regard to the role of the police in the general overseeing of prosecutions.
When my noble and learned friend Lord Gardiner drew the attention of the then Home Secretary to the fact that a miscarriage of justice might have occurred in this case, the material which was forwarded was sent to the chief constable and he quickly arranged for a senior officer of the Northumberland Constabulary to make a full inquiry into the matter. I was grateful for the tribute which fell from the noble and learned Lord to the independence and efficiency of that inquiry. That inquiry took place, and it clearly revealed unsatisfactory features which have been described in detail to your Lordships.
There is in America a law known as "Murphy's Law", which says that if
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anything can go wrong, it will, and Murphy's Law appears to have operated, I fear, in many aspects of this unhappy case. First of all, there was the question of identification from photographs. This was not in accordance with the general guidance that has been given to the police, as my noble and learned friend said. There were two witnesses—the store witnesses—and both were shown photographs. Whether the matter would be simplified by colour photographs being made available, I know not. It will certainly be looked into. It will be more expensive, and it may not be easy for a criminal to change his colour. I remember a famous case of one gentleman who appeared in a dock with—or was it without?—a wig, and transformed his appearance thereby; so I am not giving any assurance that a colour photograph will be particularly helpful.
What is important is that both witnesses—the key prosecution witnesses—were shown photographs. The practice which is recommended by the Home Office, and indeed is reflected in the Durham Force instructions, is that when one witness makes an identification from a photograph, the other witness, or indeed witnesses, should not be shown photographs but should be asked to attend an identification parade. Mr. Dougherty was not required to take part in an identification parade. A parade was arranged on one occasion, but unfortunately, owing to some misunderstanding about the date of it, Mr. Dougherty did not arrive. I fear that that probably was certainly the fons, if not the origo, of all the misfortune that flowed thereafter. If he had attended the identification parade, the subsequent difficulties of identification in the Crown Court may well not have arisen.
My noble and learned friend Lord Gardiner has raised the difficult problem of identifications, especially dock identifications. These are regarded as undesirable and to be avoided if possible, but when one looks at the learning from the judges who have dealt with these matters there have been cases where convictions have been upheld following such identifications. It is a difficult field, and I have little doubt that the Home Secretary will give attention to the suggestions that have been made about the state of the law in this field.

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Turning back again to the police action in this case, it is true that at the time when Mr. Dougherty was charged there was still opportunity, and room, for further police inquiries to be made. With regard to the alibi point that was raised, notice of alibi was not, I am told, given until after the original hearing and the committal proceedings. The police did interview four of the five people named as witnesses. One witness could not be traced, and the remaining four refused to make written statements. There is one suggestion that has been made (I do not quite know how far it goes) that the police dissuaded a witness who could have given evidence—namely, the lady who organised the coach outing—from coming to court. This, the chief constable is satisfied, has no basis in truth. Indeed, it would be a serious matter if there were any truth in it.
There has also been a suggestion that the original statements made to the police by the two crucially important store witnesses described the offence as having been committed by three people—a man, a woman, and a youth. My information is that at no time before the trial did either of the store witnesses refer to more than one person being responsible for taking the curtains, and it was only when the investigation was made by the Northumberland police, and further statements were taken from witnesses, that they mentioned having seen a woman and a youth as well. So that although faults occurred, I know your Lordships will want to be meticulously careful and fair in the pursuit of any matters which are alleged which may, in fact, not be well founded. Suffice it to say that all aspects of the matter from the police angle are now being investigated, and any lessons that are to be learned will, of course, be taken to heart and will be applied by the police force. In addition, the chief constable is considering whether any disciplinary action is required and should be taken in respect of the officers who handled this case. That of course is entirely a matter for him, and your Lordships would not expect me to make further comment on that aspect of the case.
An important suggestion that has been made in the course of the debate is that Mr. Dougherty's case illustrates the need for us to have in England and Wales a
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separate authority (rather like that in Scotland of the Procurator-Fiscal) to take all responsibility for prosecutions. I confess—and I trust that I shall not get into any trouble for making the confession—that I have some personal sympathy for this point of view. But noble Lords will recognise that that would be a very far-reaching change indeed, with considerable problems of staffing and of finance up and down the country, and I am sure that your Lordships will not expect me to pursue the matter in any further detail to-day. Clearly, such a fundamental change would need very detailed examination by the many people who would be involved, but I will see that my right honourable friend's attention is drawn to what has been said here to-day.
Many anxious questions have been raised about indentification evideace, and my noble and learned friend Lord Gardiner has referred to the discussions which the Criminal Law Revision Committee had on this subject. There is very interesting reading indeed in the 11th Report where, as the House has been told, the Committee stated:
"…we regard mistaken identification as by far the greatest cause of actual or possible wrong convictions".
Those of your Lordships who have had judicial or professional experience in the criminal courts will readily concur. The Committee considered possible ways of minimising the risk. They thought that there should be a statutory requirement that the judge should warn the jury of the need for care in convicting on disputed evidence of identification. They also considered whether, in some circumstances, there should be a need for corroboration of identification evidence, but that suggestion was rejected for reasons which seemed to me to be sound. Where a single householder, with abundant opportunity of seeing men burgling and doing violence to him, might be unable to see that justice was done because there was no one else there to corroborate the story, public indignation would be very considerable. These matters present grave difficulties. But it is only right that I should say that in the Dougherty case the learned trial judge gave "the most explicit and detailed warning", as the Court of Appeal put it, "of the dangers of identification evidence in the form

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in which it had taken place". It is really in the clearest way, one of the sad features of the case that although the summing-up was impeccable, at the end of the day a miscarriage of justice took place. As to the matter of the glass door which was raised, I am happy to tell your Lordships that that has now been covered over with some object or material which makes it impossible for that situation to arise again.
LORD GARDINER: My Lords, I do not know whether the noble and learned Lord is aware that by a species of irony of history one of the workmen who did the conversion was Mr. Dougherty.
THE LORD CHANCELLOR: I am sure that that must have given Mr. Dougherty a great deal of personal satisfaction.
A problem which arises in the case is that it appears that the defendant and the prosecution witnesses were in the same waiting room; and that is clearly unsatisfactory. As your Lordships know, the noble and learned Lord, Lord Hailsham, made great efforts to create or find court accommodation, but it is clearly necessary that separate accommodation should be provided where defendants on bail can wait until they surrender to it. A pilot scheme has been carried out at two London Courts to remedy this deplorable situation, where it exists, and I am now examining the position at all court centres with a view to making similar arrangements where that is practicable.
It was reassuring to hear from my noble and learned friend that no criticism is made of the committal proceedings themselves. This was a case under Section 1 where the committing magistrates were not called upon at all to consider the evidence, and I am sure that they will be gratified to be wholly acquitted—if "acquitted" is the right word—of any fault or responsibility for what went wrong. The matter which has perhaps most dominated the discussion in the House has been the working of the provisions for legal aid in this case. The suggestion has been made that Mr. Dougherty had second-rate treatment because he was legally aided, but my right honourable friend and I are not satisfied that that was so. While it is of
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course regrettable that, as matters turned out, there was insufficient testimony to satisfy the jury about Mr. Dougherty's alibi, that did not in my view result from any fault in the statutory provisions.
With regard to the calling of witnesses, the position of a solicitor acting under a legal aid order is no different from that of a privately engaged solicitor, and it is a matter for his discretion—subject of course to the instructions he may get from his client—to call whatever and as many witnesses as he thinks necessary in support of his client's case. Suggestions have been made which will no doubt be considered about the allocation of solicitors. I have noted what has been said—and indeed in another place I expressed concern about the matter myself—about the apparently different standards that are applied in the response to applications for legal aid in one court as compared with another, even in the same geographical area. That is clearly a matter which needs further investigation. I was also asked about the provision of duty solicitors. This is very much in the mind of the Home Office. Indeed, as has been said, there are a number of experimental schemes already being tried in some of the larger cities and they are being tried successfully. The Home Office would welcome an extension of those schemes, but the matter is one for local law societies in connection with justices' clerks. I am informed that Mr. Dougherty already had his own solicitor when he first appeared at the Sunderland magistrates' court.
With regard to the practice of the Court of Appeal in granting legal aid, which was one of the matters raised, it is the case that when Mr. Dougherty gave notice of appeal against conviction and applied for legal aid he was granted it for "counsel only". As the Lord Chief Justice explained, this was because the single judge who considered the matter thought that the only point to be argued was a technical one as to the nature of the evidence on identification that had been given. In the absence of a solicitor, there was consequently no one to interview additional alibi witnesses, and I am told that although this aspect of the case was raised in correspondence it was barely pursued by counsel in the Court of Appeal.
The House will know that under the Criminal Justice Act 1967 the Court of

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Appeal has power to grant full legal aid in the Court of Appeal consisting of representation by both solicitor and counsel, but it also has a discretion to limit the legal aid to counsel only. In practice, the services of a solicitor are often unnecessary and in those circumstances, and for the obvious saving of public funds, the Court limits representation to "counsel only". The Widgery Committee on Legal Aid in Criminal Proceedings stated in its 1966 Report:
"… in the many cases where the whole of the relevant material is contained in the transcript and counsel does not require further instructions, we cannot justify the expense to public funds which would be involved by assigning a solicitor in addition."
But the Committee did point out that if additional evidence was required a solicitor would be needed to obtain it, and they expressed the hope that the effect of providing legal advice in the preparation of grounds of appeal—as has now become the practice—would be to enable the Court to recognise more readily those cases where fresh evidence might have to be obtained. And the Committee added:
"The Court has not been slow to assign a solicitor when these cases appear or when counsel requests it to do so and we recommend no change of practice in this respect."
It is unhappily the case that these arrangements did not work in Mr. Dougherty's case, but I can assure the House that the Lord Chief Justice (and this point was expressly raised by the noble and learned Lord, Lord Hailsham of Saint Marylebone) is now considering whether any change of practice is desirable and has asked the judges for their views. No decision has yet been reached, but I have no doubt that the Lord Chief Justice will give information about this matter before long.
My noble and learned friend Lord Gardiner raised some questions as to the perhaps excessive reluctance of the Court of Appeal to admit fresh evidence. I do not think that it is a matter of powers or of the inadequacy of powers. The powers under Section 23 of the Criminal Appeal Act 1968 are indeed quite explicit. The section requires the Court of Appeal to receive any evidence tendered, unless they are satisfied that it would not afford any ground for allowing the appeal, and provided that, first, it appears to them that the evidence is likely to be credible and would have been admissible at the trial, and, secondly, that they are satisfied that
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there is a reasonable explanation for the failure to adduce the evidence at the trial, and it is for the Court to decide in each case whether those conditions are satisfied.
It is the case that when Mr. Dougherty's application for leave to appeal was considered last July, the Court did not grant his application to call further evidence, but I understand that in the circumstances which arose that that part of the application was not pursued by counsel. When the previous Home Secretary referred the case to the Court the Court was able to exercise powers under Section 23 to order the examination of the witnesses whom Mr. Dougherty wished to call to establish the alibi. That examination took place, and it was then found, of course, that the conviction of Mr. Dougherty was wrong. I do not think any weakness lies in the inadequacy of the statutory powers which are available to the Court. My noble and learned friend raised a question about the supply to the defence of statements taken by the prosecution. This is a matter which the Home Office has under review, in consultation with the interested parties. With regard to the Dougherty case, however, as I understand it, all the statements were provided to the defence, so that does not appear to have been one of the factors which led to the miscarriage of justice.
Then questions were raised about the letter from the Criminal Appeal Office. If I may say so, I was grateful for the tribute paid to the Criminal Appeal Office for its dedication, and particularly that of Master Thompson. Those of your Lordships who are, or were not so long ago, in practice at the Bar, will have abundant reason for gratitude to him for the immense dedication which he gave to the job of seeing that fairness is done. But, so far as the letter itself is concerned, which has been criticised perhaps in excessive language, it is a long factual statement which explained to Mr. Dougherty the situation resulting from the Court's decision not to assign a solicitor. It also sets out, perhaps with undue emphasis, the disadvantages which could arise if Mr. Dougherty insisted on applying for fresh counsel to be assigned in order that the question of calling further evidence could be argued. The letter

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concluded by saying that if Mr. Dougherty decided to retain counsel there was a chance that the appeal might be heard before July, but that otherwise it was feared there might be long delay. So to designate the letter as improper is, in my respectful submission, a misuse of language. It was not the language used here; but it may well be that the letter can be criticised on the ground that it was slanted in Favour of Mr. Dougherty's taking a certain course and did not make it sufficiently clear that the decision was entirely for him to take.
My Lords, I do not know whether I have covered the whole of the ground. Your Lordships may think that this was an important case. Whenever a miscarriage of justice of this kind occurs, it is right that the circumstances which led to it should be fully examined and exposed, and that steps should be taken, so far as human frailty can go, to prevent a repetition. I hope that your Lordships may think that the Government have taken a properly serious view of the situation and have done their best to remedy it.
LORD HAILSHAM OF SAINT MARYLEBONE: My Lords, perhaps the House will allow me to thank the noble and learned Lord the Lord Chancellor for his careful exposition. At this hour I should not wish to say more except that we shall reflect on what he said.

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