Sitting of 23 July 1975

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

  GREATER GLASGOW PASSENGER TRANSPORT ORDER CONFIRMATION BILL (By Order)
  Order for consideration read.
  To be considered upon Tuesday next.

  LERWICK HARBOUR (MISCELLANEOUS PROVISIONS) ORDER CONFIRMATION BILL (By Order)
  Considered; to be read the Third time tomorrow.
ORAL ANSWERS TO QUESTIONS
  ENVIRONMENT

    GLC Housing Estates (Essex)
    Mr. Biggs-Davisonasked the Secretary of State for the Environment what steps have been taken by the Greater London Council to reduce the vacancy rate on the Debden, Ninefields and other housing estates in Essex, subsequently to his Department's meeting with local authority associations and others.
    The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): The meeting was concerned with housing management generally. I suggest that the hon. Member should get in touch direct with the GLC if he wishes to know more about the way in which it exercises its housing responsibilities on particular estates.
    Mr. Biggs-Davison: Is the hon. Gentleman aware that we do not always get very sympathetic responses from the GLC? Apart from the fact that so few tenancies are given to local people, is he aware that many of my constituents com-
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    plain that houses are left vacant because of administrative delay, and there is also unhelpfulness over exchanges that would be genuinely and mutually beneficial?
    Mr. Armstrong: This is a matter for the local housing authority. It is not for us to impose anything on it. The vacancy rate in this area is rather lower than the average.
    Mr. McCrindle: Will the hon. Gentleman tell me what progress is being made in transferring responsibility for housing on GLC estates outside Greater London to the local authorities concerned?
    Mr. Armstrong: These matters are under discussion. I shall keep the House informed.

    Railways (Scotland)
    Mr. Canavanasked the Secretary of State for the Environment how much investment is planned within the next five years to extend the railway network in Scotland.
    The Under-Secretary of State for the Environment (Mr. Neil Carmichael): No major extensions are planned either in Scotland or elsewhere in Britain.
    Mr. Canavan: Does my hon. Friend realise that the last parliamentary statement on British Railways' investment plans was on 28th November 1973, under the last Tory Government? Does he not think that Parliament and the public should be kept informed more regularly about British Railways' investment plans, or is Richard Marsh a law unto himself? In particular, will my hon. Friend put pressure on British Railways to provide much needed additional track in Scotland—especially in the oil development areas—and also to construct air-rail terminals at Turnhouse, Prestwick, Abbotsinch and Dyce?
    Mr. Carmichael: I think my hon. Friend will recall that there have been a number of debates on railway matters. I answered a long Adjournment debate myself in April, about the Perth-Inverness line. British Railways have just put to my right hon. Friend proposals for increasing the capacity of that line, and these are being urgently considered.
    Mr. Henderson: Does the hon. Gentleman not recall that in the Adjournment debate the question of rail routes to the

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    Notch-East, particularly to Peterhead, was raised, and I think he agreed to draw the attention of British Railways to this matter? Has he made any progress in pressing on them the commercial prospects available to them in that area as a result of oil development?
    Mr. Carmichael: The commercial prospects of running a rail line are a question for British Railways, which put to my right hon. Friend any plans they may have. We consider them as sympathetically and urgently as we can.
    Mr. Buchanan: Is my hon. Friend aware that the state of the railways in Scotland borders on the deplorable? Due to the lack of investment, rolling stock is in a very bad state and many of the locomotive and diesel multiple units now in use have come from other areas. Due to lack of foresight and planning, many areas of economic development in Scotland are being denied the rail facilities to which they are entitled. Will my hon. Friend seek to remedy this situation as quickly as possible?
    Mr. Carmichael: I cannot fully agree with my hon. Friend on the question of railway investment being neglected in Scotland. We have had quite a good deal of investment recently, including electrification of the line between Weaver Junction and Glasgow, approval of the introduction of high-speed diesels between London and Edinburgh, the very expensive Clyde rail project and the £18 million that is being spent on re-signalling in the Edinburgh area.

    Bus Services
    Mr. Leslie Huckfieldasked the Secretary of State for the Environment, if he will make a statement on his future policy on rural bus services.
    Mr. Carmichael: The responsibility for securing provision of a co-ordinated and efficient system of public transport rests with the local authorities. Circular 43/75 makes clear that in considering their transport policies and programmes this year, my right hon. Friend will give relatively high priority to proposals to provide or maintain minimum public transport services in the less densely populated areas.
    Mr. Huckfield: Will my hon. Friend bear in mind that many local authorities
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    have not been very forward-looking in preparing the kind of transport policy to which he has referred? Is he aware that this is a very difficult problem, with which successive Governments have had to grapple, and will he recommend in the strongest possible terms, particularly to rural local authorities, that it does not benefit the community to let rural transport degenerate into lift-giving on a grace-and-favour basis? Will he also stress to them that it is in the best interests of the whole community that the regular scheduled routes of the National Bus Company should be kept intact as much as possible?
    Mr. Carmichael: I agree in general with what my hon. Friend said about the importance of maintaining the local National Bus Company service in rural areas, but the provision of more money is not necessarily the answer. There are many places where extra money would not supply a solution, because the buses would still be travelling almost empty.
    Sir David Renton: Is the Minister aware that since the present policy, which places responsibility upon local authorities, was formulated the cost of private motoring has increased so much that there is now a need to revise the rural bus services, not merely to ensure that they are maintained? Will he bear that in mind in his further thoughts on this matter?
    Mr. Carmichael: The right hon. and learned Gentleman should be aware that a great deal of work has been done on this matter in the last year. I have met many local authorities, operators and trade unions, as well as other interested people. This complicated subject is one to which we are giving serious consideration, but there is no easy solution to it, as I at one time expected there to be. I hope that we shall be able to make some sort of statement before the recess.
    Mr. Alexander Wilson: Has my hon. Friend finally abandoned his Socialist view, which is shared by my right hon. and hon. Friends, that we need a truly integrated transport system? In Scotland, particularly in the Hamilton constituency, many deaths are occurring on the A74, and it would be advantageous to set in hand a study of the restoration of Hamilton—Stonehouse railway line in

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    order to secure a truly integrated transport system and an adequate bus service for the rural areas there.
    Mr. Carmichael: I have no doubt that the Railways Board is aware of my hon. Friend's views on the question of Hamilton—Stonehouse line. The question of any improvement to the A74 is a matter for my right hon. Friend the Secretary of State for Scotland.
    Mr. Fox: Is the Minister aware that it is not only the local authorities which have not been forward-looking in this matter, but the Government, too? The growing feeling of isolation among rural communities is likely to be made worse by further cut-backs in bus services. Will the Minister look again at the Government action in the light of the 1974 road traffic legislation and think again about amending the law, so that people who get lifts in cars are given protection?
    Mr. Carmichael: I remember that point being raised during the passage of the Conservative Road Traffic Act 1972. I have travelled around the country and discussed this matter with people of all shades of political opinion in the various areas, and we are now convinced that this would not be a solution.

    Construction Industry (Output)
    Mr. Michael Lathamasked the Secretary of State for the Environment upon what evidence he bases his calculation that there is likely to be some recovery in new construction output in 1976 compared with 1975.
    The Secretary of State for the Environment (Mr. Anthony Crosland): My expectation of some recovery in new construction output in 1976 is based on my view of the economic situation as a whole.
    Mr. Latham: I declare an interest in the industry. Since the latest NEDC survey shows a sharp fall in council housing starts next year, and since all independent forecasts of construction next year foreshadow a quite deplorable situation, is it not obvious that the Secretary of State has no policy for the industry which he is supposed to sponsor?
    Mr. Crosland: This is a matter on which no two forecasters will ever agree and in which forecasting involves a very large subjective element. I base my
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    figures for house building upon the fact that in the public sector dwellings in new contracts let by public authorities are up by 19 per cent. in the first five months of this year compared with the same period last year. In the private sector, starts for the last three months are 19 per cent. up on the previous three months, and these two figures suggest a return of confidence.
    Mr. Frank Allaun: Whatever the pressure for cuts in public expenditure from either the Treasury or from Conservative MPs, will the Secretary of State resist making reductions in the house building and improvement programme and, instead, press for expansion?
    Mr. Crosland: I shall do the best I can to satisfy my hon. Friend on both points.
    Mr. RaisonIn a climate of no growth, real public expenditure restraint, cash limits and real income restraint, how can the Secretary of State possibly expect to see an increase in construction next year?
    Mr. CroslandThis depends on the judgment which the hon. Gentleman makes, which I make, which NEDO makes and which other forecasters make on the likely construction scene next year. It is not disputed that there will be a fall in construction this year compared with last year. I and my Department feel that next year there may be a modest recovery. NEDO takes a more pessimistic view than that. Those are the forecasts, and we shall see who is right—but I take a more robust view of the situation than NEDO does.

    Building Land
    Mr. Hordernasked the Secretary of State for the Environment whether he will hold consultations with the GLC about its policy of acquiring land for house building.
    Mr. ArmstrongBoth Ministers and officials of the Department hold fairly frequent discussions with the Greater London Council on all aspects of its housing policy, including its policy on land acquisitions.
    Mr. Hordern: Does the Minister realise that the GLC has enough land to build houses for another 10 years? Since the Chairman of the GLC complains that people are leaving London at a rapid rate,

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    what can be the point of the GLC buying expensive land in Horsham, and proposing to do so at Crawley, thereby depriving local people of the opportunity of obtaining their own homes? Since the Government's rate support grant to the GLC was doubled last year, and since this is against its own best interests, surely this sort of business should be stopped.
    Mr. Armstrong: The main consideration for the GLC is the very acute housing problem, and it is only prudent for it to look ahead when considering land acquisition. The GLC recently announced a cut in capital expenditure on land acquisition in 1975–76 from£28 million to£14 million. As for the purchase of expensive land, the GLC can buy land only at current value as given by the district valuer.
    Mr. Christopher Price: Does my hon. Friend agree that the very severe housing problems, particularly in inner London, can be solved in the long term only by encouraging the GLC not merely to acquire land outside London but to put further pressure on the outer London boroughs, which in many cases are preventing the solution of inner London's problems?
    Mr. Armstrong: I agree with all that my hon. Friend said, and I assure him that in our frequent discussions with the GLC we are tackling this very great social problem for London—and that involves taking land in the outer boroughs.

    Local Authority Mortgages
    Mr. Michael Morrisasked the Secretary of State for the Environment if he is satisfied with the effectiveness of his agreement with the building societies on making up his cut-back on local authority mortgages.
    Mr Crosland: Yes, Sir. Good progress is being made with the assessment of needs and priorities, and we shall shortly begin discussions with local representatives nominated by the Building Societies' Association, as a result of which individual local authorities will be put in touch with building societies.
    Mr. Morris: Would it not have been preferable to undertake an assessment of the needs and priorities before taking a decision? Is the Secretary of State aware
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    that there are thousands of young couples who want to purchase old property whose primary source of mortgage finance was the local authority, and the situation today is that those young couples have nowhere to go for the money?
    Mr. Crosland: The hon. Member is repeating what is becoming a very popular and common fallacy—that local authorities and building societies operate in totally different areas. It becomes clearer and clearer from our investigations that there is a substantial overlap between the types of property on which a local authority will lend and those on which a building society will lend. In spite of our switch of£100 million away from local authority mortgages, we have left the figure for local authority lending this year at a level which is about equal to the average figure for the four or five years preceding 1973–74, which was the period of the acute building society mortgage famine.
    Mrs. Ann Taylor: When considering this problem will my right hon. Friend pay special attention to areas such as Bolton and the North-West, where there is a great amount of older property? Despite what he says, many building societies will not lend on that type of property. Therefore, many young couples find it impossible to buy a house because of the present restriction on lending. Will my right hon. Friend pay special attention to areas such as the North-West, where this problem is so severe?
    Mr. Crosland: I absolutely take my hon. Friend's point that there are areas where, because of the age of the property, the problem is more severe than it is elsewhere. I strongly urge my hon. Friend—she may have already done so—to make sure that her local authority has been in touch with the regional officers of my Department to make clear the needs and priorities. I hope that the building societies will go some way to satisfy them. This is an important point, which is not generally understood. The area of overlap between local authority and building society lending is much greater than is sometimes supposed. People speak as though all local authority lending were on properties which building societies would not touch. That is not the case.
    Sir D. Walker-Smith: Does the Minister adhere to the pessimistic view which he took on 11th June, as can be seen from the Official Report at col. 406, as to the unlikelihood of his being able to help those 50 or so local authorities whose mortgage rates are over 11 per cent.? Is he able to say whether the Government may be able to find some way of helping these people and the hard-pressed mortgagors?
    Mr. Crosland: I regret that, unlike my right hon. Friend the Prime Minister, I do not have a total recall of all my speeches over the past 25 years or so, but I recall the gist of what I said on that occasion.
    I regret that I have not found a solution to this problem which would not involve additional Government expenditure in this direction, which would have to take place at the cost of some other, and in my view more crucial, part of the housing programme.
    Mr. Stephen Ross: Does the Minister consider that building societies, which are at present reluctant to do this, could take over some of these mortgages under which people are paying over 14 per cent? The building societies should be prepared to take over some of those at the 11 per cent. rate.
    Mr. Crosland: Any local authority which, as a result of the switch of£100 million, will be engaged in conversations first with our regional officers and later with the building societies, may draw the hon. Gentleman's suggestion to the attention of the building societies with which it is negotiating.
    Mr. Tomlinson: Is the Minister aware that those of my constituents who have consulted me about this cut-back of£100 million will be faced with homelessness or other consequences at far greater cost to public funds? Does he realise that his action will hit those in our community who can least afford to be hit?
    Mr. Crosland: There is nothing I enjoy less than making the cut of£100 million in local authority lending for house purchase. I had to decide whether it was right to do that, so as to increase by£100 million the amount of money available for council house improvements, and municipalisation. In terms of priorities, I am sure that this is right, at a time
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    when building societies are comparatively flush with funds, even though they will not take up every hard case of the sort to which my hon. Friend referred.
    Mr. Raison: I beg the Secretary of State to think again about this matter, to listen to the representations he has received from both sides of the House, and to recognise that it was a mistake to switch the money from these mortgages to municipalisation.
    Mr. Crosland: I think that if the huge majority of my hon. Friends who naturally and rightly dislike any cut in local authority lending were faced with a choice between priorities, they would back the choice which I made.

    Telford Development Corporation
    Mr. Biffenasked the Secretary of State for the Environment when he expects to conclude the statutory consultations with the relevant local authorities concerning the filling of vacancies on the board of Telford Development Corporation.
    Mr Jasper Moreasked the Secretary of State for the Environment what progress has been made with the statutory consultations with local authorities concerning vacancies on the Telford Development Corporation board.
    The Minister for Planning and Local Government (Mr. John Silkin): The confidential statutory consultations with the relevant local authorities were concluded on 16th July, when I met the Chairman and Chief Executive of the Salop County Council. Following that meeting, my right hon. Friend decided to make the appointments which were announced on 18th July and which became effective on 21st July.
    Mr. Biffen: Is the Minister aware that that statement made it evident that the county of Shropshire was being prepared for the emergence of a former Member of this House—Mr. Donald Chapman—as the Chairman of the Telford Development Corporation? Is he further aware that Telford is of great significance to the entire county, and that there is no tradition of absentee landlords in that part of the United Kingdom? Therefore, we hope that he will use his good offices to persuade Mr. Donald Chapman to live in

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    or near the county and be a full-time member in the execution of his duties.
    Mr. Silkin: The appointment of Mr. Donald Chapman—which is as deputy chairman, not as an ordinary member of the board—was made because he represented a Birmingham constituency for many years. Telford is the receiving new town for the West Midlands conurbation. He had a distinguished career, starting with a great academic record in agriculture and economics. He is the present dynamic and energetic Chairman of the Development Commission.
    The hon. Gentleman referred to the chairmanship of the corporation. It is still held by Mr. Dugdale, although his first period of appointment ended in September last year.
    The general implications of the hon. Gentleman's remarks were that there was an element of political bias in this matter.
    Mr. Biffen indicated dissent.
    Mr. Silkin: I am delighted that the hon. Member did not mean that. I shall convey his good wishes to Mr. Chapman for a long and successful occupancy of the deputy chairmanship.
    Mr. More: Mr. Donald Chapman was highly regarded as a Member of Parliament. He represented a Birmingham constituency. Nevertheless, does not the Minister regard it as wholly unsuitable and, indeed, insulting, to the people of Shropshire that responsibility for a large and complicated venture such as Telford New Town should be given to someone who, I understand, lives in Brighton and who, so far as is known, has all his interests in Brighton?
    Mr. Silkin: If I went through the lists of chairmen, deputy chairmen and ordinary members of development corporations, and ascertained their places of residence, I should end up with some surprising results—not only in respect of appointments made under this administration. The test of a development corporation is that we should obtain the best people—in our judgment—to run the new town. I believe that Mr. Chapman's contribution will be fine, energetic and dynamic. I am looking to the good of Telford.
    Mr. Skinner: Why must my right hon. Friend give these long answers to explain why this gentleman obtained this job?
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    Is not the real answer that this is part of the disturbing patronage which most Government supporters were elected to do away with as soon as possible?
    Mr. Silkin: The answer is "No, it is not." The interesting point about the new towns is that in the three and a half years of Conservative administration preceeding that of the present Government, there were seven new appointments of chairmen, five of whom were known, active Conservatives. I do not regard that as an immutable law of nature.

    British Rail (Cancellation Fees)
    Mr. Dempseyasked the Secretary of State for the Environment if he will give a general direction to British Rail to discontinue the practice of charging a cancellation fee when the cancellation arises out of a threatened railway strike.
    Mr. Carmichael: No, Sir. My right hon. Friend has no powers to do so.
    Mr. Dempsey: Is my hon. Friend aware that when persons have made travel arrangements which are threatened by an industrial strike it is wrong to charge them a cancellation fee for an exigency over which they have no control? It is too late to wait until the dispute takes place. It is necessary to act beforehand, otherwise the people concerned may not be able to get back from their holidays. Will my hon. Friend draw to the attention of British Rail the fact that this is a bad practice, which should be dispensed with forthwith?
    Mr. Carmichael: My hon. Friend has been successful in drawing the attention of British Rail to this matter by his Question. It is a matter for the board to decide. The board's usual practice is to give local staff discretion to waive cancellation charges in cases where the cancellation clearly arises out of industrial action.
    Mr. Fry: Will the Minister give a direction to British Rail to examine considerably more than the question of cancellation fees? As there have been reports that even the inter-city service is losing money, and as this year's subsidies to British Rail will be about£450 million, is it not time to have a fresh look at the financial implications of British Rail and the network as a whole?
    Mr. Carmichael: The hon. Member will realise that we are always considering the financial implications of British Rail. He may have missed the statement on the inter-city service, issued by British Rail, dealing with the report that was in the newspapers on Monday.

    Central Rhine Commission
    Mr. David Watkinsasked the Secretary of State for the Environment what is the estimated cost in the current financial year of British membership of the Central Rhine Commission.
    Mr. Carmichael: Provision in 1975–76 Supply Estimates for the United Kingdom contribution to the Rhine Commission's budget for 1976 is£26,705.
    Mr. Watkins: Is this not an item of public expenditure which could be cut out without causing hardship to anyone, and will the Government therefore cut it out?
    Mr. Carmichael: I am aware of my hon. Friend's great and long interest in this matter, but the arrangement allows traders to use a new and relatively cheap form of transport by ship-borne barge along the Rhine. Within 10 years the Rhine will be linked, through the Danube and the Rhone, to the Black Sea and the Mediterranean. My hon. Friend will therefore appreciate that the Central Rhine Commission is a big maritime carrier and that we should continue our involvement in it.
    Mr. Ronald Atkins: Will my hon. Friend consider applying for honorary membership of the commission, in view of the large cost—to the taxpayer—of the British Army of the Rhine, which is there supposedly to defend the Rhine?
    Mr. Carmichael: I congratulate my hon. Friend on getting in that supplementary question, but I think he will admit that it is rather wide of the original Question.

    Roads (Lay-bys)
    Mr. Peter Millsasked the Secretary of State for the Environment if, in view of the poor hygiene standards of lay-bys, particularly in the south-west of England, he will give general guidance to local authorities on the need for stricter con-
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    trol and adequate directions to camping sites.
    Mr. Carmichael: No, Sir. Local authorities are already well aware of the problem and exercise as close a supervision of lay-bys as is practicable. The abuse of lay-bys is not confined to overnight campers but is caused by a minority of general road users. New traffic signs regulations expected shortly will facilitate the more general erection by highway authorities of direction signs to licensed camping sites and caravan sites.
    Mr. Mills: Will the Minister bear in mind that although I am a keen caravanner I am not keen on people staying overnight in a lay-by, fouling the site, causing damage to agriculture by discarding bottles and tins and bringing about a rate loss? Will he please see that his Department ensures that caravanners are directed to proper sites, in the interest of all?
    Mr. Carmichael: In persuading caravanners to go to sites it is important to let them know where the sites are. We shall be producing regulations for new traffic signs in the near future and I hope that they will be a great help in preventing this nuisance. It is only a small minority of users of lay-bys who cause the trouble.
    Mr. Evelyn King: Is not the trouble that in most areas there are insufficient sites? Is it not time that the Government took the decision either to use their influence to increase the number of sites or, by taxation, to reduce the number of caravans—one or the other?
    Mr. Carmichael: Local authorities have a responsibility for many of these sites and they are encouraged, where possible, to construct them or make them available. The Department has introduced a number of picnicking and camping sites in the vicinity of trunk roads, and in the hon. Gentleman's area extra facilities have been provided at 22 sites.

    Council Houses (Standards)
    Mr. Hooleyasked the Secretary of State for the Environment what is the policy of Her Majesty's Government with regard to the maintenance of local authority housing standards.
    Mr. Armstrong: The application of Parker Morris standards has enabled local authorities to produce good housing accommodation and I am anxious that this should continue. Save in certain circumstances, therefore—for example, where houses are being built specifically for sale, or where a local authority needs to use builders' designs to overcome temporary delays in its programme—I believe it right that the Parker Morris standards should be maintained.
    Mr. Hooley: Is my hon. Friend aware that, in general, that is a welcome answer? Will he comment on the concern that has been aroused by Circular 24/75 and confirm that it does not express any intention of reducing standards or of slowing down the housing programme?
    Mr. Armstrong: I am grateful to my hon. Friend for giving me the opportunity to confirm that the reference in Circular 24/75 to certain concessions is in no way a licence to reduce standards. We are determined to maintain the highest standards.
    Mr. Steen: Will the Minister consider reviewing the Parker Morris standards so that local authorities are not bound by the minimum requirements of packing too many people into too little space? Will he also amend the standards so that when building new council estates local authorities include adequate play facilities per 1.000 houses, so that children have somewhere to play and vandalism is reduced?
    Mr. Armstrong: We are anxious to maintain the highest standards. We have no general review in mind, although we keep all these matters in mind when considering our future housing programme.

    Piccadilly Circus
    Mr. Liptonasked the Secretary of State for the Environment what plans he is now considering for the development of Piccadilly Circus.
    Mr. Crosland: There are no schemes for the redevelopment of Piccadilly Circus before me at present. The Greater London Council and the Westminster City Council have reached an advanced stage in their consideration of the plans by Trust Houses Forte Ltd. for the redevelopment and rehabilitation of the Criterion site. The Westminster City Council is
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    also considering a scheme recently submitted by Land Securities for limited redevelopment of part of the Monico site.
    Mr. Lipton: For how much longer must we put up with this tatty slum in the heart of the Metropolis, which many people regard as the centre of the world? When will the Minister do something about removing this disgusting eyesore, which gets worse with the passage of time? It is no good his telling us about all these bodies which are busy. They have been busy for years without result.
    Mr. Crosland: I hope that the Government will not be added to this list of "busybodies". I do not entirely share my hon. Friend's approach. Like many hon. Members, I have been a consistent opponent of the grandiose schemes for the comprehensive redevelopment of Piccadilly Circus that have been put forward from the days of Mr. Jack Cotton onwards. I take the opposite view, that we should gradually improve the Piccadilly Circus centre over a period of rehabilitation, within the scale that Piccadilly Circus possesses, and turn our backs on all kinds of gigantic improvements.
    Mr. Arthur Lewis: is the Minister saying that if the scheme goes ahead, public or private money, and men and materials, will be used, with a possible adverse effect on the tatty slums not in the Piccadilly area but in Brixton and Newham? We do not want our housing programme delayed because of grandiose schemes for Piccadilly. I would rather have—I am sure the electorate would too—tatty slums in Piccadilly than tatty slums in working-class areas.
    Mr. Crosland: I have a lot of sympathy with what my hon. Friend says, but I do not think that the two matters are connected. Both of the boroughs that my hon. Friend mentioned have acute slum problems and both are free to go ahead with their building programmes, with no Government restriction laid on them. The development of the Criterion site—I take it that my hon. Friend is referring to that site—would not involve one penny of public funds.

    Road Construction
    Mr. Giles Shawasked the Secretary of State for the Environment if he

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    will make a statement on the roads programme, in the light of the Government's White Paper on policy to combat inflation.
    Mr. Crosland: We shall continue to invest in road construction and improvement where it gives us the best economic and environmental value for the money available at the time.
    Mr. Shaw: Although I understand the Minister's reply, may I express my disappointment? Is he aware that approximately£80 million has been earmarked for the Kirkham Gate-Dishforth motorway, which will run through my constituency, and that a further sum has been earmarked for the road connecting Thackley. Shipley and Leeds? Is he aware that many people are already faced with planning blight in view of the Department's proposals? Is he further aware that the sums that I have mentioned are already affecting the lives of some of my constituents? Does he agree that now is the time to withdraw consultations until we arrive at a better economic situation?
    Mr. Crosland: I understand that on more than one occasion, and rightly so, the hon. Gentleman has raised the issue of the road that is to go right through Pudsey, on which consultations are now proceeding. On the more general point, there has already been a large cut in the road building programme, in respect of both urban and inter-urban roads, as compared with what was intended in the 1973 White Paper, which was the previous Conservative Government's last statement on the matter. There has been a major shift away from road construction towards public transport. Nevertheless, in some parts of the country, including my own area of South Humberside, new or improved roads can give not only a healthy economic return but an extremely important environmental return. Therefore, I do not think it would be right to say, at this moment, "Let us chop the new road building programme altogether".
    Mr. Cant: At the risk of being unpopular, I ask my right hon. Friend not to listen too closely to the strident voices of the anti-road lobby. Will my right hon. Friend try to persuade the members of that lobby that all the reports, including those from his own Department, in-
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    dicate clearly that whatever the advantages of rail and public service transport, there will be many more motor cars and lorries to be accommodated in this country by 2000 A.D.?
    Mr. Crosland: What my hon. Friend says is absolutely correct, and we must take such matters into account. At the same time, we must take into account the arguments put forward by people who take a contrary view. It is my task to listen with as much care and attention as I can to all arguments on this point.
    Mr. Fox: Does the right hon. Gentleman accept that many Members on both sides of the House believe that any further cuts in the road building programme should least affect those projects which will show a high economic return, and particularly the roads to the ports?
    Mr. Crosland: I have a lot of sympathy with that point of view, for constituency reasons, as I am very much concerned not only with Grimsby but with Hull. I am much concerned that extremely high priority should be attached to the roads inland from those two ports. One might say that they are a good deal more important than the Humber Bridge. I hope that that remark has not been recorded. [Laughter.]
    Mr. Jay: If we are to have further major economies in public expenditure, will my right hon. Friend assure the House that we shall not have merely a flat rate percentage cut for everything but that there will be greater cuts for the many low-priority road schemes, as compared with much higher priority programmes?
    Mr. Crosland: That is exactly what we are attempting to do. Since the Government came into office, two substantial cuts have already been made in the road building programme. Of course, it is our endeavour to approach this matter bearing in mind both economic and environmental priorities. What my right hon. Friend has in mind is what we are trying to do the whole of the time.

    Historic Buildings (Repairs Notices)
    Mr. Aitkenasked the Secretary of State for the Environment how many repairs notices for listed buildings have been served by him under Section 115

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    of the Town and Country Planning Act 1971 since 1st March 1974.
    Mr. John Silkin: None, Sir. These notices are normally served by local authorities.
    Mr. Aitken: Is the Minister aware that that is a most disappointing reply? Is he further aware that the local authorities themselves, on whom he appears to be putting the onus for issuing repairs notices, are in many instances the culprits, in that they are neglecting valuable, historic, listed buildings in their own ownership? Will the right hon. Gentleman please set a salutary example to those authorities by issuing notices under his own powers?
    Mr. Silkin: I am interested in what the hon. Gentleman said. I wonder whether he has any examples in his own constituency or county. I shall be grateful to receive any information he may have on the subject.

    National Freight Integration Council
    Mr. Buchananasked the Secretary of State for the Environment on how many occasions the National Freight Integration Council has met since January 1970; and how many proposals for freight integration have been submitted by the council to his Department.
    Mr. Carmichael: The National Freight Integration Council has met twice since January 1970. No proposals for freight integration have been submitted.
    Mr. Buchanan: Is my hon. Friend not exceedingly concerned that this high-level and independent council should be so moribund at a time when freight transport should be planned, integrated and streamlined in the best interests of the nation? Will my hon. Friend dismiss the council and set up another body which is much more keenly attuned to the necessity and urgency of freight integration?
    Mr. Carmichael: Yes. My hon. Friend will recall that the Select Committee which examined the nationalised industries recommended the abolition of the council. That would mean legislation. We are considering the functions of the NFIC and how the Select Committee's recommendations can most effectively be fulfilled.

    Housing (Local Authority Purchases)
    Mr. Newtonasked the Secretary of State for the Environment what is his policy towards the purchase by local authorities of houses built by private developers.
    Mr. Armstrong: The Department's Circular 24/75 suggests that local authorities may in certain circumstances be able to maintain their normal house building programmes by purchasing dwellings already under construction or by employing builders with land to build for the authority.
    Mr. Newton: Is the Minister aware that this is the third Question today which arises from concern about the policies of the GLC, which are causing anxiety to local authorities and others throughout Essex? Is the hon. Gentleman aware that in my constituency the GLC has recently bought a substantial block of privately-built houses without even honouring its obligation to consult the local authority, let alone residents? Is he aware that it has done so at a time when it has many unoccupied houses in the area? When will a stop be put to this imperialism from across the river?
    Mr. Armstrong: If the hon. Gentleman has a particular transaction in mind, and if he contacts me or the Department, I shall deal with it. I remind the House that many families are in desperate need of homes. This is the greatest social problem that the nation faces. As well as consulting local authorities the GLC has to bear in mind, as does every other authority, the real human needs of families.
    Mr. Douglas-Mann: Will my hon. Friend remind local authorities that one of the most productive ways of obtaining new houses for those who are in housing need, on a pound-for-pound basis, is to buy up not houses which have been built by developers but empty houses which have formerly been let by way of private tenancies and which are now standing empty? The empty housing stock is a disgrace to the country and to local authorities, and the authorities have it in their hands to remedy the problem.
    Mr. Armstrong: I am grateful for my hon. Friend's observations. Last year, to meet a real emergency, we initiated a

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    new policy. That policy has been somewhat revised, but we are willing to consider individual applications against the background of a real desire to rehouse all families in desperate need.
    Mr. Moate: Does the hon. Gentleman understand that in some areas there is considerable resentment, in that the district authorities seem to have limitless funds to expend on the purchase of privately constructed houses, or on houses yet to be constructed, at a time when there is supposed to be restraint on public spending, when the authorities do not have the funds to maintain or improve their own council houses, and when they are purchasing the majority of private houses in their areas to the deprivation of prospective purchasers? Is this not an indication of what the Minister said earlier, namely, that his colleagues prefer municipalisation to private mortgages, regardless of the cost?
    Mr. Armstrong: I am sure that if the hon. Gentleman were at my desk receiving representations from district housing authorities, he would know that there are not limitless resources available. All these matters are related to available resources and to the extent of human need.
    Mrs. Renée Short: Will the Minister take the opportunity to clear up some confusion that still exists when local authorities wish to purchase flats incorporating high alumina cement? Is he aware that because of a Press campaign generally against the use of this material, many people are finding difficulty in attracting purchasers willing to buy their
    Mr. Armstrong: This is a serious matter and there has been a drop in confidence because of statements in the Press and so on. If my hon. Friend has any particular case in mind and refers it to me. I shall do my best to deal with it.

    Cavity Wall Insulation
    Mr. Rostasked the Secretary of State for the Environment what discussions he has had with the Cavity Foam Insulation Association and with the Department of Energy, on the problems facing the industry as a result of his letter of 29th April to local authorities.
    Mr. Armstrong: I met members of the association on 17th July. Next week members of the association will be seeing the Chairman of my Building Regulations Advisory Committee, together with officials of the Department. My Department and the Department of Energy are in constant touch on all energy conservation questions.
    Mr. Rost: Since it was the Department's circular last April which created the muddle and which virtually brought the cavity foam insulation business to a standstill, will the Minister now accept responsibility and speed up his authority to clear up the mess, particularly before the critical months of next winter, so that the insulation business can get going again?
    Mr. Armstrong: It is a pity that the hon. Gentleman did not accompany the delegation, as we expected him to do. Had he done so, he would have known that the delegation did not take the view that it was the circular that caused the trouble, as alleged by the hon. Gentleman. There was some very unhappy publicity which created a lack of confidence, but nothing that happened in my Department contributed to that situation.
    Mr. Dalyell: What is being done to help genuine concerns which deal in these materials?
    Mr. Armstrong: We hope within the next 10 days to issue other suggestions to authorities. We are very concerned about the situation and we recognise the harm done to the industry. My Department and the Department of Energy are concerned about the question of insulation, and we shall do all we can to help.
    Mr. Michael Latham: May I put a contrary view to that expressed by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost)? Will the Minister, in further circulars, be careful to stress the fact that cavity insulation should take place only on suitable sites and in suitable houses, because of problems of damp and rain penetration?
    Mr. Armstrong: I am grateful to the hon. Gentleman for that comment. Our view is that if the process is carried out in the right properties, by the right people, in the right way, it can be very successful. However, care must be exercised.

    Housing (Ex-Service Men)
    Mr. Stephen Rossasked the Secretary of State for the Environment whether he has yet concluded his discussions with local authorities about the need to give priority in the provision of housing for ex-Service men; and if he will make a statement.
    Mr. Armstrong: I have sent to the hon. Member a copy of circular No. 54/75 recently issued by my Department and the Welsh Office.
    Mr. Ross: I am grateful to the Minister for drawing my attention to Circular 54/75. Is he aware that local authorities still require residential occupation and the offer of a job to ex-Service men before they allocate housing to them or put them on housing lists? Is this not contrary to the circular, and is it not time that further action was required of local authorities to make sure that at times when many ex-Service men are coming out of the forces, and at a time of unemployment, they are allocated housing accommodation?
    Mr. Armstrong: This is a difficult matter. I appreciate the substance of the hon. Gentleman's remarks, but in areas with long waiting lists and many urgent cases it is for the authorities and not for us to decide the policy of allocating houses. We have drawn the attention of authorities to the plight of many Service men.
    Mr. Jessel: What is the Minister doing to get local authorities to comply with the circular? Is it not unjust that Service men who have been serving their country abroad or in Northern Ireland are not able to qualify for a high-priority place on waiting lists in their home towns?
    Mr. Armstrong: It is unjust that many families with high priority for housing are still denied decent homes. It is not for us to instruct the authorities in these matters. I said that we have drawn their attention to the plight of many Service men. We are anxious to help, but it is a matter of matching resources to the needs which exist.

    Municipalisation
    Mr. Shersbyasked the Secretary of State for the Environment if he will make a statement on current government policy on municipalisation.
    Mr. Armstrong: Our policy is to maintain the level of acquisitions achieved in 1974–75 and to concentrate them primarily on the improvement of living conditions and on bringing empty dwellings into use in areas where social and housing conditions are most difficult. The detailed arrangements are set out in Circular 64/75, issued to local authorities on 9th June.
    Mr. Shersby: Will the Minister agree that it is ridiculous to cut down on local authority mortgages while at the same time maintaining a municipalisation programme? Is he aware that in my constituency the local authority is busy acquiring houses in the private sector while many of my constituents cannot obtain mortgages for houses that they need?
    Mr. Armstrong: I repudiate the hon. Gentleman's allegation. My right hon. Friend the Secretary of State for the Environment dealt with this matter a little earlier. It involves matters of judgement and priority. It so happens that priorities on the Labour benches are different from those on the Conservative benches. I am disturbed by Opposition suggestions that Whitehall should attempt to lay down these conditions to local authorities. Authorities know the great need in their areas.
    Mr. Lee: Is it not equally important to ensure that local authorities do not sell off housing stock? May we be assured that Conservative local authorities will be prevented from doing a mischief if they take over next May, and that the municipal housing stock will be safeguarded?
    Mr. Armstrong: My hon. Friend makes a very good point. I wish to draw his attention to our recently-issued circular on sales policy.
    Mr. Raison: Is the Minister aware that his answer to my hon. Friend the hon. Member for Uxbridge (Mr. Shersby) was wholly nonsensical? It was a clear Whitehall decision to shift money from mortagages to municipalisation.
    Mr. Armstrong: Yes, indeed—in regard to the transfer of£100 million, I do not deny that.

    Channel Tunnel
    Mr. Costainasked the Secretary of State for the Environment when he expects to publish the Cairncross Report on the Channel Tunnel; and if he will make a statement.
    Mr. Crosland: The report is being published today and copies are available in the Vote Office. The advisory group found that the traffic and cost-benefit studies were an advance on previous work, but made a number of points which will be helpful in assessing any future tunnel project. They also raised a number of issues about cross-Channel services which I am considering with my colleagues.
    Mr. Costain: We shall study that report with interest. Does the Secretary of State appreciate that the "stop-go" of the Channel Tunnel over the last 14 years has caused havoc in road planning in Shepway? Is he aware that the present Minister of Transport said that he did not have time to visit the area and study these problems? Is he aware that his predecessor said that he would visit the area, as did his predecessor's predecessor, and his predecessor's predecessor's predecessor? They have all visited the area. Why will not the Minister of Transport follow suit?
    Mr. Crosland: We have evidently had a remarkable succession of Transport Ministers who have been vulnerable to the hon. Gentleman's blandishments. As for the new Minister, since he has been in office for only a few days, he has obviously been reluctant, before acquiring full knowledge of the problems involved, to accept any invitations. But he is a charming and sympathetic man, and if the hon. Gentleman will renew his invitation I am sure that it will be sympathetically received.
    Mr. Rathbone: Is the right hon. Gentleman aware that there are those who hope the Cairncross Report on the Channel Tunnel will lead the Government to reassess the viability of the Channel Tunnel and to restart work as soon as possible, particularly as it does not cost the taxpayer a penny?
    Mr. Crosland: No, Sir. The Cairn-cross Report was not intended to be, nor
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    is it, a complete reassessment of the tunnel project, such that it would cause the Government to reassess the decision they took—a decision which I announced some months ago.
    Dr. Marshall: Does the report make any comparative evaluation of the respective concepts of rail and road-oriented schemes for the Channel Tunnel? If so, what conclusions does it reach, and does my right hon. Friend agree with them?
    Mr. Crosland: I have had the opportunity of only a quick reading of the report, but it appears to reach a conclusion which may not be palatable either to myself or to a lot of my hon. Friends—that the more rail-oriented the tunnel is, the less profitable it is from an economic point of view. I do not wish to comment in any greater detail than that until I have had a longer opportunity to study the report in detail.

ARBROATH (FIRE)
Mr. William Hamilton(by Private Notice) asked the Secretary of State for Scotland if he will make a statement on the fire which took place in Arbroath on 22nd July when six people died.
The Under-Secretary of State for Scotland (Mr. Harry Ewing): At 23.44 hours on 21st July the Arbroath Fire Station received a call to attend a fire at a guest house at 34 Addison Place, Arbroath. A fire appliance manned by whole-time personnel responded immediately and arrived at the guest house within four minutes. A second appliance manned by retained personnel arrived within five minutes later.
The house, which is a stone semidetached house on two floors, was found to be smoke-logged, and there was considerable fire damage in the living-room and in the staircase. One male guest was found dead outside close to the doorway. The proprietor's wife and two-year-old son were rescued from an upstairs bedroom, but the wife died before reaching hospital and the son died later in the hospital. The male guest's wife, his daughter and grand-daughter were all found dead in upstairs bedrooms. The proprietor escaped and is recovering in hospital. The fire was extinguished by the fire brigade by 01–06 on the morning of 22nd July.

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I express my sympathy to the relatives of those who lost their lives, and I am sure that the House would wish to join me in this expression of sympathy.
I understand that there was no application for a fire certificate under the Fire Precautions (Hotels and Boarding Houses) (Scotland) Order 1972, and, indeed, that none was required, since the sleeping accommodation was not being provided for more than six guests.
It is too soon to say what was the cause of the fire. An examination by experts is still going on. A report is being submitted to the Procurator Fiscal, and my right hon. and learned Friend the Lord Advocate will consider, after he receives a report from the Procurator Fiscal, whether to instruct an inquiry under the Fatal Accidents and Sudden Deaths Inquiries (Scotland) Acts 1895 to 1906.
Mr. Hamilton: I am sure that the whole House will share the expressions of sympathy for the relatives and friends of those who were bereaved in this sad accident.
The accident happened in Arbroath, which is not my constituency, but I understand that the hon. Member for South Angus (Mr. Welsh) is ill, and, in any case, most of the people who have died were my constituents. Indeed, three generations of one family were bereaved as a result of this accident.
I should like to ask the Under-Secretary of State one or two specific questions. First, how many of these guest houses are there in Scotland which are not covered by the 1972 fire regulations which he mentioned? There is an editorial in the Glasgow Herald this morning—my hon. Friend may have read it—which indicates the enormous scope for likely repetition of this kind of accident. Will he consider asking the local authorities to take the kind of action recommended in that editorial today, and will he take every opportunity of trying to influence the Lord Advocate to have an inquiry, and to urge the local authority to do everything in its power to prevent a repetition of this kind of accident?
Mr. Ewing: The position in relation to those boarding houses and guest houses which do not provide accommodation for more than six guests is as I explained in my statement. When the 1972 order
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was made, a decision was taken to exclude the smaller premises. I am bound to say that, with only the larger hotels and boarding houses requiring designation, the existing resources of the fire brigades are so stretched that less than half of the premises which have applied —those accommodating more than six guests—have been inspected and received fire certificates.
As to my hon. Friend's question concerning the number of guest houses which do not come under the 1972 order, this is not recorded, but it is known that since 1972 there have been a number of guest houses which have reduced their accommodation from more than six guests to under six in order to exclude themselves from the fire prevention regulations that were made in 1972. Certainly we shall look at this aspect.
Concerning my hon. Friend's other question, about the need to impress on my right hon. and learned Friend the Lord Advocate that a public inquiry should be held, I am sure that my hon. Friend will accept that this decision can be taken only against the background of the report which is given to my right hon. and learned Friend by the Procurator Fiscal.
We shall certainly consider the point made by my hon. Friend in respect of the local authorities.
Mr. Buchanan-Smith: May I associate my right hon. Friends, hon. Friends and myself with the expressions of sympathy given by the hon. Member for Fife, Central (Mr. Hamilton) and by the Under-Secretary of State in relation to this accident.
Since this happened in a town in a neighbouring constituency to my own, I am sure that I express also the sympathy which my colleague the hon. Member for South Angus (Mr. Welsh) would wish to express were he able to be here. I also express the very deep sense of shock in the town of Arbroath as a result of this accident.
May I ask the Under-Secretary of State three questions? First, following the question by the hon. Member for Fife, Central concerning the Fire Precautions (Hotels and Boarding Houses) (Scotland) Order 1972, will the Under-Secretary of State acknowledge that the Tayside Region, under the fire master for Tayside,

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has been one of the most active in Scotland in seeking to implement the order, and will he state what plans the Government have to assist the fire services over staffing matters to make sure that that order can become effective?
Secondly, are the Government considering at any stage the extension of the order to smaller guest houses?
Thirdly, will the hon. Gentlemen—this is of the greatest practical importance in immediate terms—consider how to have more publicity and more help from the fire prevention departments of various fire brigades in Scotland in order to bring home to guest house owners a number of very simple, sensible precautions that can be taken, without a great deal of expense, to prevent the sort of very serious and unhappy tragedy which has occurred in Arbroath?
Mr. Ewing: I think that these are three very telling points made by the hon. Gentleman. It is important to point out to the House that in the fire brigade area in which this unfortunate accident took place there have been 497 applications for fire certificates by hotels and boarding houses that come under the 1972 order. All these premises have been inspected, a situation which is the exception rather than the rule. In actual fact, the fire brigade area in which this unfortunate accident took place has a 100 per cent. record in respect of inspecting premises which have applied for a certificate. It is important that this should be on the record.
I accept the point made concerning the extension of the provisions of the 1972 order to cover this type of guest house and boarding house. I am sure that the hon. Gentleman will agree with me when I say that once we have dealt with the premises which now fall under the 1972 order we can examine the possibility of extending the provisions to cover all these other boarding houses and guest houses which at the present time do not come under the order.
Finally, I think it is right and proper to draw to the attention of small boarding house owners, and to the local authorities in whose area these boarding houses are situated, the elementary fire precautions that can be taken. Certainly my Department will look at the possibility of issuing another circular in this respect.
Mr. Grimond: May the Liberal Party also be associated with the expressions of sympathy concerning this appalling tragedy? I fully appreciate that we have to wait until the Lord Advocate has considered the matter, but will the Government bear in mind the very small size of the house in question, and the fact that the fire service appears to have gone there with remarkable expedition, on which I congratulate it, and consider whether there may not have been something peculiarly inflammable about the materials or furnishings in the house? Will that aspect be covered by the inquiry, if there is one, and if it appears that this sort of factor is involved, will there be a technical inquiry into the nature of the materials that may have caused the fire?
Mr. Ewing: The right hon. Gentleman will have read in the Press today that experts are examining all the contents left following the blaze. It is hoped to establish from that examination the precise cause of this unfortunate and tragic event that we are discussing. Following that examination, we shall be in a position to say what caused the fire and, from that, my right hon. and learned Friend will then be in a position to take a decision regarding a public inquiry under the Fatal Accidents and Sudden Deaths Inquiries (Scotland) Acts.
Mr. Dalyell: Is it not right to say now that an even greater priority than extending the 1972 orders, which will be very expensive and difficult in terms of time, is the need to do something about the problem of foam which allows a fire to spread so quickly—a subject often raised by my hon. Friend the Member for Hackney, South and Shoredith (Mr. Brown)?
Mr. Ewing: It has to be appreciated that this was a very old house. I do not want to prejudge any expert opinion which may be revealed later, but we are discussing a building which was 80 years old. By the very nature of things, such a building is normally highly inflammable at any time. Therefore, that has to be borne in mind.
Mr. Teddy Taylor: Will the Under-Secretary encourage the proprietors of guest houses which do not require fire certificates to get the informed advice

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and assistance of fire prevention officers? Can the hon. Gentleman also give any indication of the shortage of manpower in fire services in Scotland and say whether the situation is getting better or worse?
Mr. Ewing: Recruitment to fire brigades in Scotland in 1974 was higher than it has ever been. It has been very good. In that respect, therefore, it is true to say that the manpower situation is vastly improved on what it has been in previous years.
Mr. Gordon Wilson: On behalf of my colleagues, may I also extend my sympathy to both families bereaved in this very unfortunate accident during the holiday season, which is a time of happiness? I appreciate that the cause of the fire will have to be sifted, examined and found. Will the hon. Gentleman consider strengthening his resolve in relation to a public inquiry not simply to find the cause of this accident but also to give publicity to the need for fire precaution requirements for accommodation which is offered for holiday purposes? Will he also consider asking fire officers, on a voluntary basis meantime, while he is considering any changes required in the regulations, to make inspections of a brief nature of electrical wiring systems in order to take a first step in making some judgment and to give guidance to house- holders who may be affected? Further, will he ask those who may be involved in the Tayside region, since most of their inspections have been carried out—for which they are to be congratulated—to give urgent attention to these informal inspections of casual accommodation?
Mr. Ewing: Throughout Scotland, fire prevention work has been stepped up considerably, especially over the past year or 18 months. There are many areas through- out Scotland—I imagine the Tayside area is one of them, in view of its high rate of answering applications for inspection by the fire prevention officer—where even household inspections have been carried out. The work of fire prevention officers has been stepped up considerably over the past 18 months, as I said. Nevertheless, we shall consider what the hon. Gentle- man says.
I wish to thank all right hon. and hon. Members for their expressions of sym- pathy to both families. I know that both
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communities, especially Arbroath, which is a very friendly town and which always welcomes holiday makers, will be stunned and shocked by this tragedy. In the constituency of my hon. Friend the Member for Fife, Central (Mr. Hamilton) the small town of Ballingry will be equally stunned and shocked by this accident affecting three generations of one family.
Mr. Sillars: Is my hon. Friend aware that none will regret this fatality more than the firemen who attended the incident, and that it is one of the worst parts of a fireman's job to attend an incident in which there are so many fatalities? I think that the turn-out time of the Arbroath Fire Brigade stands to the credit of both full-time and retained men.
Will my hon. Friend confirm that from first reports the main characteristic of this fire appears to have been the very large volume of smoke rather than fire? If he will look at the number of fires in households in Scotland in the past six months he will see that this characteristic runs throughout. Therefore, irrespective of what the Lord Advocate says or finds, will my hon. Friend institute an inquiry into the inherent dangers of materials used in household furnishings?
Mr. Ewing: My hon. Friend brings to this question his own experience before coming to the House. When I received the report of this incident, it struck me that the revealing feature was the smoke-filled condition of the house. This prevented rescue operations even by those who raised the alarm before the firemen reached the scene of the blaze. I shall consider seriously what my hon. Friend said about this matter.

TEXTILE, CLOTHING AND FOOTWEAR INDUSTRIES
The Secretary of State for Industry (Mr. Eric Varley): With permission, Mr. Speaker, I should like to make a further statement about help to the textile, clothing and footwear industries.
First, we have decided to provide up to£20 million under Section 8 of the Industry Act 1972 to raise productivity in the clothing industry, through help for modernisation and re-equipment. It will be available to all sectors. This is a medium- to long-term measure which will

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help the whole textile industry, which depends on the clothing industry for a significant proportion of its domestic sales. Details will be announced shortly, after further discussions with the Clothing EDC.
Secondly, we are ready to explore with other sectors the scope and need for schemes under the Industry Act which are suited to their particular circumstances, provided the financial resources can be found. Discussions have already begun with the footwear and jersey fabric industries.
Thirdly, public purchasing: Government Departments are being asked to ensure that they get their requirements of textiles, clothing and footwear from British manufacturers and that these use British materials. I hope that other purchasers in the public sector will, as far as possible within present constraints, be guided by the same principle. It would be against our interests as an exporting nation to violate the international rules about discrimination. Nor can the Exchequer be expected to accept grossly unfavourable terms for domestic products.
Fourthly, we stand ready to invoke the safeguards provided in the GATT Multi-Fibre Arrangement where imports of textiles or clothing cause or threaten disruption. Consistently with the MFA, the European Commission is negotiating bilateral arrangements, covering the Community as a whole, with the principal supplier countries, to prolong and in some cases extend the existing restraints on the more sensitive products. The Community has just completed negotiations on these lines with Hong Kong.
Extended restraints on Taiwan will be published shortly. If other negotiations cannot be brought to a speedy conclusion, we would be entitled to propose that the Community use the provisions in the MFA which allow importing countries to take their own safeguards.
In the case of footwear, Poland, Romania and Czechoslovakia have undertaken that their exports to the United Kingdom of men's leather footwear will be at a level between 5 per cent. and 10 per cent. below that of comparable exports in 1974. We are keeping the position on footwear under careful review.
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To consider action in good time, we must know about potentially disruptive imports. The Government's fifth measure is accordingly to apply to all clothing and textile imports from non-EEC sources the surveillance licensing which is already in force for some man-made fibres, yarns and fabrics. These are not import controls; licences will be issued on demand. This extended surveillance will take effect from 1st September. The administrative arrangements will be announced as soon as possible.
Sixth, anti-dumping powers: an industry which thinks it has the makings of a case for use of these powers should not hesistate to come immediately to the Department of Trade, which they will find very ready to give advice and help and to take vigorous action where dumped imports cause or threaten material injury. Cases have to be properly investigated; but, where there is a good case and an imminent threat of injury, we have powers to take provisional action for up to six months.
Finally, the ceilings on duty-free imports from Portugal will be properly applied. Hon Members will know that customs duties have been reimposed from 15th July on woven outer garments.
The immediate difficulties of these industries spring primarily from the world-wide decline in demand for their products. Our aim is to assist a constructive response to change and to avoid change at a pace which causes undue social hardship. The range of measures I have announced shows the Government's determination to see textile, clothing and footwear industries which are profitable and competitive so as to provide secure and well-paid jobs.
Mr. Michael Heseltine: Does the Secretary of State for Industry appreciate that the House will suspect that not a great deal is new in the statement he has made this afternoon? What calculations has he made of the impact of today's announcement on the level of demand and employment in the industries concerned?
Will the right hon. Gentleman further clarify the position of the£20 million to which he referred in his statement? Is this figure included in the£100 million which has been announced on two earlier

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occasions by the Chancellor of the Exchequer and the Prime Minister, or is it additional expenditure about which we are hearing for the first time? Will he explain to the House the impact of spending£20 million on increasing productivity at a time of falling demand, which I believe could have the effect only of increasing the unemployment in the industry?
I welcome the Hong Kong and Taiwan agreements under the Multi-Fibre Arrangement, but can the Minister explain the latest position about Korea?
Will he recommend to his right hon. Friend the Leader of the House that the House would welcome an early debate upon the problems of this difficult industry?
Mr. Varley: My right hon. Friend the Leader of the House is sitting with me on the Front Bench and will have heard what the hon. Member for Henley (Mr. Heseltine) has had to say about a debate.
On the question about the impact on employment, this scheme I am sure will be welcomed by the EDC. That body has been arguing for a scheme of this sort for some time and believes that it will assist the textile industry a great deal. I am confident that in the medium and long term it will help the industry.
The hon. Gentleman raised the matter of the£20 million. The money for the scheme will come from the allocation of£100 million announced by my right hon. Friend the Chancellor of the Exchequer, but should it become necessary to increase that amount to assist this scheme, it will be increased by up to£5 million.
I am not in a position to say anything about Korea at present, but I shall undertake to write to the hon. Gentleman on this matter in due course.
Mr. James Lamond: Will my right Friend accept that the seven points that he has outlined today do very little to assist the textile industry and that many of them are mere restatements of what has been said before or a suggestion that surveillance will be extended—which does not help the immediate problem? Nor does the£20 million, which my right hon. Friend mentioned, assist. Will he bear in mind that the textile industry is already capital-intensive and efficient, and that
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another£20 million has, as far as I am aware, not been asked for by employers? Will he bear in mind the point about an early debate? I fully accept that all these matters need an early and thorough airing in the House in order that we can explain to the Government the steps that are necessary to save the textile industry in Britain.
Mr. Varley: On the question of a debate, I cannot add anything to what I have already said in answer to the hon. Member for Henley (Mr. Heseltine). I am sorry that my hon. Friend cannot welcome this scheme. I know that he has been following the Clothing EDC, which welcomes the fact that£20 million has been provided to modernise the clothing industry, which will directly help the textile industry. However, in these difficult days when we hear calls from some quarters of the House for a reduction in public expenditure, I should have thought that the£20 million would be welcomed.
I know that my hon. Friend has, from time to time, suggested that there should be import controls. However, he will appreciate that my right hon. Friend the Prime Minister answered this question on 23rd May when he made the statement that the Government were not prepared to use import controls.
Mr. Richard Wainwright: Is the Minister aware that there may well be a mild welcome among those who are still surviving in the textile industry for some of the measures he has announced?
His statement on anti-dumping was a meaningless repetition. Will the Minister at least seek the help of his right hon. Friend the Foreign Secretary to obtain the help of our embassies overseas to provide evidence of local producers who charge high prices at home and low prices on their exports to this country? I realise that this is a notoriously difficult operation. Secondly, will the right hon. Gentleman confirm, in relation to surveillance, that his reference to 1st September means that all imports which have not cleared United Kingdom Customs by midnight on 31st August will require licences in order to be imported? Is that the meaning of his reference to 1st September?
Mr. Varley: I am advised that the same will apply as applied on the previous occasion. I thank the hon. Gentleman for the half-hearted welcome that he has given to the£20 million. I believe that when hon. Members have examined the statement in more detail—particularly what will be said by those directly involved—they will realise that it will be welcomed.
The hon. Gentleman mentioned assistance from overseas posts. That is a valuable suggestion. I understand that some help is already given, but I shall follow up his remarks.
On the question of anti-dumping, my right hon. Friend the Secretary of State for Trade is ready to give whatever assistance he can where the case can be made out. If hon. Members believe that further assistance is required, I urge them to take up the offer that has been made.
Mr. Dan Jones: Is the Minister prepared to accept that there are many in the textile industry who believe, together with the Prime Minister, that there are immense difficulties over import controls? Will the Minister consult the Department of Trade about the document supplied by a group, of which I am a member, involved in the textile industry's difficulties? That document is calculated to alleviate those difficulties and was produced a month ago. Will he prevail on his colleagues to give us an early reply to it?
Mr. Varley: I shall certainly consider the point raised by my hon. Friend and find out whether he can have a quick and speedy response to the document to which he referred. I am grateful to my hon. Friend for pointing out some of the difficulties of import controls. The total production of textiles at present is divided as follows: a third goes to home clothing demand, a third is exported and a third goes into carpets and other products. If we were to follow the course that some Conservative Members propose, namely, to impose import restrictions, it is possible that there would be retaliation against the third of the textiles that we are at present exporting.
Mr. Fletcher-Cooke: Does the right hon. Gentleman realise that he has introduced a new vocabulary into the debate? He says that Her Majesty's Government
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"stand ready" to do this and "stand ready" to do that. He says that they "stand ready" to activate the Brussels machinery and "stand ready" to do one or two other things. Does that mean that he will now be doing them? If not, and if he is going to do them, may we have a debate to find out when he will be doing them?
Mr. Varley: The answer to the question on a debate is that my right hon. Friend the Leader of the House has heard what hon. Members have said. Of course we shall do what is consistent with our obligations under GATT and the Multi-Fibre Arrangement and under our obligations within the EEC. That is what my right hon. Friend said on 23rd May. That is what I say today.
Mr. Dunlop: While I am not advocating any increase in the import of manmade materials, may I ask the Secretary of State to ensure that there will be a more equitable distribution of licences for China grey cloth? There is a firm in my constituency whose life is dependent on this particular fabric. The paucity of the licences given by another Department is such that 400 jobs are in jeopardy. It would mean the very life of the village concerned if these jobs became redundant. Will the Secretary of State help in this matter?
Mr. Varley: As the hon. Gentleman will appreciate, the matter which he raises does not fall to me and my Department. However, if he gets in touch with my right hon. Friend the Secretary of State for Trade, I am sure he will look into the point raised by the hon. Gentleman.
Mr. Madden: Will the Secretary of State acknowledge that the textile industry is fed up with Government promises and Government expressions of sympathy? If he does not know what is causing the crisis in the textile industry, the industry does. It is the influx of cheap foreign imports. Will he acknowledge that fact and act upon it? Will he further undertake a serious examination of the problems of the industry, which are at present causing high unemployment, short-time working, redundancies and closures?
Will he not "stand ready" to take action on Government purchasing policies? This is an area in which he

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can act. I ask him to direct the Government to buy not only from British suppliers but from British manufacturers of textiles. May we have a realisation of the urgency that this crisis deserves on the part of the Government, and not further limp statements of this sort which will add to the growing cynicism and bitterness which exists in the British textile industry?
Mr. Varley: My hon. Friend knows that the solution that he advocates today has already been rejected by the Government. That was done on 23rd May. I should have hoped that my hon. Friend would at least welcome the scheme, instead of the carping criticisms he has made. We stand ready to help on this matter, and we shall help if we can. We are not unmindful of the problems of the industry. We are doing all that we can to help. From time to time it would help the Government if my hon. Friends started to support us, too.
Mr. Churchill: Is the Minister aware that his statement today will do very little to relieve the critical employment situation in the Lancashire textile industry at present? Is he seriously suggesting, in point six of his statement, that his Department has so far received no evidence whatever of dumping of textiles in Britain? Furthermore, will he give an undertaking that when his Department does receive such evidence, he will act on it promptly to introduce anti-dumping regulations?
Mr. Varley: Of course we stand ready to act where there is clear evidence of dumping. If the hon. Gentleman or any firm in his constituency has evidence, the matter must be taken up with my right hon. Friend the Secretary of State for Trade, and it will he examined seriously.
Mr. Jim Marshall: May I point out to my right hon. Friend that it is not carping criticism that we are bringing to bear in the House today? Perhaps I may draw his attention to two points which he made. First, as to extending the surveillance scheme, I should like to remind him and the House that Southern Ireland introduced this on 12th June. I am sure that the textile industry in Britain will be pleased to know that we react some four or five weeks after the Irish Government.
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As regards the seventh point in his statement, on anti-dumping, the textile industry has been making representations to Government Departments for at least two or three years and on no occasion has it received any satisfaction. As my right hon. Friend and I are both East Midlands Members of Parliament, may I remind him that there are 70,000 people in the East Midlands dependent upon the hosiery and knitting industry? His statement will do nothing to relieve the despair and despondency which followed the Prime Minister's statement on 23rd May. The Government must realise that unless something is done to stimulate home demand for British produced textiles there will not be a British textile industry to take advantage of the boom which he and other Cabinet Ministers continue to tell us will come in 1976.
Mr. Varley: I very much hope that when my hon. Friend has had a chance to study the statement, he will realise that the£20 million of assistance to the clothing industry will directly—although it will take time assist British textiles. But I should like my hon. Friend to consider one point: is he confident that if we were to impose import controls in the way he wants, there would not be retaliation against the one-third of our textiles that are presently exported?
Mr. Arthus Lewis: Try it and see.
Mr. Farr: Is the right hon. Gentleman aware that what he has said cannot be regarded as anything more than an interim statement? Will he, in particular, undertake to monitor the situation in the East Midlands and in the Leicester area, where there are problems in both the footwear and the hosiery industries and a rate of unemployment which is increasing and is three times above the national average? If he finds—as is almost certain—that what he has said today is hopelessly inadequate, will he act again and act properly forthwith?
Mr. Varley: I find the criticism and genuine concern of some of my hon. Friends easy to understand. I find it difficult from a Conservative Member, especially when he is not very explicit when he criticises this statement. A sum of£20 million has been provided under this scheme. I understand that last night the hon. Gentleman voted against furthe

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public expenditure, but he is now saying that we should increase public expenditure even further. I also understand that the Conservative Party is not in favour of import controls, so I find it difficult to understand the criticism of the hon. Gentleman in particular. However, the point he makes about the concern in the East Midlands is genuine, as it is throughout Great Britain. We shall monitor and we are monitoring. We are watching the situation extremely closely.
Mr. Torney: Is my right hon. Friend aware that there is near despair in Bradford, in my constituency, and that in the whole West Yorkshire textile area people are afraid of unemployment and short-time working, which is already taking place? Will he, therefore, make the strongest possible representations to the Prime Minister to persuade him to change his mind regarding import controls, because both the workers and the employers in the industry want such controls? As textile area Members of Parliament, we are not prepared to accept a bland statement that that will do no good. We are convinced otherwise. Why does not the Minister give them a chance and try to persuade the Prime Minister to change his mind?
Mr. Varley: I think that my hon. Friend has quite considerable powers of persuasion, and no doubt during the next few weeks he will be using them. Of course we are ready, and we understand his concern, and we listen. We are concerned about unemployment in his constituency—just as I am concerned about unemployment in my constituency. But my hon. Friend will know that the Wool Textile Industry Scheme has been widely welcomed. This Clothing Industry Scheme is very comparable to that scheme. I am confident that it will help the textile industry in the way outlined in the statement.
Mr. Reid: Why has the Minister not given greater consideration to the repeated representations from the industry in Scotland for assistance with pre-shipment finance, particularly in view of the long delay which often occurs between the export of these quality Scottish goods and payment by the foreign purchaser, and would not this be a positive move towards the stability of the
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industry in Scotland and the export trade of the United Kingdom in general?
Mr. Varley: This is a serious point. I cannot give a firm assurance that we can introduce the kind of scheme that the hon. Gentleman has just outlined but it is something under consideration. Of course, one of the severe constraints is the level of public expenditure and how far public expenditure can be used on schemes of this kind.
Mr. McGuire: Is my right hon. Friend aware that I very much regret having to tell him that his statement today, which is the same kind of palliative as we have had in the past, will do nothing for the industry, which is already under crisis, and particularly will do nothing to save the jobs of the 350 people who work in the last cotton spinning mill in the Wigan area? May I remind him, when he speaks of retaliation, that he, like me, is a responsible member of the National Union of Mineworkers, and when miners in this House wanted cheap coal imports to be stopped, we stopped them? Can he tell me whether the United States of America, which was the principal supplier, retaliated in any way? I have to tell my right hon. Friend that if this cotton spinning mill closes, and it is already under threat, the verdict will be passed by people in the cotton industry, particularly in Lancashire, on this Labour Government and there will not be a Labour Government after the next General Election.
Mr. Varley: I know that my hon. Friend wants to be fair about this. I am not sure, in relation to the analogy he made to us, that the textile situation is in any way comparable to the coal situation, with which we are both very familiar. But there is an international recession in textiles, and this is part of the problem. That should be, and I am sure is, freely acknowledged by all my hon. Friends.
Mr. Michael Morris: Is the Minister aware that hon. Members representing the shoe towns are equally fed up at seeing their work force go on short time and become unemployed whilst workers in the COMECON countries are on full time? Is not he aware that ever since 1973 a copper-bottomed case has been brought forward indicating that there has been

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dumping from the COMECON countries? When are we to get action on that front?
Mr. Varley: The hon. Gentleman could not have listened to the statement, particularly on this point. When he gets the chance to read the statement he will see that we have taken action on this very point about footwear imports from Eastern European countries.
Mr. Noble: Would my right hon. Friend accept that we on this side have been demanding quota restrictions, and doing so in the light of expert evidence from the rest of both the textile and the footwear industries, which over a period of 25 years have seen the bottom knocked out of their market by a flood of cheap imports? Will he further accept that the Government will be pouring money into those industries whilst the plug is still left out of the sink, so that the money will be pouring away unless something is done about imports? Will he answer my hon. Friend's question and say whether surveillance to be associated with textiles is to be extended across the board for footwear, and will he consider changing the anti-dumping regulations so that when a case is first presented to the Department the goods are held at the quayside until the importers have shown that the goods are not being dumped, rather than, as at present, the goods being allowed in freely and a case having then to be made?
Mr. Varley: The point that my hon. Friend makes on surveillance is being considered and will be further considered. On the other points raised by my hon. Friend, I hope that he will not damn this scheme until he has seen the comments of those who are employed directly in the textile and clothing industries, because I am confident that when they have seen the scheme and have had time to examine it they will realise that it is of some benefit to their industry.
Mr. Speaker: I understand that the hon. Member for Bradford, South (Mr. Torney) wishes to make an application.
Mr. Torney: On a point of order, Mr. Speaker. I seek leave to move the adjournment of the House for the purpose of discussing the very specific and important matter with which we have just been dealing. I consider it should have urgent consideration because
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certainly we who represent textile constituencies are very dissatisfied with the way the Government have been dealing with this very important matter of the textile industry. We are concerned for unemployment in our industry. Many of our constituents are continually worrying us to take action, and we in turn must press the Government for action. Therefore, Mr. Speaker, time is certainly running out and I would ask for this matter to be dealt with under Standing Order No. 9.
Mr. Speaker: I understand the strong feelings of hon. Members on this very serious situation. I would think it would be the general feeling of the House that it should be debated at some time but I have really to decide on a procedural point and whether I should interfere with business for today, to which great importance is attached, or with business tomorrow, to which great importance is also attached. Therefore, I cannot allow the application today. I am sorry.
Mr. Peyton: On a point of order, Mr. Speaker. Without in any way quarrelling with that ruling, could I, through you, Sir, in view of what you have said about the force of the matter and the obvious desire shown widely through the House that it should be debated at an early date, ask the Leader of the House—and I know that his resources in time are not overflowing—whether perhaps he could find an earlier opportunity for a debate, even if it displaced some of the other business?
Mr. Speaker: We have a Business Statement tomorrow and I feel that it would be preferable for this matter to be considered then. In view of what has been said today, perhaps this matter can be dealt with tomorrow in questions on business.
Mr. Cryer: Whilst I realise that this would be trepassing on important time, the textile industry in the West Riding and the North is in very severe difficulties. Mills are closing day by day, and I would support the right hon. Gentleman opposite in asking the Leader of the House whether he can give sonic indication now whether, as a matter of emergency, he can juggle an admittedly crowded programme so that time can be given to debate this topic which is so vital to the North and the Midlands.
Mr. Speaker: No doubt the right hon. Gentleman the Leader of the House will consider that suggestion.
Mr. Hoyle: Further to that point of order, Mr. Speaker. This is a matter of extreme urgency for many parts of the country, particularly my own. Since it is to urgent, could we not debate it today, never mind about waiting until tomorrow?
Mr. David Steel: Further to that point of order, Mr. Speaker. Whilst I appreciate your ruling, and although we are to have a Business Statement tomorrow, it would help throughout the country if we had a statement today about a forthcoming debate on this matter. This is a serious matter. Mills arc closing up and down the country and jobs are affected. I would not have thought it good enough to leave it at a Government statement with no indication of whether or not we shall have a Business Statement on this.
The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): There will be a Business Statement tomorrow. I have listened to what has been said today, and that will be borne in mind and considered before tomorrow. I cannot go further than that.

MEMBERS (PAY AND ALLOWANCES)
Mr. Douglas-Mann: On a point of order, Mr. Speaker. May I ask your guidance as to a decision of the House last night on Members' salaries and their linkage to those of Assistant Secretaries and, in particular, as to whether that decision is binding on the House and the Government?
As you know, Mr. Speaker, the decision, which I understood was to take our salaries to between£8,650 and£11,000, vastly in excess of the Boyle Report's recommendations, was taken at two o'clock in the morning in a House in which there had been a very wide-ranging discussion in which even the mover of the motion scarcely dealt with its subject matter. [Interruption.] The decision was taken in the absence of nearly 60 per cent. of the Members of the House at
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two o'clock in the morning by a majority of one vote, and I understand, although I may be incorrect in this information, that that one vote was that of an hon. Member who inadvertently went into the wrong Lobby.
If we as a House deal with public expenditure of which we are beneficiaries in such a cavalier and thoughtless fashion we are justifiably bringing ourselves into disrepute. May I ask your guidance, Mr. Speaker, on whether it would be in order for a different motion to be brought before the House on another occasion when it can be properly debated at a reasonable hour as the main subject for discussion by the House?
Mr. George Cunningham: May I remind you, Mr. Speaker, of the following matters? First, the amendment which was carried by one vote had been on the Order Paper with due notice in the normal way. Secondly, although that amendment was carried by one vote, as someone famous once said, one is enough to carry a vote in this House. Thirdly, the substantive motion which was then amended was carried by 169 votes to 70, a majority of 99. Therefore, the point of substance was voted upon twice, first with a majority of one and the second time with a majority of 99, with all the normal notice that the House gives.
Several Hon. Members rose—
Mr. Speaker: Order. This is wholly irregular. I did not recognise a point of order in the original question to me. It would be much better if we all studied Hansard, which is not yet available, and saw the precise terms of the resolution and whether the Chair has any part to play. I am very doubtful about that. The House appeared to come to a decision. Whether it can come to another decision at another time is not for the Chair to say—and that is the end of that.

STATUTORY INSTRUMENTS
Ordered,
That the Customs Duty (Personal Reliefs) (No. 1) Order 1975 (S.I., 1975, No. 1132) be referred to a Standing Committee on Statutory Instruments.—[Miss Boothroyd.]

TEMPORARY ABOLITION OF MINISTERIAL SALARIES
4.21 p.m.
Mr. George Cunningham: I am due at this point to move,
That leave be given to bring in a Bill to suspend the payment of salaries to Ministers; and for purposes connected therewith.
[Laughter.]
It is clear from the response so far that the Bill would be carried with acclaim. However, I am mindful that the House debated that matter a little and certainly the general subject of salaries of Ministers and Members this morning until about two o'clock, and I sense that I should be thought to be imposing upon the House if I now spoke for 10 minutes on that subject.
Therefore, important though the subject matter is, I do not seek leave to bring in the Bill at this time, but I shall revert to the subject on another occasion if the House will allow me.

ORDERS OF THE DAY

  REMUNERATION, CHARGES AND GRANTS BILL
  Order for Second Reading read.
  4.22 p.m.
  The Chancellor of the Exchequer (Mr. Denis Healey): I beg to move, That the Bill be now read a Second time.
  Mr. Speaker: I have selected the amendment on the Order Paper in the names of the Leader of the Opposition and her right hon. and hon. Friends:
  That this House declines to give a Second Reading to a Bill which provides for existing contractual rights to be over-ridden by a White Paper which is not open to Parliamentary amendment; for the legal obligations imposed by the White Paper to be interpreted by a member of the Cabinet instead of by the Courts; which leaves to a further unpublished Bill the specification of additional sanctions referred to in the White Paper; and provides for an undefined increase in indiscriminate housing subsidies.
  Sir Geoffrey Howe: I rise, Mr. Speaker, to raise briefly a point of order about the further proceedings on the Bill. It appears that the normal printing arrangements for the publication of amendments are not working in relation to the Bill. The amendments tabled on Monday were available yesterday. Those tabled yesterday have only just come into my hands, in duplicated form, presumably now generated by the machinery in the basement of the House.
  As it is an important matter, and other amendments are being tabled today, may we have an assurance that by the time we come to the further stages of the Bill tomorrow we shall have a properly marshalled Notice Paper, with all the amendments there set out together?
  The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): I apologise to the House that it has not been possible to produce the normal marshalled amendments for the debate today. The reason is that it was not possible to obtain overtime working in the Parliamentary Press last night. Therefore, the machinery that we installed in the basement had to produce amendment lists by duplicated typed copy today.

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  However, I understand that 50 or 60 copies are available now, and that the rest will be available before five o'clock. I shall ensure that the normal marshalled list is available for the stages of the Bill tomorrow.
  Mr. Healey: Last night the House of Commons, by an overwhelming majority approved the Government's White Paper on The Attack on Inflation. The Conservative Opposition did not oppose this decision. Inevitably, in the two days which preceded the vote the debate ranged very wide, covering many aspects of Government economic policy, particularly on public expenditure, and right hon. and hon. Members gave a good deal of attention to the nature of legislation which would be needed if the Government were to find it necessary to acquire compulsory powers to ensure that the pay limits laid down in the White Paper were observed.
  Today our purpose is more limited—to discuss the legislation the Government have proposed to support the voluntary policy for incomes which the House has approved, a voluntary approach preferred by the Government, by both sides of industry and by the right hon. Lady the Leader of the Opposition and her predecessor, the right hon. Member for Sidcup (Mr. Heath), in his remarkable speech yesterday.
  What the Bill does is to remove legal obstacles to the effective operation of the voluntary policy, and to ensure that the Government have at their disposal effective means of discouraging employers and their work people, in both the public and the private sectors, from breaking the pay limit. It does not impose legal controls of any kind on pay as such. On the other hand, it ensures that the Government, work people and their employers will have the best possible chance of making sure that the voluntary policy works. The Government will have full information about settlements, made and intended, in the public sector, and informal arrangements cover the bulk of important settlements in the private sector. Thus the Government already have information covering 60 per cent. of the employed population. In addition, the TUC and the CBI are to discuss arrangements for extending monitoring
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  on a voluntary basis, and the flow of information through the Price Commission, about the pay settlements which underlie applications for price increases, will further strengthen the Government's position.
  Accordingly, Clause 1 relieves employers of contractual obligations to give remuneration in excess of the pay limit, while Clause 3 looks to an amendment of the Price Code which will ensure that applications for price increases are supported by the relevant information on pay settlements and will provide for the sanction through the Price Code whereby the whole amount of any pay settlement which breaks the pay limit—and not just the excess over that limit—can be disallowed for price increases. Clause 4 provides for a comparable sanction in the local authority field, in giving the Secretary of State power to withhold rate support grant from individual authorities which make pay settlements outside the limit.
  But in the case of Government Departments no such sanctions are required. The Government will make certain that Civil Service pay is negotiated within the limit—and, of course, there is no question of inadequate information. Nor in the case of nationalised industries is there any need for additional formal powers for the Government to impose effective sanctions over and above those deriving from the Government's rôle as principal provider of funds for investment and other purposes and those available through the Price Code. The Government will not hesitate to enforce these sanctions should the need arise in specific cases—and the price of excessive pay settlements in these cases is bound to be lost jobs.
  What we want most of all—and here I agree with the right hon. Lady—is to have a voluntary policy, and to avoid the establishment of further complex machinery separate from the Government Departments responsible to engage in detailed examination of very large numbers of pay settlements. This is why we are not proposing the establishment of a Pay Board. We already have all the institutions we need now for the operation of an effective voluntary policy. The Price Commission is working well, and the legislation under which it is operating

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  —for whose extension we are providing in the Bill—enables the Government, subject to a proper measure of parliamentary control, to develop their policy for price control flexibly to take account of changing economic conditions.
  As for monitoring pay settlements, and determining whether such settlements fall outside the limit, we believe that this is a task for the Government and not for a separate, non-elected body which would not be answerable in Parliament.
  Before I turn to the details of the Bill, I must deal with the criticism that the Government are in effect, it is said, legislating by White Paper, and that they are unreasonably asking Parliament to grant powers over whose exercise there would be no effective check. No accusation could be further from the truth. The fact is that Parliament has been able already to debate fully the contents of the White Paper setting out the pay limits, and decided by an overwhelming majority last night to support that White Paper.
  No changes will be possible under this Bill in the definition of the pay limit for the purposes of the sanctions or of relieving employers of contractual obligations, without the express consent of both Houses of Parliament. The Bill provides that an Order in Council may be made substituting new pay rules—which would be in a new White Paper—for those in Cmnd. 6151, but that such an order will cease to have effect unless approved by both Houses within 30 sitting days. In practice, we envisage that if such an order were required the Government would ask both Houses to approve the new rules before it came into effect; in other words, that the Government would not bring new pay limit rules into effect without the prior consent of Parliament, and in the next 12 months we envisage using this procedure only if it is necessary to remove rough edges or to block loopholes which have come to light.
  I have repeatedly made it clear that we cannot just have a policy for 12 months and then let things rip. We have to get inflation down to 10 per cent., by next autumn, and then we must make further efforts to get it into single figures. We have to get our rate of inflation down to that of our international competitors and keep it there.
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  It would be unrealistic for the Government—in consultation with the TUC and the CBI—to try to settle now exactly how we should pursue these further objectives a year ahead. But we shall certainly need to pursue them, and the guidance we shall need to give negotiators at that time is bound to be different from the guidance given now by the White Paper. For example, I do not believe that the flat£6 limit could last for more than one year, and I made that clear on Monday.
  The common-sense course—as the last Government recognised in 1973—is to provide for changes in the operating rules of the policy, subject to parliamentary control. That is what the Bill does, through the provisions in Clause 2(3), allowing the powers to be prolonged by order for a further year until 31st July 1977, and in Clause 1(2), which allows the White Paper pay limit to be replaced by new rules appropriate to the developing situation. The Government envisage that any new rules should result, like the current rules, from a new agreement with the TUC, in which we hope the CBI might also join. Elimination of the provision for changing the pay limit would make it impossible to allow modifications even where these were wanted by both sides of industry.
  I now turn to discuss in more detail what the Bill does, clause by clause. Clause 1(1) relieves employers of contractual obligations to give remuneration in excess of the pay limits imposed by the policy set out in Cmnd. 6151. Without it employers who were anxious to comply with the limits would find themselves unable to do so. Of course, this subsection does not affect employers' rights to bring actions against their employer on any ground other than the one dealt with in it. Subsection (2) provides for new pay rules to be activated by order, subject, under subsection (3), to affirmative resolutions in both Houses. Subsection (4) ensures that the Crown, as employer, enjoys the same protection as other employers. Subsection (5) provides for the Secretary of State for Employment to determine whether or not any remuneration exceeds the limits.
  Mr. Peter Rost: How many infringements of the£6 limit, particularly in the private sector, will be reported and tolerated before the

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  second mystery sanctions Bill is introduced?
  Mr. Healey: We discussed this matter in great detail on Monday and Tuesday. It has nothing to do with the Bill in front of the House at present.
  Mr. Paul Dean: On Clause 1—
  Mr. Healey: With great respect, I was interrupted 28 times on Monday. I checked it in Hansard. I propose to make this speech in my own way, in my own time, and to give way no more than the right hon. and learned Member for Surrey, East (Sir G. Howe) did yesterday.
  Clause 2 sets time limits to the operation of the provisions contained in Clause 1, and enables them to be terminated and reactivated within those limits. It also allows certain provisions of Part II of the Counter-Inflation Act 1973 to be extended, or, if necessary, reactivated, during any period during which Clause 1 is in force. The purpose is to provide for the continuation of the relevant powers of control over prices, dividends and insurance premiums beyond 31st March 1976, when they would otherwise lapse. If this were not done, the Government's powers to control prices and dividends would disappear before the end of the year covered by the White Paper pay limit, and with them would disappear the sanction to disallow the whole cost of excessive pay increases for price increases.
  Clause 3 deserves a rather fuller explanation. The present relevant powers of price control are contained in the Counter-Inflation Act 1973. Section 2 of that Act provides for a Price Code to be made. Section 6 requires the Price Commission to exercise the powers conferred by it
  "in such ways as appear to them appropriate for the purpose of ensuring that the provisions of the code…are implemented".
  The powers are to restrict prices or charges by notice or order.
  As a sanction against firms which breach the new pay policy, we intend to amend the Price Code immediately after the Royal Assent so as to require that labour costs arising from pay settlements in excess of the limits in the White Paper are not to be reflected in price increases. Additional sanctions may also be needed
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  for firms with relatively low labour costs. We also propose that the code should provide explicitly that action by the Price Commission to restrict a price in accordance with the sanction shall be taken only on the basis of a certificate from the Secretary of State for Employment that the remuneration is excessive. The Price Commission will have no independent or parallel duty to interpret the limit.
  As it is central to enforcement of the limit that the sanction should be imposed through the Price Code, we need to strengthen the powers in the 1973 Act which did not contemplate such a sanction. This is achieved by Clause 3, by virtue of which the sanction need not be limited to disallowance of the excessive remuneration for pricing purposes; it may be such as the Secretary of State considers "appropriate"—total disallowance of offending pay, or more severe if necessary. The Price Code will be amended as soon as the Bill is enacted, and accordingly details of the proposed amendments have already been published by the Secretary of State for Prices and Consumer Protection in a consultative document.
  Clause 4 of the Bill implements the statement in the White Paper that the Government would withdraw grant from an individual local authority where that authority made a pay settlement outside the limits.
  Mr. Arthur Lewis: This Clause deals with a local authority which pays outside the limit. I understand that the Government can intervene. I should like to put to the Chancellor a situation which has already occurred and which could well occur again. Let us assume that a council wants to take legal advice, and briefs a QC, who can, and does, fix the fee for his brief and his refreshers. QCs have never been party to any type of wage freeze. Let us also assume that the dustmen, who come under the same council, are fighting for a wage increase. Assuming that the council hires the QC at a charge of hundreds of pounds for refreshers, will it be barred from claiming that back or will it be allowed to pay the QC hundreds of pounds?
  Mr. Healey: I shall seek to answer that question as best as I can. Many hon. Members will know, not least the right

  581
  hon. and learned Member for Surrey, East, that effective control of the fees charged by barristers has not proved possible in the past. All I can say is that, even if the Government were to disallow what is regarded as an excessive payment for a lawyer, that disallowance would be unlikely to trouble very much the financial situation of the local authority concerned.
  Mr. Arthur Lewis: But it troubles the workers.
  Mr. Healey: I know it does, but we are talking about sanctions under the Price Code for excessive payments. I fear that this particular sanction would not be very effective, even supposing that it were possible to apply the rules in a better way. This is one of the many areas which the right hon. Member for Sidcup referred to yesterday when he said that any pay policy is bound to have rough edges and throw up difficulties and anomalies which have so far defied the ability of all Governments which have attempted to deal with the problem to handle successfully.
  Mr. Paul Dean rose—
  Mr. Healey: I have given way once to an hon. Member on each side of the House. I propose to make a little more progress if the House will allow me to do so.
  I do not think anyone would dispute the necessity for such a power taking into account the way rate support grant works. We said in the White Paper that we would base rate support grant and increase orders on only that expenditure which fell within the pay limits. That ensures that we shall not pay grant nationally on national settlements which are in excess of the limits. But it does not deal with the case of the individual authority which rejects what authorities as a whole are doing and decides to pay for some of its own staff greater sums than the pay policy allows. If there were only a few such authorities the restriction of grant in total would not affect them greatly, and they would get the benefit of the resources element to supplement the additional rate demands they made to finance such expenditure. We therefore need special powers to deal with them by withdrawing grant. Such action would be distasteful to us, but our priorities at
  582
  this point in time are clear. We must ensure that the pay policy works, and we must ensure that where the Government have power to influence bodies through payment of grant, that grant is used to influence them to keep to the policies.
  Mr. Timothy Raison: Will the Chancellor tell us whether when grant is withheld by the Government there will be any check on local authorities simply slapping the expenditure on the rates?
  Mr. Healey: We have considered this matter carefully. The hon. Gentleman knows that it is impossible to interfere with the right of local authorities to fix rates consistent with their independence. This general problem is under consideration by the Layfield Commission. I dare say that we may in consequence find some way of handling the financial arrangements of local authorities which will enable the Government to have this type of power. But the essence of a local authority is that it should have independence of decision in some financial areas. I think that the Opposition would think very carefully before proposing to make the level of rate levied by a local authority subject to agreement by the Government. To do so would completely destroy the independence of local authorities. I think that the hon. Gentleman will accept that.
  The Secretary of State will have power to withdraw grant at his discretion after a local authority has had an opportunity to make representations. The intention is to enable him to withhold grant up to, but no further than, the whole cost of any pay settlement which exceeds the limits, following the precedent in the private sector, where the whole cost of a pay settlement outside the limits may be disallowed for price increases.
  Clause 5 arises from paragraph 35 of the White Paper. It is proposed to amend the Housing Rents and Subsidies Act 1975 so that the special element of housing subsidy can be paid for 1976–77 as well as for 1975–76. By this means we expect to give sufficient help to local authorities and new town corporations to enable them to contain the rent increases for 1976–77 within a national average of 60p per week. The administrative arrangements for the payment of this subsidy will be worked out as quickly as possible in consultation with the local authority associations. We have the experience

  583
  of the 1975–76 special element to guide us, though adaptations will be necessary to meet next year's situation.
  Mr. Peter Walker rose—
  Mr. Healey: I must get on. I will give way to the right hon. Gentleman later. Hon. Members often complain about the length of speeches from the Government Front Bench. If I have to spend 25 minutes, as I did on Monday, dealing with a whole string of interventions, apart from noisy interruptions by groups of hon. Gentlemen opposite, the business of the House will be obstructed in an intolerable way.
  I emphasise that this is a special subsidy, payable for one year only, to meet the particular needs of the Government's policy to fight inflation. It will not be payable after 1976–77. The subsidy will act as a strong inducement to local authorities to keep their rent increases down so that they do not on average exceed the rise in prices generally. We are not proposing to restrict their freedom to fix rent levels and manage their housing account for themselves—a freedom we restored to them under the 1975 Act. But should it emerge next year that a significant number of authorities are making unreasonably large rent increases, and in so doing prejudicing the success of the Government's attack on inflation, the rent limiting powers of Section 11 of the Housing Rents and Subsidies Act are available, and my right hon. Friend would not hesitate to use them if he felt it essential to do so.
  Mr. Michael Latham: Will the right hon. Gentleman give way?
  Mr. Healey: With respect, I must ask to be allowed to finish the part relating to local authorities. I will then give way to the right hon. Member for Worcester (Mr. Walker).
  Clause 6 is necessary because there is no Scottish equivalent to the "special element subsidy" in England and Wales which is being extended by Clause 5 of the Bill to provide for payments during 1976–77. This clause applies to Scotland only and provides for the payment of a new subsidy—the rent limitation subsidy—to local authorities for the year 1976–77, which will reproduce on rents in Scotland the effect of the extension of
  584
  the special element subsidy in England and Wales.
  Mr. Peter Walker: The Chancellor said that the rent increase would be an average of 60p. Does that mean that those who arc currently paying double the average rent—for example, many people in Greater London and Birmingham—will have to pay an increase of 120p?
  Mr. Healey: The Government have no more power to determine the specific rents demanded by local authorities than to determine specific rates. The right hon. Gentleman cannot have it both ways. If we want local authorities to be independent, we must give them financial freedom in certain areas. The areas in which they have such freedom are rents and rates. It may be possible at some stage to change the situation. I do not know whether the Opposition have proposals for changing that situation. I do not believe it would be right to take that power.
  Mr. Raison: The Chancellor pointed out that he had power under the Housing Rents and Subsidies Act 1975. Why is he now saying that he has not got that power?
  Mr. Healey: The average increase will be 60p next year, just as there was an average increase this year. In some cases it may be more; in others it may be less. We do not propose to intervene in order to establish an absolute uniform increase throughout the country.
  Mr. Bruce Douglas-Mann: Will my right hon. Friend give way?
  Mr. Healey: No. I must proceed.
  Clause 7 is needed to provide an appropriately all-embracing definition of "remuneration". If "remuneration" were not widely defined, it would be possible to evade the limits imposed by the policy on the ground that some benefit in lieu of an increase in pay and the arrangements for providing it—for example, provision of a free holiday by an employer to an employee's relative—did not constitute an increase in remuneration and was, therefore, exempt.
  Mr. Paul Dean: Will the right hon. Gentleman give way?
  Mr. Healey: No. Clause 8 provides in the usual way—
  Mr. Paul Dean: On a point of order, Mr. Deputy Speaker. I ask for your guidance and protection. I am trying to ask the Chancellor to explain an important element in the Bill to which he has not yet referred—namely, pension rights. I seek your guidance on when I may ask that question?
  Mr. Deputy Speaker (Mr. George Thomas): The hon. Gentleman has long experience here. He knows that he has got his intervention in. It is not a point of order.
  Mr. Healey: I do not know whether the hon. Gentleman was here when I spoke on Monday and answered two identical questions from hon. Gentlemen opposite regarding pension rights under existing schemes. Those will be maintained. My right hon. Friend will deal in detail with the application of the Bill to pensions when he winds up the debate later this evening.
  Clause 8 provides in the usual way for expenditure incurred under the Bill and other Acts as a result of the Bill to be met from Votes.
  Finally, Clause 9 contains the Short Title of the Bill.
  I come now to the amendment tabled by the Conservative Opposition. I must confess I am a little uncertain about its status and purpose. The right hon. Lady the Leader of the Opposition told us on Monday that the Opposition would reserve judgment on the package. She said:
  "We shall ask the country in a year or two what it thinks of it when the country knows how it works in detail."—[Official Report, 21st July 1975; Vol. 896, c. 89.]
  The right hon. and learned Member for Surrey, East seemed to take a different view. He told us yesterday that his party would not vote for the White Paper, for reasons which had nothing to do with the Bill before us today but because of the Government's commitment to Socialism and because he disagreed with the Government's policy on public spending and with the Government's policy for the recovery of the private sector. On the other hand, he said that the Conservative Party will give my right
  586
  hon. Friend the Prime Minister its positive and united support when the time comes for him to stand firm on the commitments in the White Paper
  "because the survival of democratic government in this country depends on the willingness of the House of Commons to give just that kind of support to its elected Government".—[Official Report, 22nd July 1975; Vol. 896, c. 318.]
  I fully agree with him, but is that what the amendment that he signed means?
  The right hon. Member for Lowestoft (Mr. Prior) went, if anything, rather further. He undertook:
  "we shall still support the Government when the fight against inflation and even the future of parliamentary democracy hangs in the balance."—[Official Report, 22nd July 1975; Vol. 896, c. 442.]
  He also paid a well-merited compliment to the immense contribution made by the TUC. I wish it had not been left to the very last speech from the Opposition in the debate before that view was expressed.
  Yet having refused to support the White Paper on grounds which have little to do with today's Bill, and having conspicuously refused to oppose it, the right hon. Lady has tabled an amendment which declines to give a Second Reading to a Bill whose only purpose is to make possible a voluntary policy on incomes, which she has undertaken to support. I cannot help feeling a little confused as to what all this manoeuvring means and how it fits in with recent statements from the Opposition Front Bench.
  Mr. Peter Walker: It may be that the confusion was caused by the right hon. Gentleman's references to the voluntary policy outlined in the White Paper.
  Mr. Healey: I take the right hon. Gentleman's point. This is a voluntary policy, and there is a distinction in the case of a policy for pay whose details have been voluntarily accepted by the TUC, whose broad thrust has been voluntarily accepted by the CBI and which is supported by certain rules laid down in this House to make it impossible for employers to breach the rules that have been voluntarily accepted. Hon. Members have every encouragement from me to laugh, but this type of verbal nitpicking will make a very different impression on the millions of men and women

  587
  in this country, like the right hon. Member for Worcester who see the current policy as the only hope of saving the country from inflation. I think I can rely on him at least to treat this matter with the seriousness it deserves.
  The right hon. and learned Member for Surrey, East seemed to indicate yesterday, that the Conservative Opposition would not vote for their amendment if the Government were able to allay the anxieties they expressed. So may I now deal with the four points raised in the right hon. Lady's amendment.
  First, the amendment complains that the Bill provides for existing contractual rates to be overridden by a White Paper which is not open to parliamentary amendment. I think the House will recognise that it would make complete nonsense of a policy for limiting pay settlements to 10 per cent. or£6 if employers were compelled by contractual agreements to pay more. Both the CBI and the TUC fully accept the need for this element in the Bill. I cannot imagine that the Opposition, who claim that they want to support the Government's efforts to limit incomes, will reject this element in the Bill.
  It is true that the White Paper is not open to parliamentary amendment—although it was approved as it stands by an overwhelming majority of Parliament last night and was not opposed by the Conservative Opposition. In this respect there is no difference between the procedure followed by the present Government and that followed by their predecessor in the Counter-Inflation Act 1973. On that occasion both the Pay and Price Codes were put into effect by means of parliamentary orders following discussion with both sides of industry. That was a sensible, flexible and necessary arrangement then, and it still is now. I do not see how the Opposition can pretend otherwise without renouncing their whole record when they were in office. There is no substance in the first anxiety.
  The second complaint in the Opposition's amendment is that pay limits are to be interpreted by the Secretary of State instead of by the courts. But if the Opposition are seriously concerned with the rights of Parliament this is certainly a better procedure than that which they followed in their legislation
  588
  when the interpreters of the codes were the Chairmen of the Pay Board and Price Commission, men who had never been submitted to the discipline of election and who had no responsibility to Parliament.
  Of course there may be questions arising under the present Bill where it will be open to the parties involved to refer to the courts as there was under the legislation of the previous Government, but the policy is the responsibility of the Government now, as it was then, and it is surely right and sensible that a Minister rather than a judge should take responsibility for explaining it. Is is also far better that the House should be able, as under the present Bill, to question the Minister responsible in a way which was quite impossible when the previous Government transferred the comparable responsibility to the Chairman of the Pay Board. There is nothing in the second anxiety either.
  The third anxiety expressed in the Opposition's amendment refers to additional sanctions, by which I suppose is meant the powers in reserve. But this is a Bill the whole purpose of which is to avoid the need for compulsory wage control. The question of what will happen if it proves inadequate will, of course, be for the House to discuss if ever the occasion arises, and I think all of us are determined to do our utmost to see that the occasion does not arise. The right hon. Member for Sidcup made very clear yesterday, and I agree with him, that no one would want a statutory incomes policy if it was possible to avoid it.
  Perhaps it might serve to allay genuine anxieties of both sides of the House if I make clear again—my right hon. Friend the Prime Minister did yesterday—that if it ever proved necessary to introduce the Reserve Powers Bill it would not be retrospective. There would be no question of imposing penalties on employers for having made excessive settlements before the Bill was enacted. On the other hand, once the Bill was law the Government could, if they chose, exercise the power to reduce the pay made under an earlier settlement which exceeded the limits laid down in the White Paper down to the permitted level from a date after the Bill had come into force. The employer would be liable to the fines laid down in the Reserve Powers Bill only if he

  589
  failed to obey an order to enforce the pay limit in this sense. I say again that the powers could be used only from a date after the Bill became law.
  Mr. Nigel Lawson: What about employees?
  Mr. Healey: If the hon. Gentleman will just contain himself and his natural exuberance for one second, his knowledge will almost equal his exuberance, though I doubt whether it actually could do so. There would be no question of requiring employees to pay back money they had already received under some excessive settlement made before the date of a restriction order or notice. They could not be punished for what they had before then, but the Government would be able in such cases to reduce future pay down to the level permitted by the White Paper.
  Mr. Douglas Hurd: This point came up at Question Time yesterday, but the explanation that was given was in plain contradiction to what the Chancellor told the House on Monday when he said that the reserve powers, the secret Bill, would enable the Government to take action to reduce to the White Paper level any settlements entered into after 1st August. That clearly implied an element of retrospection.
  Mr. Healey: Let the make it clear again. From 1st August the policy provided for in the White Paper begins. I hope that it will never be necessary to introduce the reserve powers, but for the sake of argument let us assume that they are introduced in October. Once they become law the Government would be able to reduce an excess pay settlement which had been negotiated and settled between 1st August and that date from the date when the Bill was given the Royal Assent. They would not be able to "roll back" the overpayment to an earlier date, nor would they be able to punish an employer for making a settlement. However, if an order or notice was served against an employer requiring him to reduce the level of payments from that date and he refused to comply with it, as under earlier legislation he would be liable to prosecution under one method or another. I hope I have made this absolutely clear. If the hon. Member reads again my actual words on Monday, he will
  590
  see that they are totally consistent with this explanation.
  In other words, a settlement is not allowed to stand after the Bill has the Royal Assent, even if it was made before that date, but there is no question of punishing the employer for making an agreement or attempting to recover money received by workers between the date of the agreement and the date of Royal Assent. It would operate from the date of the Royal Assent onwards.
  The Conservative Opposition's amendment complains that this Bill provides for an undefined increase in housing subsidies. The Opposition have every right to object to the Government's decision that local authority rents should not go up faster than the cost of living. If they do not object, I hope they will make that fact clear. However, I made clear on Monday that the cost of the assistance which will be given by the central Government to local authorities for this purpose will be£80 million for one year only. In other words, the amount is not undefined. The fourth anxiety expressed in the motion therefore falls.
  Mr. Douglas-Mann: Will my right hon. Friend assure us that the£80 million will come out of additional tax or revenue from other sources and will not be obtained by reducing expenditure on housing in other spheres, or that rents will not he held down for those who have houses at the expense of those who do not?
  Mr. Healey: I made it clear on Monday that this additional£80 million, like the additional£70 million for food subsidies, will be a net addition to public expenditure in the coming year.
  This has been a long, hot summer. I think that most hon. Members will agree with most Chancellors, of whatever party, that July is the cruellest month. Tempers can run high and party feeling is sometimes likely to get out of control. But I appeal to right hon. and hon. Members opposite to think very hard about the nation's interest before they vote for their amendment tonight. I do not believe that any of the anxieties expressed in it are justified, still less that they constitute a reason for opposing a Bill which is essential if the Government's attack on inflation is to end in victory.

  591
  I say again, as I said on Monday, that I recognise that the White Paper has its rough edges and will produce its anomalies and distortions, as any incomes policy is bound to do. But I ask the Conservatives to ponder seriously the words of the right hon. Member for Sidcup in his historic speech last night. The policy that the Government have put to the House and the nation for limiting the increase in incomes in the coming year offers the only strategy which gives the nation any chance of getting inflation down in time. As the right hon. Gentleman said, and as I said on Monday, the alternatives put forward on both sides of the House, whatever their long-term prospects might be, could not produce the necessary effect over the next 12 months.
  There is no practical alternative to the policy that the Government have put forward. The policy—here I agree with the right hon. Member for Sidcup—can function only with consent. The only point on which I disagree with the right hon. Gentleman is that there is now overwhelming evidence that the great majority of people in this country who do not belong to trade unions or take part in CBI activities are as desperately anxious as the representatives of industry that the policy should succeed. It would be a pity if at this moment, when the nation as a whole is united behind a policy which it rightly sees as the only chance of pulling our country through, the House of Commons was the only important body not to join that unity.
  5.6 p.m.
  Sir Geoffrey Howe: I beg to move, to leave out from "That" to the end of the Question and add instead thereof,
  "this House declines to give a Second Reading to a Bill which provides for existing contractual rights to be over-ridden by a White Paper which is not open to Parliamentary amendment; for the legal obligations imposed by the White Paper to be interpreted by a member of the Cabinet instead of by the Courts; which leaves to a further unpublished Bill the specification of additional sanctions referred to in the White Paper; and provides for an undefined increase in indiscriminate housing subsidies."
  I hope that we have made clear from this side of the House the extent to which we wholly and completely share the concern felt about the grave economic situation now facing the nation and about
  592
  the necessity for firm and sustained action to deal with it. Yesterday we discussed aspects of the Government's strategy which we do not endorse and those with which we agree, and I do not want to go back over that ground now. Nor do I want to diminish what I said yesterday about how, when the time comes for the Government to stand firm, they will not find us unwilling to support them. However, if the Government are to be able to do that it is important that they should be seen to do so on grounds which now and hereafter can be seen to be defensible.
  Many hon. Members on both sides of the House may be understandably concerned about the necessity of resorting to a prices and incomes policy. I am not concerned with that argument. In the present emergency we took the view last night that we should not oppose the White Paper. I am concerned for the purposes of this debate about the way in which the Government are choosing to carry out their solution, about the means they have chosen to achieve their ends. The grounds we have put forward should be of concern to right hon. and hon. Members on both sides of the House, whether they are for or against the general strategy the Government have adopted. It is on those aspects that I want to concentrate.
  Our amendment deals in its last point with one quite separate aspect, namely, the increase in housing subsidies. I do not want to spend a great deal of time on that, because if that were the only matter of which we are complaining it might lead us to a different conclusion. Nevertheless that should not be disregarded. It should be recognised that the imposition of a system of price control and, alongside that, the perpetuation of the present pattern of subsidised rents in public authority housing is likely to do grave and increasing damage to the housing situation in this country and to the whole state of our economy. We must all recognise that the intensification of price control and the possible impact it will have on profitability, which the White Paper recognises is under great pressure, is likely to do grave damage if it is continued or tightened further.
  Housing subsidies operate in an area where price fixing is leading to fewer houses being available to those who need

  593
  a house, which leads to a decline in the quality of the nation's housing stock and the expansion of what I called, many years ago, "The waiting list society". These arguments are being recognised by the Secretary of State for the Environment. He has been demonstrating in recent speeches that the continued expansion of open-ended housing subsidies cannot and should not be allowed. The Chancellor himself accepted this fact in his April Budget. He made some reductions in housing subsidies for the next financial year. Now, apparently, that approach is to be abandoned and£80 million extra of subsidies is to be made available.
  It is that which causes us concern. To intervene in that way for a short period to affect prices indiscriminately in the housing market will make it still more difficult to resume the path towards sanity which the Government looked like treading. The Secretary of State for the Environment said in May that
  "it would be essential for them"—
  that is, local authorities—
  "to raise rents substantially so that they make a larger contribution to costs than will obtain this year."—[Official Report, 5th May 1975, Vol. 891, c. 309.]
  In June he said that unless that happened
  "we are likely to reach a situation in which the taxpayer and ratepayer combined will simply say 'We cannot go on indefinitely footing the bill'."—[Official Report, 11th June 1975; Vol. 893, c. 398.]
  The Government therefore know that substantial rent increases are inevitable, and we are concerned at their regression from that conclusion and the fact that even in the present situation it is wrong to increase the follies which now abound in our housing market. The decision now to limit rent increases to 60p on average will lead to the necessity of very much larger increases in the years thereafter. The fact that these provisions are contained in the Bill, with no limit on the amount of money to be made available, adds to our concern.
  There are other substantial aspects to our amendment. Last night we did not oppose the entire package. There are many aspects on which one could dwell by way of criticism of the strategy adopted by the Government—their commitment to a flat-rate limit which will increase differential problems next year, their predisposition to equality for its
  594
  own sake, and so on, but it is the damage done to the foundation of law upon which this strategy will rest that we are now most concerned about.
  These are the fundamental questions. In an emergency we may have to accept strange effects on the rule of law. I should not like the House to accept that lightly. We have an obligation, if the measure is passed, to see that the minimum damage is done to the rule of law.
  Under Clause 1 the Government propose to rely upon
  "the limits imposed by the policy set out"
  in the White Paper. That is an important point. Is the policy which we are being asked to approve voluntary or statutory? The Chancellor was ready to quote the remarks of my right hon. Friend the Member for Sidcup (Mr. Heath). The credibility of the Bill depends on the way in which the Government are prepared to carry it out. My right hon. Friend drew attention to the need for sanctions to support the measure. If, as appears, the measure is more than voluntary, it is important that sanctions should be imposed in a way which people can respect and accept.
  The Chancellor said that the Bill was intended to contain effective means of discouraging employers and workpeople from disregarding the limits set out. He said that the Government would not hesitate to enforce the sanctions in the Price Code. He said that the wide definition contained in Clause 7 was necessary to prevent the evasion of the limits set out and that it was necessary for the policy to be supported by rules laid down by Parliament. Those elements have the quality of a statutory policy.
  It is not verbal nit-picking to analyse the way in which the Government are to proceed. We object to the measure being proceeded with by means of a policy, set out in the White Paper, which is described in the statute as setting out the limits imposed by the policy. It is difficult to describe a measure involving the imposition of limits as having the quality of voluntarism.
  The Chancellor asked what was wrong with that approach. The last Conservative Government, he said, also embodied a prices and pay code in a White Paper.

  595
  This is was is wrong with the present proposal. Half of the White Paper, by way of annex, was drafted by the Trades Union Congress. The rest is a commentary by the Government. The Conservative method of using a White Paper was under strong and legitimate pressure from the Labour Opposition. It is true that it was debated by means of an affirmative resolution, which gave it the force of law. But it was also debated in draft. We were pressed to give an undertaking to that effect. That is why at each stage we laid the draft code before the House. It was debated by both Houses. It was the subject of public consultation, which was laid down in the provisions of the Counter-Inflation Act.
  All that was in total contradiction to the present White Paper, the necessity for which emerged 24 hours after the Prime Minister said that he would not take panic action, and which we are now invited to accept without a debate on a draft in which the Government may consider our points. We debated the matter in general terms, although there are many more points on which questions can arise and to which we wish to draw attention. The Chancellor did not meet our concern on that point. He said that we need not be concerned about any subsequent changes as they would be brought before the House by means of an affirmative resolution under the provisions of Clause 1(2).
  May we be given an assurance that if substantial changes are to be made during the forthcoming recess, they will not be proceeded with before we have had an opportunity to consider them? The Government should not lay the White Paper before the House and expect the Opposition to leave the Government free to do as they like throughout the Summer Recess without debate. That is an important point. The approach will cause further damage to the rule of law.
  I appreciate that the Secretary of State for Employment needed to search for a new formula. He could hardly be seen to re-enact the 1966 legislation. That would strain his conscience. Nor would he be welcomed if he re-enacted the proposals contained in the Conservative 1973 legislation. In the event, the Government have produced the worst solution.
  596
  There was at least a clear code in the Conservative Party's legislation. It was debated in draft and approved. A board with clear authority was established by Act of Parliament. Its operations were subject to rules. It could not make an order without giving notice to the people against whom it proposed to make an order. There was provision for representation before the board. The Secretary of State, who had oversight of the board, was also accountable to Parliament. He could be called on to answer questions about it. He could exercise powers under the 1973 Act to set aside the decisions of the board, and could be called upon to explain why he did so.
  Under the 1966 legislation different machinery was adopted with an accountable board. In that case an order was laid before the House and debated.
  We now have a curious non-statutory provision which is capable of overriding contracts, by reference to the annex which was drafted by the TUC, and about which many questions can be raised. My hon. Friend the Member for Somerset, North (Mr. Dean) raised one point. Not many of these points have yet been answered. For instance, does the policy apply so as to secure no more than£6 a week maximum to individuals, on an individual basis? That is what the annex appears to suggest. Or will it apply, as paragraphs 19 and 21 of the White Paper suggest, to settlements on a payroll basis? There is provision to surcharge employers if they make excessive pay settlements. Are they to be free to give£2 to some workers and£8 to others?
  Ministers may shake or nod their heads. These questions are being asked by employers. How will the policy apply to incremental scales? The obscure details set out in appendix 4 are not referred to in the White Paper itself. When will the policy start? Paragraph 7 of the White Paper says that it will start from the date of publication of the White Paper. On llth July the Prime Minister said that it would start on 1st August. The TUC annex says that it will start "about" 1st August. How will it apply to the consequences of arbitrations or to agreements entered into before or after the date of publication of the White Paper?
  Paragraph 8 contains many obscurities about that. One might ask endless questions, but it is not my intention to do so

  597
  tonight. I am concerned to draw attention to the way in which those matters are to be resolved. By whom are they to be resolved? They are to be resolved by the Secretary of State in his unfettered discretion. Seldom if ever can one have seen the proposition that
  "Any question arising under this section…shall be referred to and determined by the Secretary of State."
  It is a classic reproduction of the phrase attributed to Mr. Justice Megarry: "If anything shall seem, the Minister may deem". I hardly expected to see the Secretary of State for Employment exercising ministerial powers of that quality.
  There is no provision for notice to be given to any people likely to be affected, not even to a trade union which may have entered into a collective agreement which will be struck down. There is no provision for notice to be given to employers, no right of representation to the Secretary of State and no right of appeal. The Chancellor said that that procedure was all right for a matter of policy to be determined by the Secretary of State, but these will not be matters of policy. They will be detailed interpretations of questions which affect people who claim the rights established by contracts already in existence.
  The Secretary of State may remember what happened under the 1966 legislation when a union then, I think, called ASSET and now called ASTMS brought proceedings against Thorn Electrical in the Edmonton County Court in respect of its rights under a pre-existing contractual agreement. There is no guarantee that a similar action will not be brought again. It seems more than probable that those who decline to be convinced of the voluntary quality of this voluntary policy will seek to bring proceedings of that kind. What happens if Mr. Clive Jenkins or his colleagues bring proceedings in the Edmonton County Court against a company, saying "We have a pre-existing agreement, and we wish to have our rights awarded to us under that agreement"? Presumably counsel instructed by the employer or counsel instructed by the Secretary of State—
  Mr. Arthur Lewis: At£6 a week.
  Sir G. Howe: I do not take issue with the hon. Gentleman on that. Presumably counsel appearing on behalf of the
  598
  Crown in some capacity would go to the court and say "Your Honour, you cannot deal with this case. The Act says that any question arising shall be referred to and determined by the Secretary of State." The judge will be stopped in his tracks while a deputation goes to St. James's Square to confront the right hon. Gentleman and ask what is the answer.
  There is no provision for this eventuality; there is no machinery for it. If one wishes to refer a matter to the European Court of Justice—which the right hon. Gentleman loves so much—there is proper machinery laid down, but in this case the Secretary of State will issue his diktat and that will go back to the county court judge. His diktat will not be sacrosanct; it will be challengeable in the divisional court of the High Court of Justice. A legal merry-go-round of astonishing complexity will he set in motion.
  Mr. Healey: The right hon. and learned Gentleman is slightly puzzling many of us on this side of the House. He makes a strong case for a return of a fully-fledged statutory policy of the nature he described so eloquently when he was a Minister in the previous Conservative Government, but my understanding of what the right hon. Lady the Leader of the Opposition said on Monday is that she is very much against that type of policy. The right hon. and learned Gentleman supports the objectives of our policy but he criticises some of its aspects because it is not a fully-fledged statutory policy with a pay code and a pay board like those he introduced. Is he in favour of that sort of policy? If not, what policy is he in favour of? He must at some time in this important debate give us some indication of the positive views of the Conservative Front Bench on these matters.
  Sir G. Howe: I fear that the cap fits the heads of right hon. Gentlemen on the Government Front Bench. They have been mesmerised by their own verbal fantasies in seeking to present a statutory policy and describing it as voluntary.
  We have here a statute. These questions will affect the rights of working people throughout the country. If they are not considered, the effectiveness of that statutory policy will be discredited.

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  That is why we challenge the way in which the Government are setting about it. If they choose to set aside the rule of law and rule by fiat, they must do it in a clear way for the sake of those who believe in this policy as well as of those who challenge it.
  The same is true of Clause 3. We never expected to see these words attributed to the Secretary of State for Employment:
  "The changes made in the price code at a time when section 1 of this Act is in force may include such changes as appear to the Secretary of State as appropriate to provide a sanction against the payment of remuneration in excess of the limits mentioned".
  What in the name of heaven would the right hon. Gentleman have said if such a clause had been contained in the European Communities Bill?
  There is no mention of what the sanction might be. I suppose that it can only be a sanction on the employer, but even that is not clear. So far as I can tell, the right hon. Gentleman could require someone to be hanged at Tyburn Cross under that provision. That is an example of the imprecision with which the Government have acted in introducing this policy which they are seeking to veil from the eyes of the people it will affect.
  Even that which I have said so far does not come to the heart of the matter. The heart of the matter is apparent when we come to the undisclosed Bill referred to explicitly in paragraph 26 of the White Paper. There we are told:
  "Legislation has therefore been prepared which, if applied in particular cases, would make it illegal for the employer to exceed the pay limit. The Government will ask Parliament to approve this legislation forthwith if the pay limit is endangered".
  That is the Bill which the Secretary of State for Employment rightly described last night as the "secret powers" Bill. The legislation has been prepared. How, then, can the Government justify not disclosing it to us? How can they argue that it is still being drafted? If they are to call upon Parliament to enact that legislation, if necessary forthwith, how can we be expected to do so if we have not seen it? Is the House to be recalled at 48 hours' notice during the recess to enact this "secret powers" legislation? At the least, we are entitled to see it.
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  What does it contain? Is it or is it not retrospective?
  The Chancellor sought to deal with some aspects of that in his speech this afternoon, but on Monday he said that the Bill would enable the Government to reduce to the White Paper level any settlement made after 1st August 1975. In answer to a question from the Leader of the Liberal Party he said that it would enable the Government to require individual employers to "roll back" pay increases. The Chancellor told us this afternoon that it will be operated only in such a way as to take effect on pay due in the future, after the Bill has been passed—but pay due under agreements entered into between now and then. It seems a little strange to describe the Bill as not having restrospective effect.
  People will be entering into collective bargains which, unwittingly or wittingly, may contain provision for the payment of wages which exceed the limit, as that limit will be defined by the Secretary of State at some future date, with all the imprecision attached to that. People will enter into bargains and will commence work upon the promise that they will receive agreed wages. To say that that is not retrospective and that the Government are to take powers to invalidate those agreements entered into between now and the enactment of the Bill is once again, if I may borrow a phrase, legal nit-picking of an extraordinarily unconvincing kind. It is retrospective, and that is implicit in the Chancellor's statement. We know not what other sanctions may be contained in the Bill. We know not whether there will be sanctions which apply to trade unions even if not to employees.
  My right hon. Friend the Member for Sidcup yesterday said that the Government's failure to produce the "secret powers" Bill was making it difficult for those who wished to support that policy. It is a matter of great importance and of equal significance to those who believe in the statutory policy which the Government are introducing as it is to those who do not believe in a statutory policy. Those who do not believe in that policy, where-ever they sit in the House, regard this covert way of dressing a statutory wolf in unconvincing voluntary sheep's clothing as intolerable. That is no way of going about it. Those who believe in the policy must regard it as equally unacceptable.

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  I draw the attention of the Chancellor to a witness whose name he has called in aid several times today, the CBI. The Chancellor says how terrible it will be if the House of Commons fails to endorse everything the Government are doing, their method as well as their objective, when everyone outside the House, including the TUC and the CBI, is overwhelmingly enthusiastic in the way in which they support the Government policy.
  Let me remind the Chancellor of the statement issued today by the CBI. I think it is accepted that the CBI accurately reflects
  "the widespread feeling throughout the country that the destructive evil of inflation has to be defeated even at the cost of considerable personal sacrifice."
  We are all of us making sacrifices to achieve that end. We would not shrink from doing so. We are prepared to do so even though the cost might be high. We are prepared to have regard to the rule of law.
  I return to the CBI statement, which reads:
  "However, the Government will not achieve its objective unless it makes it quite clear that it is prepared to stand up and defend its policy. The parliamentary debate on the White Paper casts severe doubts on the Government's strength of will and thus on the workability of its programme."
  The statement specifically states that
  "the Government has refused to publish the draft reserve powers which would make the pay limit statutory should this prove necessary."
  That is precisely the point that was made yesterday by my right hon. Friend the Member for Sidcup. How are the Government to carry credibility in support of their policy? And how are we to be able to make a judgment when they are unwilling to make these matters clear?
  Why are the Government unwilling to make the secret powers Bill available to the House? Is it because of the understandably contorted but still respectable conscience of the Secretary of State for Employment? If so, so be it. In those circumstances it would not be too high a price for the Government to pay if the right hon. Gentleman were to return to the leadership of those who take a different view. It seems that we have a Government who are concerned more with the unity of their own party than with anything else. The Government
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  should be putting first the interests of the nation. That is why I shall be asking the House to vote for our amendment.
  The Secretary of State for Employment (Mr. Michael Foot): The right hon. and learned Gentleman has given us the advantage of his legal opinions on these matters, and I shall try to answer later what he has said, but will he tell us what the legal position would be if the Bill were defeated tonight? What would be the position if the policy contained in the White Paper could not be carried out? What would be the legal position if the right hon. and learned Gentleman's vote were effective and the Bill were defeated? Is it not the case that it would then not be possible to apply effectively the voluntary policy of a£6 limit?
  Sir G. Howe: I was just about to come to those questions. I am grateful for the Secretary of State's assurance that he will be answering some of the many questions that will be raised in this debate. The House will remember that the right hon. Gentleman did not do so last night. I note the fact that it is his opinion that the voluntary policy cannot succeed without the enactment of the Bill. How that policy then fails to be a statutory policy I do not know.
  I turn to the way in which we invite the House to approach the amendment. We ask the House to vote for it tonight on the basis that we welcome, as we have made clear, the Government's decision to attack inflation. We are not disposed to deny them the means of achieving that.
  Mr. Healey: Oh!
  Sir G. Howe: The right hon. Gentleman must try to take these matters seriously. Let him hearken for a change. By no means would we choose to act in this way, but at this stage—this is the substance of our amendment—we decline to approve these means because they do unnecessary damage to the rule of law. Secondly, there is the Government's failure to produce the secret powers Bill. We consider that those matters represent an affront to Parliament and the nation. Thirdly, we believe that there must be grave doubts as to the will and determination of the Government for the reasons given by the CBI.

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  If the amendment is carried, as we ask the House to do, we shall look to the Government to introduce the fresh Bill which the Secretary of State says is necessary to give statutory force to his voluntary policy. We shall ask for that Bill to be a complete Bill. If we do not succeed in carrying the amendment, I must tell the House that we shall not this evening challenge the Bill's formal Second Reading, which would follow the defeat of our amendment. However—I ask the Chancellor and his right hon. and hon. Friends to take this seriously—throughout the lengthy proceedings in Committee which would necessarily follow if the Bill were to receive a Second Reading, we would press the Government to improve the Bill along the lines I have indicated. It will necessarily be a lengthy period in Committee. We shall ask the Government to eliminate the Bill's worst features. Further, we shall look to the Government for the publication of the secret powers Bill before we come to Third Reading of the Bill now before us.
  If by the time we come to Third Reading the House has not been satisfied on both the matters that I have raised, the whole House will seriously have to consider whether the Government have given sufficient evidence of their will and determination, and their acknowledgment of constitutional proprieties, to be entitled to ask the House for a Third Reading.
  I conclude by reading the last three sentences of the CBI statement:
  "Unless the Government is prepared to shoulder its own responsibilities we must warn it that it is placing on industry an intolerable burden and putting the whole policy in jeopardy. If it fails, inflation and unemployment will rise still further and a major opportunity for united action to solve this country's economic problems will have been squandered. It is still not too late for the Government to change its mind."
  Mr. Healey: The right hon. and learned Gentleman has made an important statement, and I wonder whether I am right in interpreting it, in answer to the questions that I put earlier. It seems that the Opposition are only prepared to support an incomes policy along the lines that the Government have laid down provided that it is fully statutory and similar to earlier legislation in that it contains a pay board, a pay code and compulsory
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  powers affecting not only the employer but working people. I listened carefully to the right hon. and learned Gentleman and it seemed that that was the clear implication of his remarks. He has made an important statement but it fits rather oddly with the speech made by the right hon. Lady the Member for Finchley (Mrs. Thatcher) on Monday.
  Sir G. Howe: I appreciate the extent to which the Chancellor is embarrassed by the curious situation in which the Government find themselves. The embarrassment is essentially that of the Government. They have come before the House seeking the enactment of a statute to give force and effectiveness to their policy for incomes and prices. I shall not pursue the semantic argument, but it seems that there is a Bill before the House which apparently requires statutory form if the policy is to be effective. Once the Government have put themselves in that position, it is surely right, necessary and proper for the House to satisfy itself about the coherence and legitimacy of the statutory powers.
  The Chancellor asks whether we are asking for a pay board and a further range of sanctions. We are saying that a system which is to depend upon the unfettered solitary diktat of the Secretary of State for Employment, sitting alone in St. James's Square, cannot be regarded as satisfactory from any point of view. It is not an element which a Government should include in their statutory incomes policy. We also see a system which is to depend upon shrouded and veiled secret powers. That does not help the House. It is a policy which cannot be regarded as one that the House should lightly be invited to accept.
  5.40 p.m.
  Mr. Les Huckfield: It has been an intriguing three days for most of us who have sat and watched the tactics on the Opposition benches. We have now heard the fifth Front Bench speech on behalf of the Conservative Party—and I have heard them all. I have not yet heard any Conservative put forward any positive alternative which the Conservative Party feels that it would like to put into practice at the present time. When there are on the same side of the House the right hon. Member for Worcester (Mr. Walker) and the hon. Member for Oswestry (Mr. Biffen), I can see

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  that the Conservative Party faces its difficulties. In matters of economic theory those two Conservatives are poles apart.
  The right hon. and learned Member for Surrey, East (Sir G. Howe) did his party no credit at all. He fulminated passionately the other day, with his hon. Friends agreeing, that this was a crisis situation and that something had to be done. He emphasised that inflation was tearing the country apart and bringing the country to its knees. But what happened in respect of the proposals which were put before the House last night? Although allegedly it felt so strongly and passionately about them, the Conservative Party neither voted for those proposals nor voted against them. It seems to me that there is to be a repeat performance tonight. The right hon. and learned Gentleman apparently still feels passionately about these matters, but he refuses to give any support to the policy put forward by the Government. By the same token he is not putting forward any alternative policy.
  The Conservative Party has been criticised in The Times, in this House and throughout the country. On the subject of information—and I recognise the difficulties of the hon. Member for Blaby (Mr. Lawson)—and where the Conservative Party stands on the necessity to provide information, we should by now have had more signs of positive economic thinking.
  For many of us this is a difficult Bill to support. Many of us recognise that my right hon. Friends the Secretary of State for the Environment and the Secretary of State for Prices and Consumer Protection would be given some broad and wide-ranging powers in the Bill. Even if it is a voluntary policy, the Bill seems to go a pretty long way down a statutory path. Cash limits on the nationalised industries which will automatically determine the level of wages, sanctions on local authorities which pay more than a certain amount to their employees and rigid sanctions through the Price Code and in the private sector seem to me to go a substantial way down a statutory road.
  I recognise some of the difficulties and doubts expressed last night by my right hon. Friend the Secretary of State for Employment. I share his doubts, but I am prepared broadly to give this policy my assent. Indeed, I am prepared to
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  give the Bill my consent provided that it remains on the basis of voluntary powers and works on a voluntary basis.
  I recognise that for those of us on the Labour benches who consider ourselves to be on the Left of our party our reaction to the Bill represents the acid test of our whole credibility. I believe that if we want to challenge the Bill, it is up to us to put forward realistic alternatives.
  I recognise the sincerity with which my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) spoke the other day. I admire my hon. Friend and often follow him into the Division Lobby. I am sorry to say that I was not able to do so last night, and I cannot follow him down the road of the alternatives which he advanced in his speech on Monday.
  Having listened to my hon. Friend and having read the letter which was contributed by some of my hon. Friends below the Gangway to The Times yesterday morning, I could not help feeling that the most worrying feature of that letter and the so-called economic alternatives was that in regard to the present crisis most of those alternatives not only are irrelevant but would make the situation worse. The impression given by the letter in The Times is that it would appear that the sterling crisis is almost an optional extra. The letter gives the impression that a 30 per cent. rate of inflation is almost an afterthought. Therefore, I do not believe that the alternatives offered by some of my hon. Friends in the Tribune Group are relevant to the immediate problems which face our economy.
  We cannot get away from the fact that Britain happens to be a bank. We cannot change that situation overnight. People have to go on putting money into that bank and lending money to this country if we are to be able to carry out some of the public spending projects to which our party is committed. Some of my hon. Friends talk of liquefying or nationalising the overseas portfolio. That surely would inspire about the same amount of confidence in investors in a bank as would a process of hawking the Crown Jewels down Petticoat Lane on a Sunday morning. It is a desperate act and it does not inspire confidence in our currency or in the economic management of this country.
  When some of my hon. Friends speak about indexation of overseas sterling

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  holdings, do they realise the full extent of the cost of that policy in exchange guarantees and indexation? Even if they are prepared to mortgage some of our North Sea oil, which is a precious asset, I am not prepared to do so. [AN HON. MEMBER: "It is already mortgaged."] If we are to have a proper degree of economic control over our national resources, and to bring about an economic recovery in this country we must maintain the fullest possible control over the extraction and utilisation of our North Sea oil resources.
  My hon. Friends also talk about import controls. I would remind them that I represent the car manufacturing industry and also textiles and hosiery concerns. I appreciate that import controls have a part to play in a longer-term strategy. In the present situation import controls would not only encourage inflation, but would create and encourage more inflation. A policy of import substitution is always inflationary.
  Mr. Ron Thomas: I shall not debate with my hon. Friend policies aimed at protecting sterling, but I wish to ask my hon. Friend a straightforward question. If the foreign bankers and oil States—entities which my hon. Friend wants to appease and to persuade to keep their money in London—insist one way or another on a statutory policy, with the threat that otherwise they will remove their money from London, where will my hon. Friend stand then?
  Mr. Huckfield: I am sorry, but my hon. Friend does not seem to understand the workings of the international money market. It involves people being confident enough to keep their money in this country and to continue to invest it here. If they see a Government who are prepared to take determined action, as I believe the present Government are, I believe that we shall see a recovery of the pound and that our economic growth will return to the path from which it seems to have strayed.
  If my hon. Friends below the Gangway believe that short-term depositors and overseas long-term investors in this country treat our currency and our economy lightly, they should listen to some of the American analysts who advise American corporations whether
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  to stay in the United Kingdom. These are decisions which they are now taking in respect of their investments in plant, assets and securities in this country. We must face the situation, and it is a situation which the White Paper and the Bill were designed to answer.
  The long-term ambitions for a restructuring of the British economy expressed by my hon. Friends below the Gangway are correct, and I wholeheartedly agree with them. I am convinced that if the private sector will not make the investment, the public sector will have to do so and that if private corporations will not provide us with the manufacturing capacity that we need, the National Enterprise Board will.
  I agree with my hon. Friends that this Bill is only a short-term palliative. I believe that we must have some long-term remedies as well, and I shall with all my vigour be pressing my right hon. Friends on the Front Bench to carry out some of the longer-term reforms that my hon. Friends have put forward. I am sorry, Mr. Deputy Speaker, to see that my hon. Friend the Member for Walton has to leave the Chamber on hearing what I say.
  I should not like the House to get the impression that I wholeheartedly and unreservedly support the White Paper which we debated yesterday, although I voted for it, and I should not like the House to have the impression that I wholeheartedly and unreservedly support the Bill, which gives my right hon. Friends some quite far-reaching powers.
  I have some doubts, for example, concerning price increases. What will happen when, time and time again, my right hon. Friend the Secretary of State for Prices and Consumer Protection, despite all her valiant efforts, has to tell the House that a more than 10 per cent. increase is justified because it is a cost increase which has been in the pipeline? We shall have a lot of these situations. Despite the fact that the Government's policy may in the future be operable, we shall still have a lot of larger-than-average wage settlements and commodity price increases which were in the pipeline. But simply to enable my right hon. Friend the Secretary of State for Prices and Consumer Protection to do those things which may appear to her to be

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  necessary does not, in my opinion, go far enough.
  I want to know why we cannot have a price stabilisation scheme along the lines of the one developed by the French, whereby we could fix the price of at least 30 key commodities. I have put down a new clause—which I hope that you, Mr. Deputy Speaker, or Mr. Speaker, will call—which asks the Secretary of State to do just that.
  I cannot understand why there cannot be at least a six-monthly gap between price increases. I cannot understand why we do not use all the local monitoring centres which we presently use to gather the information for the compilation of the retail prices index and all the monitoring bodies up and down the country, not only to monitor prices in shops but to report to the Government on prices in shops. All these things seem to me to be necessary if we are to have a realistic policy in regard to the prices side of the package.
  Although this is called a Remuneration, Charges and Grants Bill, to me it is still a Prices and Incomes Bill. We talk about the cut-off limit of£8,500 a year. I do not know of any shop steward or any convener who cannot give me at least a dozen ways of getting round that cut-off limit, whether it be by means of expenses, cars or cheap mortgages. I should like to hear a little more from my right hon. Friends on the Front Bench as to how on earth they intend to enforce a limit of£8,500 a year and no more. I cannot see how the policy can be policed.
  I recognise that this is a policy which has been discussed on a basis of voluntarism and consent with the trade union movement. It would be fair to say that the trade union movement has initiated a great deal of this policy, and that is to its credit. These were not the kinds of discussions that we had in 1966 or in 1973. It was a proud day for the Labour movement when, at the last two elections, the trade union movement and the Labour Party stood four square on the same policy. I am very glad that the trade union movement was brought into the discussions and took a very leading part in the formulation and compilation of the White Paper—
  Mr. Sydney Bidwell rose—
  Mr. Huckfield: I recognise the sincerity of my hon. Friend the Member for Ealing, Southall (Mr. Bidwell) and do not doubt his sincerity at all, but this policy has been endorsed by the TUC and by a gradual succession of trade union executives and conferences. It is because it was born of the TUC and the Government, on the basis of voluntary discussion, that I am prepared to give it my support.
  Mr. Bidwell: There was a famous figure in history who once said that there was no such thing as a "sincere-ometer" and that people can be judged only by their deeds. Of course we respect each other's decision, and the sincerity of my hon. Friend the Member for Nuneaton (Mr. Huckfield) is accepted. That is assumed in Parliament. But I should like my hon. Friend to deal further with the supposition that the Government have picked on only part of the TUC proposals. He talks as if the rest of it is a throw-away thing, including the ideas of the Tribune Group, which synchromesh to a great extent, and that they are not longer-term propositions that the TUC is putting forward. This will be very urgently shown in the coming months.
  Mr. Huckfield: I hope that my hon. Friend has listened carefully to all I have said, because I have fully admitted that this policy is only a short-term palliative. If we are to have an economic recovery and an increase in investment in manufacturing capacity, we shall need a lot more than this Bill. That is why I support some of the alternatives put forward by my hon. Friends. The only alternative which I suspect would be advanced by the hon. Member for Oswestry (Mr. Biffen), and by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) if he were here, is that of massive public spending cuts.
  Mr. Lawson: They are coming.
  Mr. Huckfield: It has been freely admitted that over the past year we have had no real growth at all in the National Health Service and that we shall have to have very severe restraints indeed imposed on public transport, education

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  and a lot more of our social services. We can all give constituency examples of this.
  I want to say for my constituents and for the Labour movement that I believe that the alternative that the Conservative Party would like to see is totally unacceptable to us. I have heard the sorrowful stories of school leavers in my constituency who are trying to find jobs and who have had to sign on for unemployment benefit. One has only to hear these stories to realise some of the difficulties that would be caused in human terms on a much greater scale if the Conservative Party had its way.
  I recognise that this is a fairly far-reaching Bill in regard to the powers it gives to some of my right hon. Friends. I recognise that it goes quite a long way down a statutory road, although I agree that it is based on a policy of consent and voluntarism. But because it is to me the only realistic alternative, and because it has been born of the trade union movement, I shall give it my support tonight.
  5.59 p.m.
  Mr. John Pardoe: It is a great pleasure to follow the hon. Member for Nuneaton (Mr. Huckfield). He has realised—no doubt it has been something of an agonising struggle for him, holding the political views that he does, which we respect—that the condition of this country and the condition of the world today necessitates an introduction of these measures.
  The Government claim that the Bill that we are debating today is consequential on the White Paper which we have debated for the past two days. The Prime Minister, in his speech yesterday, implied that the one was so consequential upon the other that no one could vote differently on each of them. I think that the Prime Minister was wrong.
  Yesterday, together with my right hon. and hon. Friends, I supported the Government in both votes because we believed they had at last taken the first tentative steps down the road that we had been asking them to take.
  The distinction between the White Paper and today's Bill is the distinction between ends and means. The White Paper stated the Government's aim and general purpose in regard to inflation.
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  That aim and purpose ought to be a national aim and purpose, and it ought to have national support, as the right hon. Member for Sidcup (Mr. Heath) said yesterday. My right hon. and hon. Friends did what we could last night to ensure that it got that national support.
  Today's Bill is the Government's means of achieving their aim and purpose, and, as such, it falls woefully short of what is required. The Prime Minister and an influential part of the Cabinet, among whom I imagine the Secretary of State for Employment resides, still do not seem to realise the danger confronting our country. I absolve the Chancellor of the Exchequer of that charge. I believe that he does now—and I emphasise the word "now" because he did not until a few weeks or months ago. He now understands what he so lamentably failed to grasp in March last year, again in July and again in the October General Election. I shall resist the temptation to say "I told you so", because there is no credit in being right about such matters as the rate of inflation or the necessity for this economic package. Any fool these past 10 years who has forecast consistently the future of the British economy on the basis of choosing the worst possible result has had a far better than evens chance of being proved right.
  Five weeks ago, on 20th June, the Prime Minister announced in a speech that the Government would come forward with proposals to deal with the inflationary crisis within six weeks. The day after, on 21st June, the Chancellor of the Exchequer repeated the pledge. At the time I was visiting America to discuss our economic situation with the International Monetary Fund and American hankers and members of the United States Treasury staff. On the very day that the Prime Minister made that speech, I was in the international exchange department of a large New York bank, and I was given to understand in no uncertain terms that if the Prime Minister thought that he had six weeks in which to stop the rot he would think anything and that it was more likely to be six days—and that with luck.
  So it turned out. The Government had to rush out an early statement of intent, and it did the trick for sterling for a while, until the market digested the Bill to

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  which we are asked to give a Second Reading today. Then, I am afraid, the game was up. Yesterday the Bank of England had to take steps to raise the minimum lending rate because our foreign creditors, who were notably absent from the list of those whom the Chancellor of the Exchequer reeled out today as supporting this measure, were somewhat less than impressed. The Chancellor of the Exchequer knows this, even if other members of the Government do not, because the Bank of England, the Treasury and the staff of the IMF have all advised him informally, if not formally, that only a really tough compulsory prices and incomes policy will stop the pound sliding further and further below the horizon.
  But the Chancellor, knowing this, is caught in what is the age-old Catch 22 of the Labour Party, that what is economically necessary is politically impossible and that what the world wants and requires of Britain the Secretary of State for Employment cannot stomach. So, in our view, the Bill is not good enough, and it will not stop the fall in the pound. A substantial rise in interest rates may save the Government's face for a while. But before many weeks are past we shall all be back here to pass some very different measure.
  We have tried to short-circuit this idiotic waste of time with a series of amendments which to all intents and purposes rewrite the Bill. The resultant amended Bill, in our view, would be the very least that the Government could get away with if their attack on inflation is to have any credibility with our foreign creditors. We shall be able to go into these matters in much more detail in Committee tomorrow. But I hope that tonight the Government will give us some clear idea of their attitude to the broad outlines, some of which have been touched upon already by the right hon. and learned Member for Surrey, East (Sir G. Howe).
  First, the Bill itself must be far more specific on the actual pay limits and on what constitutes a breach of those limits. The Bill provides for reference to the White Paper and to the TUC annex, and, although I am aware that a similar provision was in the 1966 Prices and Incomes Act, for which I voted, and in the White Paper, that was a very much better White Paper than the one that we have now.
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  It is a bad principle to legislate in this way. The courts would be hard put to it to interpret these pay limits of the White Paper, and that is one of the reasons why they will not have anything to do with it. They will not be asked to interpret them. The Secretary of State is to be judge and jury.
  The Bill envisages revision of the pay limits by another White Paper, and that revision will become law automatically unless reversed by Parliament. Again, in our view, that is not satisfactory.
  The pay limit in the Bill is a cash supplement to remuneration. But what about benefits in kind, and how do the Government propose to overcome the problems of short-time working, overtime rates and absence due to sickness, for instance?
  What do the Government propose to do about incremental scales? I believe that in previous prices and incomes legislation and pay restraint, incremental scales for a small privileged section of our society have been a crying scandal, and the Government must be very much tougher on these than they have been so far.
  What about reductions in hours? We have already had the threat from the NUR talking about a 35-hour week, with a consequetial increase in overtime, of course. Do the Government intend to forbid a reduction in hours as a way round this legislation?
  We want to know about pension contributions. I understand that we are to hear something about them later tonight. But do the Government propose to increase employers' contributions in the£6? Will they also consider telling us something about profit-sharing schemes? Will profits shared also count towards the£6 pay limit?
  I come now to the Minister's powers. The Bill gives the Secretary of State complete freedom to decide whether pay limits have been exceeded and controls breached. In our view, that is totally unacceptable. Inevitably, there will arise the suspicion that the Secretary of State is interpreting the law in a politically convenient manner. Sometimes he will find it very inconvenient to say that a breach has occurred. It will usually be less convenient if the union concerned is

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  the NUM, and perhaps it will sometimes be more convenient if the union concerned is that of the Post Office workers or that of the agricultural workers.
  We have to remember that one of the Secretaries of State mentioned in the Bill is the Secretary of State for Employment, who in the past said:
  "A Labour Government can survive only if it sustains its links with the trade union movement".
  What we make of the independence of a judge who said before trying a case in court "This court can survive only if it sustains its links with the plaintiff"? Amazingl'y, the Secretary of State is to exercise these sweeping powers without either party having the right to be heard or consulted.
  To overcome this difficulty we propose that all questions on Clause 1 should go to a reconstituted Prices and Incomes Board for a report and a decision. Of course, the final decision will still rest with Parliament, but at least Parliament and the public will be able to form their opinion in the light of an independent report. Accordingly, we have tabled a large number of new clauses which seek to restore the Prices and Incomes Board which existed under the Labour Government's Prices and Incomes Act 1966. Many of these new clauses will be familiar to the Secretary of State. They come, suitably amended, from the 1966 Act, which in our view should never have been repealed.
  Exactly what do the Government propose to do about re-entry—the Prime Minister's graphic phrase—because Clause 2 provides for the duration of the present limits? What happens afterwards? What about the appalling problem of differentials, which we shall have to face after 1st August 1976, or whenever it is? It is vital that some body should consider the problem now, because we cannot stagger from week to week until, after the policy has undergone many changes, next July we find that no policy for the future exists. It is, therefore, essential that the Government refer this whole question of the future policy to a body such as the Prices and Incomes Board.
  Mr. Foot: I know that the hon. Gentleman has always favoured—and now he
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  has outlined—a more elaborate legal procedure for dealing with this whole matter than has ever been contemplated in this country before. He is proposing to insert that procedure into the Bill. I do not believe that this is the most appropriate way to establish such machinery. What does he think would be the response of the trade union movement if we were to adopt his advice? From all the indications I have, if the Government were to attempt such an elaborate scheme of legal machinery for dealing with this problem as that we should destroy utterly any possibility of co-operation with the trade union movement of this country
  Mr. Pardoe: I can best answer the Secretary of State, who may understand what I am getting at, by drawing a historical analogy. What, I wonder, would have been said to Henry VII, when he was challenging the power of the barons of his day, had he been told that he could not set up the splendid courts around the country which he was trying to establish in order to expand the King's justice to men of all status, because the barons simply would not recognise the courts. Would, perhaps, Henry VII have retreated like the Secretary of State and this Government? He did not—thank goodness he did not. If we need another Henry VII, or another Cromwell for that matter, so be it. I hope that democratic procedures will win through. However, if the Secretary of State is suggesting that there is a large body of people in this country called the trade unions which will not abide by the laws passed by this House, I do not quite know what the Secretary of State is doing in this House at all.
  Mr. Foot: I hope that the hon. Gentleman will not try to mislead himself—I do not think he will mislead anyone else—by making such a statement. I was not suggesting that the trade union movement would seek to disobey the laws of this country at all. I am saying that if we attempted to deal with the problem with such an elaborate legal machinery as he is suggesting—dealing with every possible device and exception that may arise under this kind of policy—we should destroy any possibility of genuine co-operation with the trade union movement. That is not a question of disobeying the law. It

  617
  is a question of whether we have a Government who try to govern by persuasion instead of by force.
  Mr. Pardoe: The Secretary of State is saying that some trade unions want the laws suitably washed, through some process of the Labour Government, in order that they can abide by them. This is the fundamental question that we face in imposing any prices and incomes policy. Therefore, if I may, because I—
  Mr. John Nott: I hesitate to intervene between the hon. Gentleman and the Secretary of State. I am glad that the hon. Gentleman takes this view. However, did he and his party take this view when the miners were challenging the laws of Parliament in February 1974?
  Mr. Pardoe: Yes, indeed; it is absolutely true that we supported the Government of the day on the principle of who rules this country. However, we did not support phase 3 of the Conservative Government's prices and incomes policy. If the hon. Gentleman will refer to the reasons given, he will find that they were two-fold First, the policy asked the House and the country to go to sea in a sieve marked "flexibility", and, secondly, it was based on the idea that commodity prices would fall. We said that they would not fall and, therefore, the thresh-hold agreements would be ruinously inflationary. On both counts we were proved right. However, we supported the Conservative Government on the basic issue of who rules the country.
  I am afraid that the country did not respond to that challenge, but I believe that the then Conservative Government chose the wrong battle. They chose a battle with the miners, which was, perhaps, the least wise battle to choose. I have always maintained, and I still do, that the miners had no right to break the law—nor does anyone else. We shall have to deal with the crunch again.
  As I have been interrupted over quite a long period, I shall omit the other points I wanted to make because there will be an opportunity to deal with them on the amendment tomorrow.
  Briefly, I want to say why it is—and I say it particularly to some Labour Members and to some hon. Members on this side of the House also—that I and my right hon. and hon. Friends have advo-
  618
  cated a statutory and compulsory incomes policy, and why we do so now. It is not because we believe that it is the only answer to inflation or that wage increases are the only cause of inflation. It is not because we are in love with such a policy for itself. Indeed, the very thought that the Government should for ever be involved in fixing every person's rate of pay is quite obscene.
  In the short term it is that if the pound goes on falling because our rate of inflation is higher than that of other countries, the situation is a vicious circle. The only way we can cut into this vicious circle is by a tough incomes policy, because nothing else will work quickly enough. That is not the most important reason but it is the short-term reason. An incomes policy is necessary at this time to cut into that cycle of the falling value of the pound and increasing domestic inflation. In our view, therefore, an incomes policy is inevitable.
  However, the inevitability of an incomes policy in the longer term is not the most important part of an anti-inflation strategy. Nor is it intended to be permanent. It is simply a manifestation of the classical remedy for monopoly. Until monopoly can be broken up—or in the rare cases where monopoly is inevitable—the prices charged by monopoly must be controlled by Government. The largest single cause of inflation today is the monopoly bargaining power of the trade unions.
  Mr. Lawson: Is the hon. Gentleman saying that the statutory incomes policy should not apply to any pay which is not monopolistically bargained by trade unions?
  Mr. Pardoe: The hon. Gentleman is opening up a complicated point. I happen to believe that the economy needs to be divided rigidly between the administered sector and the free enterprise sector, and that if people are prepared to live in the competitive sector of the economy they should not be subject to a long-term prices and incomes policy.
  However, I am linking it to a monopoly. In my view the monetarists mistake cause for effect. Inflation cannot happen if the money supply is held constant, but what are the pressures on successive Governments which force the

  619
  money supply to expand? The largest of these pressures is the monopoly bargaining power of trade unions. This power is exercised through so-called free collective bargaining, which is no more than a device by which one gang of robbers—the unions—conspire with another gang of robbers—the employers—against the interests of the people.
  In the debate over the past two days some hon. Members have said that wages are not the problem but that we have problems of investment and overmanning. It is true that nothing contributes so much to the bad investment climate that we have had in this country for a long time as the low return on that investment. Overmanning is the primary cause of that. However, the monopoly bargaining power of trade unions is at the root of overmanning. It is that monopoly power which ensures that we go on using too many people on the new machinery that we introduce with our new investment.
  I believe, therefore, that an incomes policy is absolutely inevitable to deal with monopoly power as long as that monopoly power exists. Some may say that that means that I am advocating a permanent statutory incomes policy. I believe that it will be possible in the future for this House to enact legislation for participation, industrial partnership, profit sharing and works councils which will undermine the monopoly bargaining power of the trade unions. Until that time comes, I see no alternative at all.
  Yesterday the right hon. Member for Sidcup said that this House should send a message of unity to the nation at this time. But I believe that this House is incapable of doing so, because, in spite of warnings about its own ineffectiveness in the face of pressures building up within our society, this House has failed to prepare its defences. Those defences can be built only by fundamental political reforms. Our system of Government is probably unequal to the task. The task is to ensure that in the next upturn of the business cycle, the fire of inflation next time does not engulf us all.
  6.21 p.m.
  Mr. Peter Walker: When I had the privilege of catching your eye, Mr. Deputy Speaker, in the Budget debate
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  I expressed my concern at the lack of reality in the debate. We had listened to the Chancellor of the Exchequer analyse the nation's problems and say that runaway wage inflation was creating a crisis which, unless tackled, would result—as he expressed his fear in that debate—in Britain ending up in the hands of our creditors. What surprises me about today's debate, and the debate of the previous two days, is, once again, this lack of reality.
  It was expressed by the Secretary of State for Employment when he told the House last night about his talks with the TUC and how well they were going, and said that they were preparing a framework for the future development of the social contract. He said "I was rather worried when the Chancellor suddenly came along to me, and it could have resulted in some bad effects, but fortunately they have all agreed to the new voluntary policy." But it was not the Chancellor coming along to the Secretary of State for Employment. It was the creditors of this country who had gone along to the Chancellor.
  We all know the reality. It might have been bad taste on the part of our creditors, but when the Prime Minister attended the Royal Show he was suddenly informed, after making a speech saying how calm and collected the Government were, that he had to fly back to London where talks would take place because there was a great flight from the£ sterling. This was predictable. Since the Budget the Government have pursued a policy knowing that runaway wage inflation was ruining this country and massively damaging our future prospects, but they were unwilling to take any action about it until the creditors made them take that action. That is the whole background of the situation.
  Last night the Secretary of State for Employment defended his position and made his remarkable case. He said that this was still a voluntary policy, but the fact is that from 1st August onwards free wage negotiations cease in this country. The right hon. Gentleman shakes his head. If free wage negotiations do not cease, this Bill and the White Paper are useless documents. The whole debate of the last three days has been on the basis that the Government have created a

  621
  situation in which free wage negotiations end on 1st August.
  I remember the debates I used to have with the right hon. Gentleman when we had a statutory policy far fairer than his statutory policy, and the manner in which he endeavoured to encourage those who wished to break that policy during that period when we were offering to the miners, under phase 3, a rather bigger increase than they will obtain under his policy in the coming year. When one recalls that and sees the right hon. Gentleman's name on this Bill to end free wage negotiations on 1st August, one asks why he does not resign. However, I think that the right hon. Gentleman is right in not resigning. Sometimes in politics it needs more courage not to resign than to resign. I think that he would have enjoyed resigning on this matter. The speech he would have made from the Government side of the House would have been well delivered, with immense enthusiasm, and it would have been a great parliamentary occasion. I think he decided not to resign because he genuinely feels, reluctantly, that the policy he is entering into might, at the end of a year, be cast away, and he can then return to the kind of concept that in the past he has believed possible.
  However, the matter on which I believe he should resign in the coming months is the ever-increasing unemployment that his policy to do nothing about massive wage increases will create. As each month's figures come in I hope that the right hon. Gentleman will weigh up carefully the policy he has pursued so enthusiastically for the past year and realise that that has been the main cause of that increase in unemployment taking place.
  The other lack of reality in the debate is the lack of a sense of how grave is the national economic crisis. Earlier today the Chancellor said that he thought the speech of my right hon. Friend the Member for Sidcup (Mr. Heath) was an historic speech. The main gist of my right hon. Friend's remarks was that the nation should be told just how bad the economic situation is. I do not believe that the nation has been told these facts by the Government Front Bench. The Government endeavoured to create an opinion when they suddenly recognised that there was a bad problem of inflation, and they
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  said "We shall now take these measures for a year".
  The Prime Minister said to the miners "All we ask of you is to sacrifice one year." That sacrifice will continue for much more than a year, because what has happened in the 16 months the Labour Party has been in power is that the people have been paid an extra 40 per cent. but have produced 4 per cent, less. That is the gist of the problem that faces the country now. Under the policy pursued by the Government after the General Election, of deliberately having free wage negotiations with no Government intervention, we have had a period in which the nation, already suffering from severe inflation problems due to raw material prices, and suffering from immense problems due to the oil deficit, has decided to pay itself 40 per cent. more but to earn 4 per cent. less. That is the basis of the problem facing us.
  The situation is far worse now. In opening the debate on Monday, the Prime Minister once again, as always, made great play of our excellent export performance. In almost every speech Ministers say how magnificent is the improvement that has taken place in our balance of trade and balance of payments, but what they should be doing is telling the country how serious our export position is. The reality is this. Taking, for example, the last quarter for which our export figures are available, one finds that the volume of our export trade for that quarter is 8 per cent. lower than it was in the third quarter of last year, and 4 per cent. lower than it was in the quarter in which we were suffering from the three-day working week. Therefore, the volume of our exports is not increasing; it is going down. All of the latest business surveys show that in the more recent months the number of export orders obtained has become fewer and our firms have been finding things very difficult.
  What of the next 12 months? The Government are predicting that over the next 12 months we shall have a very severe rate of inflation in this country, far higher than that of all our major competitors. When the Prime Minister tries, as he frequently does, to say that at least on exports we are obtaining more than our share of trade—he says "After all, we have had a world recession and

  623
  here are Britain's exports rising"—we should look at what is happening to our major competitors. Comparing the first quarter of this year with the last quarter of last year one finds that the volume of Britain's exports dropped by 8 per cent. The volume of the exports of Germany rose by 5 per cent., that of France by 8 per cent., of Japan by 8 per cent. and of the United States by 10 per cent. It is a remarkable world recession when every major exporting country is expanding its volume of exports.
  Already we are beginning to hit the position where our exports are dropping. Therefore, there is no future joy in the next few months as regards exports. The only joy is that the price of our exports has risen due to the speed of inflation.
  There has certainly been an improvement in relation to imports. There was a 26 per cent. reduction in raw material prices a month ago, according to the Financial Times Index, as compared with the same period last year. It is a remarkable coincidence that during a year in which we have had a 26 per cent reduction in raw material prices we have also had inflation at 26 per cent.—such is the skill of the economic management of the country by right hon. Members of the Government.
  Mr. Foot: The right hon. Gentleman is recalling a bit of the past, delving into history a little. Could he tell the House what was the trade balance of this country at the time when he made his speech about the problems of success?
  Mr. Walker: Certainly I can. I will now tell the the right hon. Gentleman where the difference lies. Throughout the period of which I was speaking we were increasing our imports of raw materials and machinery and we were massively increasing our exports as well.
  Let us turn to what has happened and I will give the reason for the transformation. Once again the Government are showing that they do not want to face the reality of the situation. If we take the position on imports the situation is that, during the last nine months, the great improvement in our balance of payments that has taken place has been because there has been a reduction in our imports of raw materials and fuel
  624
  of£631 million while at the same time we have had an increase in imports of finished manufactured goods of£151 million.
  As to the future, in the last month there has been a substantial rise in raw material prices; and if we have that uplift in world trade at the end of this year that is predicted by the Government the British economy will be unable to take advantage of that uplift because of the non-competitiveness of its exports, and it will have run down its stocks of raw materials to an all-time low, and will have to buy in those raw materials at much increased prices. So that the economic situation in terms of the balance of payments, which the Government constantly endeavour to pretend is a great blessing and a good feature of what has happened, is such that in the coming months, as a result of a 40 per cent. increase in wages with a 4 per cent. drop in production, we are going to see the punishment.
  This particular form of statutory policy which the Government are to introduce will mean that on 1st August free wage negotiations will disappear. That is to be done primarily by means of certain threats and by a piece of legislation which we are unable to see. It was quite remarkable that the right hon. Gentleman the Secretary of State for Employment should have said last night that nothing could be more offensive to constitutional practice than that the Government should introduce such a Bill and brandish it in the face of the House of Commons and the country. What the Government have done, without introducing a Bill, is to brandish it in the face of the House of Commons, the country and the trade unions. And what of this relationship with the trade unions when we can have the vital reserve power which appears in the White Paper and which is a very fundamental part of Government strategy when a draft of the Bill cannot even be discussed with the trade unions which will be very much affected by it?
  The whole system of this statutory incomes policy is based upon a new concept: "We will punish, but we will not tell you how or when we will punish". There is just the vague threat that it will happen, if people do not comply

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  with what the Government lay down. That is a new formula for a future statutory burglary policy. Perhaps the Government will introduce anti-burglary legislation under which burglary will be voluntary but anyone who practises it will be punished. The difference is that under the Government's anti-inflation legislation they intend to punish not the burglar but those who are burgled.
  Throughout this legislation the Government wish to keep away from the tough decision making it necessitates. Everybody but the Government can practise it. If the chairman of a nationalised industry is faced with the dilemma of finding himself confronted by the threat of industrial action for£7 a week and decides that if he reduces his investment programme within his cash limits and pays the£7 that will do less damage to his industry than paying only£6, that nationalised industry chairman is to be sacked for pursuing such a policy. If a local authority decides that a threatened dustmen's strike would be intolerable and pays£7 rather than the£6 laid down by the Government the ratepayers will be penalised under the Bill. An employer in the private sector who is short of cash, if he is faced with a wage claim he fears might drive him into bankruptcy but who knows that industrial action will certainly immediately bankrupt him, will if he decides to give way, be punished under this legislation.
  This policy cannot be fair. The Government know that the flat£6 a week proposal is a crude device. It is unfair to the skilled as opposed to the unskilled, it is unfair to the energetic as opposed to the lethargic: it is unfair to a whole host of workers.
  The Government know that at the end of phase 1 of their policy the flat£6 will create immense problems for phase 2. What are the prospects for phase 2? At the end of the period this legislation and this method will itself have been highly inflationary. Have the Government calculated the inflationary effects of the flat£6 a week? If we take the public sector alone, with the nationalised industries, it will cost something like£600 million. In central Government the flat rate£6 will cost something like£600 million. It will cost local government something like£900 million. Nearly£2,100 million will
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  be added to public expenditure by providing for a flat£6 increase in this way.
  The Government should realise the inflationary effect of this, that for local government alone, this year's increase combined with the£6 flat rate, both of which have yet to appear on rate demand notices, will add something like£160 to be paid in rates or taxes by every family of four in the country.
  The inflationary effect of this will mean that we shall still be at the top of the league in terms of world inflation, and I do not see how the Government can contemplate that they will be able to ease the situation in 12 months, rather than toughen it. In fairness, they have not contemplated doing so. The only person who has is the right hon. Gentleman the Secretary of State for Employment, who sees the TUC document as a development of the social contract.
  When the trade unions embarked on the social contract, did they expect it to develop into a 26 per cent. rate of inflation? Did they expect it to develop into a 32 per cent. increase in wages whilst productivity was falling? Did they expect it to lead to a statutory incomes policy and the ending of free wage bargaining, as it has? Was that a development the trade unions expected to bring about? When we praise the TUC, as I do, for coming now to some sense of reality in its policy, let us appreciate that it is the members of the TUC and the manner in which they have operated the social contract that have resulted in the 26 per cent, inflation and 32 per cent. wage increase in the last 12 months.
  So we have a situation where the development of the social contract means, first, the right hon. Gentleman, of all people, having to stand at that Dispatch Box and accept that from 1st August onwards free wage negotiations in this country will end. The second stage will be tougher still, because we shall still be behind in trying to combat inflation, and eventually we shall have to come to reality in an effective statutory incomes policy which brings into its assessment a disastrous 16 months of 40 per cent. increase in earning and a 4 per cent. drop in productivity.
  6.39 p.m.
  Mr. Giles Radice: The right hon. Member for Worcester

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  (Mr. Walker) has spoken very passionately, but how is he going to vote tonight? For many people the interesting point about this debate has been the very extraordinary attitude of the official Opposition. Oppositions can occasionally justify abstention on minor matters, but on a matter of national crisis, which they say it is, the posture of the Opposition is really quite incredible. They are always telling the Government to give a lead, but the Opposition, far from giving a lead themselves, have elevated "Don't know" to a matter of high political principle. They really ought to be ashamed of themselves.
  In his speech on 21st July the Chancellor asked for support for the Government's policies. I supported them last night, and I shall do so again tonight. Nobody suggests that a prices and incomes policy is the only incredient in an anti-inflationary package, but the Government are telling us that a prices and incomes policy is an essential part of their package. Faced by a dangerously high level of inflation, far higher than that of our main competitors and far higher than we have experienced in our recent history, we find it difficult to say that they are wrong. We also face the pressures of our international creditors.
  A number of Opposition Members say that the only way to tackle inflation is by massive public expenditure cuts. But they, and particularly the right hon. Member for Down, South (Mr. Powell), are always very reticent—irresponsibly reticent—about the effects of what they advocate. They do not tell us about the massive unemployment and about what would happen to the social programmes and social fabric of this country. They do not tell us about the social dislocation. They think that all that they advocate could be done without that kind of result. Such an approach may be attractive to some Opposition Members, but it is not a road down which my party should go.
  There are others—here I address my remarks to some of my hon. Friends—who refuse to accept the part that income increases have played in the generation of inflation in recent months, and, therefore, do not feel that they are obliged to put forward any solution to the immediate problems that face us. I wish that I could accept their reasoning. During 1973 and
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  a large part of 1974 it was possible to argue that the major factors in our inflation were the increases in oil and commodity prices and the fact that the Conservative Government had let social expenditure get entirely out of control and had resorted to the printing presses. However, it is inescapable that since last autumn incomes have played a predominant part in inflation.
  It is for that reason that I support the Government's measures to tighten up the incomes side of the social contract. I welcome their package for three reasons. First, it is simple. The limit of increases is£6 a week. That is a figure that everyone can understand. One of the main criticisms of the social contract as it has operated so far is that many people were not quite sure what was involved. Secondly, it is egalitarian. The right hon. Member for Worcester had a cheek to criticise us for putting forward a flat-rate increase, when that was part of the anti-inflation policy of his own Government. It has a lot to recommend it, although I accept that it cannot last for more than a year or so, because it favours the low paid.
  Mr. Ivor Clemitson: Does my hon. Friend agree that it will favour the lower paid only if the£6 a week becomes not only a maximum but a minimum? In other words, if everyone receives the same flat-rate increase, clearly the lower-paid workers will benefit comparatively. But my right hon. Friend the Chancellor of the Exchequer has said on several occasions that the£6 is only a maximum. That may well imply that the people who will not receive the maximum will be precisely the lower-paid workers.
  Mr. Radice: There is a great deal in what my hon. Friend has said, but I think that he will accept that some companies and industries may not be able to afford to pay the£6, and it will be a question of choosing between the£6 and employment.
  Thirdly, the policy is based on consent. Whatever the argument about a statutory or a voluntary policy, I think that every hon. Member will accept that for incomes policies to be successful they must be based on consent. Therefore, it is all the more encouraging that what we are debating is broadly the policy of

  629
  the TUC, supported by a majority of the General Council. I have no doubt that the policy will receive the backing of Congress in September by a majority of at least two to one.
  As Lawrence Daly said last Saturday at the Durham Miners' Gala, a vast majority of trade unionists are on the side of the policy. They are sick and tired of having to fight for larger and larger money increases to keep ahead of rapidly rising prices, increases which for many firms in the private sector are threatening their jobs. They desperately want to break out of the vicious inflationary spiral. That is why I find overwhelming popular support for the Government's measures wherever I go. On this question it is the Government, and not their critics, who are speaking for the majority of the British people.
  I accept, as anyone must, that there are considerable difficulties ahead. I have no doubt that if the incomes side of the policy is successful prices will come down in line with the White Paper target, but there will be a critical period during next winter when they will still reflect the increases now in the pipeline. During that period it will be extremely difficult for trade union negotiators to settle for£6, and to persuade other members who have already settled for£6 not to come back to ask for more. The Government may then need something more on the prices side. They may need to impose a prices freeze for three or four months in the winter. I hope that they will seriously consider that.
  Much has been said about re-entry. I wish that we could choose a better word. I do not know whether its symbolism is spatial or sexual. But I think that in any case it is not an accurate word, for it does not describe what we are talking about.
  Mr. Neil Kinnock: Coitus interruptus.
  Mr. Radice: We are talking not about re-entering anything but about moving into a new phase of policy. It is clear that the more successful the policy is in the year ahead, the more it will be essential to work out what is to follow it, and to do so in good time to prevent the floodgates opening. We shall need a prices and incomes policy for a number of years, and not just for this one year.
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  I do not believe that one can build a democratic Socialist society without such a policy. However, democratic Socialism is about more than a prices and incomes policy. It is about fundamentals, about the maximisation of equality and freedom, based on the underpinning of a planned growth of employment and wealth. I hope that in the months ahead the Government will not lose sight of their long-term objectives. They must not forget that the attack on inequality is not possible without a high level of public expenditure and social expenditure.
  It is undeniable that our public sector deficit must be brought under control. An effective prices and incomes policy will help in that respect. But it would be wrong for a Labour Government to be forced into a position in which they had to embark on massive, slashing cuts in all the key items of social expenditure. That would have a catastrophic effect on the low paid, the sick and the elderly. It would also lead to a level of unemployment which would be unendurable, as has been said a number of times from these benches. Many of us in the Northern Region are already gravely concerned about the present level of unemployment, and particularly about the plight of school leavers.
  I accept, as we must accept, that the Government cannot embark on general reflationary measures in the present situation, or until the anti-inflation policy is seen to work. However, the Government have already accepted in principle that there is more room for selective measures. The North-East welcomes the temporary employment subsidy, which we hope the Government will produce very quickly.
  I ask the Government to look again at their regional policies. I do not believe that we are getting value for money. I do not believe that we yet have the right institutions, and in that criticism I include the way that the National Enterprise Board will work.
  I turn to the essential long-term question of re-equipping British industry. This matter has been mentioned by hon. Members on both sides of the House during the last three days. In this connection I thoroughly support the case for a powerful NEB, and I have voted for it on a number of occasions. I deplore the havoc that has been created by the House of Lords concerning this legislation.

  631
  I wish to repeat a point that I have made a number of times; namely, that we cannot restructure British industry by rhetoric, whether it is of the Right-wing or Left-wing variety. We cannot change British industry by the stroke of a pen, as too many people seem to think we can. We cannot even change industry by setting up new institutions. We need a strategy or a plan, and by that I do not mean anything over-elaborate or over-complicated, as was, for example, the national plan of the 1960s. I mean a concentration of resources, energy and time on those industries which play a critical part in our economy, whether it be in terms of export or import savings. That must be done very quickly.
  Successful anti-inflation policies can prevent disaster. They can buy us time, but they will not, by themselves, put right the problems of what the right hon. Member for Sidcup (Mr. Heath) called "an unbalanced economy"—only a coherent industrial and economic strategy can do that. We must win the battle against inflation, but in our concern to win that batle we must not forget our basic objectives.
  7.3 p.m.
  Mr. Paul Channon: I agree with some of the points raised by the hon. Member for Chester-le-Street (Mr. Radice), but I think he will agree that for all responsible hon. Members, whether they be on the Labour benches or the Opposition benches, the past few months have been agony. We have watched our country bleed away, with continually rising inflation, and with the Government apparently unable or unwilling to do anything effective about it.
  Is it not a terrible indictment—one must say these things because lessons must be learned for the future—that we should be faced at the end of July with a situation that has been clearly visible to anyone for months past, with inflation now running at 26 per cent., with the pound having fallen and with still, I suspect, grave dangers for sterling lying ahead? Yet only now have the Government come forward with these measures, some of which, for reasons which have been outlined by many of my hon. Friends during the past few days still are inadequate. I believe that that is a terrible
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  indictment, and it would be wrong for the Government not to recognise at least that fact.
  I do not believe that even now people outside the House have woken up to the seriousness of the economic situation. Not only do we have inflation at 26 per cent. but we shall in the next year, 18 months and two years have levels of unemployment that we have not seen for a long time. There is little, if anything, that the Government can do about it at present. Therefore, during the next year, 18 months and two years there will be a combination of record inflation and levels of unemployment certainly not experienced in the post-war period. This will produce a combination of social tensions and pressures that may put very great strains on our society.
  Therefore, I come to my first conclusion, which I regret that the House so far has not seen fit to adopt. I believe that in this very trying situation the overriding need at present is for both sides of the House at least to try to work out a policy that most of us can agree upon. I much regret that we are in a situation where the Government, for reasons that I shall come to in a moment are not prepared to take the necessary steps essential for all of us to be able to work together to try to save the country from the appalling situation that lies ahead.
  The Bill is inadequate for many reasons which I shall come to later. But when we consider, above all, the principal question—namely, should we, or should we not, have an incomes policy at this time, even such an imperfect one as we are being offered?—I believe that we have to come down on the side of having an incomes policy. I do not believe that any hon. Member is keen on such a policy. I do not believe that even the hon. Member for Cornwall, North (Mr. Pardoe), whose party has been advocating it for quite a considerable period, is anxious to get involved in such a policy. Nobody wants it, but, at present, I believe that it is absolutely inevitable.
  Labour Members, and indeed Ministers, have said that we need national consent and that these policies must be based on consent if they are to succeed. It is crucial that it should not just be the consent of half the population, or indeed a quarter of the population. It must be based on the consent of as many people

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  as possible. There must not be a surrender to one particular section or another. There is considerable resentment about what the last Labour Opposition did when my right hon. Friends were engaged 18 months ago in trying to get national consent for a policy to tackle inflation. It is absolutely right that we should be trying to get a policy of national unity and national consent around which the nation can rally. That cannot be done if partisan measures are taken which only half the country will support.
  There will inevtiably be sacrifices made in all parts of the House and in constituencies represented by hon. Members in all parts of the House. In many industries—though not all—this slump will be very deep indeed. This is quite inevitable, and it is foolish to pretend otherwise. It is disingenuous of Ministers to pretend that there is much that can be done to deal with the levels of unemployment that we shall face. The OECD report indicates that we shall have 1½million unemployed next year. That may or may not be true, but the people whom I have consulted in industry seem to think that it is more likely to be so than otherwise. I fear that we may see levels of unemployment of 2 million next winter, and that will present serious problems.
  If we are trying to get consent, is it not all the more regrettable that the House should be faced with what I believe to be the intolerable situation of being asked to pass a measure like this tonight with no accurate knowledge of what the real back-up measures are that the Government are threatening the country with but are afraid to publish? They are willing to wound but afraid to strike.
  The Secretary of State owes the House an explanation why the Government are unprepared to publish the reserve powers of the Bill. There has been considerable confusion about the nature of the retrospective powers that may be required. If we read carefully what the Chancellor said on Monday and what the Prime Minister and the Chancellor said yesterday and today, we find that their words are not wholly consistent. When there is doubt, surely there is all the more reason for the Bill to be published. It is utterly intolerable for the House to be asked to pass this measure tonight, for
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  us to go away and for the country not to know what the real purpose of the Government's back-up Bill is. If drafting considerations are holding it up, the least we should have is another White Paper on what the Government would do if those measures became necessary.
  It is fatuous that employers should be threatened if they break the policy. I think that in the past the Prime Minister referred to them as rogue elephants. Yet they have no idea what penalties, if any, will be levied on them if this policy breaks down. That is not the way to handle the House of Commons. Nor is it likely to get the sense of national unity which we require if this policy is to work.
  I ask the Secretary of State to tell us why it is impossible for the Government to publish a Bill, and, if they will not publish it, why they will not at least publish a definitive statement saying what they would be prepared to introduce should circumstances demand it. That is the minimum that this House should allow the Government to get away with before giving a Second Reading to the Bill.
  Mr. Foot: I do not know whether the House will wish me to traverse the whole subject again tonight. Therefore, I should like to try to answer the hon. Gentleman now. Ministers have made clear statements to the House on what they believe would be incorporated in such legislation, if it were to be brought forward. However, they have also said that they wish to proceed on the voluntary principle which we are now operating. In continuation of that position I have said that, in my opinion, one of the worst constitutional outrages would be to flaunt before the House and the country an unpassed Bill. If a Bill is produced, it should be presented to the House, and the House should decide clause by clause whether it wants it. I suggest that it is quite wrong, particularly on matters of this kind, to have a Bill produced and flaunted in the country without being presented to the House of Commons.
  Mr. Channon: It is precisely for that reason that the Government should seriously consider publishing, if not a Bill, at least a second explanatory White Paper outlining what they have in mind. That would be in accordance with precedent and would make clear to people

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  outside this House what was proposed. That would remove any element of doubt.
  Mr. Foot indicated dissent.
  Mr Channon: It is no use the right hon. Gentleman shaking his head. There is considerable doubt both inside and outside this House. The only way to remove that doubt is by a definitive statement. When we have Ministers making somewhat differing statements day after day, people outside do not understand what is going on.
  Mr. Foot: I was shaking my head because I was disputing the view apparently held by the hon. Gentleman, and shared by other hon. Gentlemen, that it is a good constitutional process to have a Bill published, but not presented to the House of Commons, one which is flaunted round the country threatening people because they do not know whether it will be put into operation or not. A Bill is either presented to the House of Commons or it is not.
  Mr. Channon: The right hon. Gentleman knows that my suggestion is that, since the Government are reluctant to publish a Bill, they should publish a White Paper instead.
  Mr. Nick Budgen: Does my hon. Friend agree that, on reflection, he is really suggesting that we should have rule by White Paper? If the Governemnt want the citizen to alter his actions in any way, ought they not to bring forward legislation?
  Mr. Channon: If that is what the Government want, that is what they should do. They should not have law, not only by threat, or by White Paper but by an unpublished White Paper, which is what we are having now. So-called law is being made without people knowing what it is. That is what I complain about. If the Government want to take further steps, they should bring a further Bill before the House and ask us to accept or reject it. I accept what my hon. Friend says.
  One of the central weaknesses of this policy is the flat-rate £6. Whatever may be said in this House by Ministers, there is no doubt that outside everyone regards the£6 as an entitlement—a minimum. There are many industries where the£6 increase will be more than 10 per cent.,
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  and other industries where it will drive people into bankruptcy if it is paid in full.
  That is both inflationary and extremely damaging. Already leaders of trade unions have said that the£6 is an entitlement, not a maximum. That will cause great trouble in the next 12 months.
  What is the Government's policy on increments? If they are exempting incremental payments, what is the logic behind that decision? People to whom I have spoken find it extremely unfair. I must ask the right hon. Gentleman to tell us what has led the Government to the conclusion that incremental payments should be exempt from the policy.
  I think that the White Paper and the Bill will have some effect, but not a great deal, on inflation. I believe that inflation may moderate a little in the short and medium term. Many hon. Members take the view that the policy outlined in the White Paper can at best have only a palliative effect on the course of inflation in this country. I think that we shall get the worst of both possible worlds if we are not careful. We shall have the Bill put forward and a situation of extremely high unemployment. I believe that, for a variety of reasons which have been discussed by many hon. Members, inflation will shoot forward again in 1977, or at the end of 1976, and we shall be in the worst possible situation. If we get into that situation, it will be entirely the fault of the Government, who won two General Elections on fraudulent manifestos and have been unprepared to face the situation that they have created. If we get into that situation, God help this country! I hope that we shall not reach that situation, but my great fear is that we shall.
  We are being asked to accept the White Paper and the Bill. Yet, at the same time, the Government are refusing to learn any of the lessons of the last 18 months. We are still being asked. as a Parliament, to go ahead with expensive measures of nationalisation—community land, petroleum, industry, ship building and craft. We are still being asked to increase housing subsidies, with all their distorting effects. We are still being asked to agree to more money being spent on food subsidies. The people in this country are in danger of becoming punch

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  drunk from both inflation and Socialism at the same time.
  This game will come to an end. The party is over, as the Secretary of State for the Environment said. I hope that the hon. Member for Chester-le-Street (Mr. Radice), is under no illusion about that. On Monday the Chancellor of the Exchequer, referring to what would happen to public expenditure in two or three years, said:
  "in the course of the current normal annual review of all expenditure programmes over the next five years the Government will be seeking further substantial economies in these programmes, particularly in 1977–78 and 1978–79."—[Official Report, 21st July 1975; Vol. 896, c. 70.]
  Those economies are essential. What I complain about is that they are not being undertaken now when they are so clearly necessary.
  I support the idea that the Government should come forward with a White Paper of this kind and take measures to try to tackle wage inflation, which is only part of the problem confronting this country. But I believe that the indictment on the Government at the end of the day will be, first, that they wounded the country by creating, or making worse, the conditions of inflation from which we now suffer, and, secondly, that they were not prepared to take the necessary steps to save the country in the areas of public expenditure, in particular which I have outlined. These are crucial if we are to get back to a reasonable state of normality, which I believe the country and the majority of hon. Members so fervently desire.
  Mr. Speaker: May I make a special plea to hon. Members? We have rather less than two hours before the winding-up speeches begin. The last two days have been very harassing for the Chair with the number of hon. Members who wished to speak and the length of the speeches. I would like to call another 10 or 12 hon. Members tonight, and this will require a self-denying ordinance by speakers to confine themselves to about 10 minutes each.
  7.10 p.m.
  Mr. Tam Dalyell: I am not a great one for "yah-boo" politics, and this is not the occasion for them, but when I listened to the speeches
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  of the right hon. Member for Worcester (Mr. Walker) and the hon. Member for Southend, West (Mr. Channon) talking about the conditions that the Government have created, I begin to wonder. I recollect that two years ago they were the enthusiastic young Ministers encouraging the then Tony Barber, as Chancellor, in his profligacy. They were egging him on. If there is one thing we are discussing tonight, it is the economic consequences of Tony Barber.
  I am alarmed at the way in which costs of public administration have risen, are rising and may continue to rise even more ominously. The facts are best presented in the TUC's economic review. The share of employment in the manufacturing sector has fallen from 37 per cent. of the total labour force in 1961 to 33·7 per cent. in 1973. This has coincided with gains in the public administration sector, which comprised 5·7 per cent. of total employment in 1961 and had risen to 6·8 per cent. in 1973. Employment in service industries has risen in the same period from 30·5 per cent. to just over 37 per cent. In numerical terms this means that 9,200,000 people were employed in manufacturing industry in 1961 and that this number has fallen by 1,300,000 to 7,900,000.
  I am also concerned at the Chancellor of the Exchequer's statement yesterday that the growth of local authorities' spending in 1973–74 was 30 per cent. higher than planned and that over a two-year period it had been 50 per cent. higher than planned.
  The Prime Minister said yesterday:
  "In the case of an individual authority which breaks the limit, the Government will be taking powers to withhold not just any excess over the£6, but the full amount of the settlement. If an individual local authority seeks to finance an evasion of the limit by manipulation of its capital finance, the Government have made clear that they will use all their existing powers to control, case by case, that authority's borrowing, including access to the capital market."—[Official Report, 22nd July 1975; Vol. 896, c. 327.]
  While making it clear that I am not insinuating wide-scale inefficiencies, let alone corruption, may I ask hon. Members to reflect on their own experiences in their own areas, whether in England or Scotland, of local government reform. Every one of us knows of instances when new administrative jobs have been

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  created and salaries for old jobs, often under new names, have soared up out of all proportion to the General Index of Retail Prices or any other index. As one who has indulged in more than his share of party, political and personal controversy, I have never in 13 years in this House received so much annoyance from level-headed constituents as on the occasion of the rise in salary of local authority officials in the Lothian Region into the mid-teens of thousands of pounds a year range. I acknowledge that a number of hard-working public servants are profoundly embarrassed.
  But the costs of change and upheaval in government are of an order that any country and any government must take into account.
  Mr. Ralph Howell: I am interested in the figures the hon. Member is putting forward. Does he know that since 1960 we have employed more than 1 million extra people in local government and that since reorganisation 80,000 more have been added to that figure?
  Mr. Dalyell: I simply accept those figures and do not comment because of what Mr. Speaker has said about the limited time available to the House.
  At business questions after business questions, I have asked my right hon. Friend the Leader of the House, to his not inconsiderable irritation, to provide a financial appendix to the White Paper on devolution. Every upheaval and change has its price tag. It is not simply a question of paying 140 Assemblymen post-Boyle salaries—one could hardly pay them less because many of them will also have to keep up two homes. Infinitely more serious are the costs of carving up the Civil Service and on what matters it will be responsible to the Assembly and on what matters it will be responsible to the Westminster Government. Without going into the problems of serving God and mammon, with which my hon. Friend for Fife, Central (Mr. Hamilton) and I hope to deal if we are lucky enough to get a debate during the Consolidated Fund Bill, there is a problem of leap-frogging of salaries between those paid in the Assembly and those being paid in the regional authorities.
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  Is a Permanent Secretary responsible to a department in the Scottish Assembly to be paid less than a senior officer of the Strathclyde or Lothian Region? If so, it would be a bit bizarre. The problem is mentioned in Professor Tait's study "The Knife-Edge of Devolution". I hope that this subject will be raised by the Government, as promised in paragraph 15 of the White Paper, when they meet the Convention of Scottish Local Authorities.
  I see my hon. Friend the Member for South Ayrshire (Mr. Sillars) looking a little blue. He might like to contemplate the scene in the Whips' Office when they are required to keep some of our hon. Friends here night after night on a constitutional issue on the Floor of the House for the purpose of voting post-Boyle salaries to Scottish Assemblymen while those with huge regional responsibilities in their part of the United Kingdom, or like Scottish regional councillors, get an all-too-meagre attendance allowance. Is it right to pay Assemblymen post-Boyle salary when those who run our great cities, like Manchester, Sheffield, Newcastle, London and Glasgow, are paid only attendance allowances? After what some of us went through at 2.30 a.m. this morning in the Boyle debate, one wonders whether the Government business managers fancy that prospect.
  There is only one sound reason why the Scottish Assembly should go ahead in this financial situation and in the economic situation that has been outlined over the past three days. That is the charge of deceit and hypocrisy in relation to Labour's policies in October 1974. I would like to face this head-on. In October the signals were that once the Labour Party became committed to an Assembly, the idea of regions in general and Strathclyde in particular would be frozen. Rightly or wrongly, that was my understanding. By November 1974 the Secretary of State had made clear that it was too late and that many contracts had been signed.
  Secondly, the situation which necessitated the "Attack on Inflation" White Paper, if foreseeable, was not quite foreseen by many politicians, and we are in a different ball game now.
  At a deeper level, the notion of an Assembly in Edinburgh with its crippling

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  extra costs on the Scottish—or is it British?—taxpayer can be reconciled with the basic promise of the devolution of power. For example, the Treasury should swallow its understandable objection to hypothecated expenditure and allocate a percentage of oil revenues to Strathclyde. I am not a Strathclyde Member, but I think that expenditure should be hypothecated for housing and other deprivations in Strathclyde, Merseyside, Salford and other similar areas. This was the promise of the Labour Party and it was a right policy.
  During the debate on the Consolidated Fund Bill I hope to argue that other powers such as the regulation of the licensing laws, as set out in the Clayson Report, should be given to the regions. This is much more sensible since there are different views in the Western Isles than in the Lothian Region, for example. However, the layer of an Assembly would be mighty costly and we should take this into account in discussing the rising costs of local government and public expenditure.
  The right approach is for devolution, in which I believe as strongly as most of my colleagues, to be given quickly, in full and generously to the regions of Scotland. This may be second best to some of my hon. Friends, but it is practical and it is sensible financially. It is on the finances of devolution that I beg my right hon. and hon. Friends to exercise their most critical faculties.
  7.21 p.m.
  Mr. Nigel Lawson: The first thing to get clear in our minds is what kind of beast it is we are talking about. Is this a statutory or a voluntary incomes policy? Last night the Secretary of State for Employment, when tackled on this point, said that it was a matter of semantics. Suddenly this great matter of principle, a voluntary policy like the social contract or a statutory policy such as we have here, is reduced purely to a matter of semantics. At his Press conference on 11th July the Prime Minister said that it was a matter of terminology.
  The Government quite clearly are introducing a statutory policy, and that is why we have a Bill before us. If anyone is in doubt let him listen to what the Chancellor said at that Press conference. He was referring to Clause 1 and he said:
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  "This, of course, would prevent payments in excess of the£6 flat rate; prevent payments to anybody earning more than£8,500 a year; prevent the payment of increments or staged increases above the£6 limit; and prevent arbitrators from making awards outside this limit."
  This is not the language of voluntarism. It is the language of a statutory incomes policy.
  The second question is whether we have a temporary emergency package designed to operate for a very short time, which some hon. Members might feel is called for in this crisis, or whether is something more. Of course, it is something a great deal more. It is the first step along a road we have traversed all too often in this country before. At that Press conference the Chancellor said:
  "We see the policy we have announced as covering the wage round over the next 12 months as a policy for the first of several years."
  He went on:
  "We have agreed already with the TUC and the CBI"—
  without informing Parliament what had been agreed—
  "to start discussions in the very near future about the formula which should follow the current formula."
  So we go from formula to formula, from stage I to stage 2 to stage 3, and so on. That is the sort of policy we are being asked to approve. It is a statutory policy, and one that will last an interminable time.
  The question is why the Government are setting out upon a road which has inexorably led to the downfall of every Government who have hitherto tried it. It is not because that is the only way of cutting quickly into the rate of inflation. We know the truth. The Governor of the Bank of England informed the Chancellor that unless something were done very quickly all of our sterling would suddenly disappear on some sort of magic carpet back to the gnomes of Arabia. Being an inexperienced Chancellor, the right hon. Gentleman believed it.
  Of course, the policy which it is said will cut quickly into the rate of inflation will do nothing of the sort. In the first instance people will discover—and this was pointed out by my right hon. Friend the Member for Sidcup (Mr. Heath) yesterday—that for some time inflation will go on at its current horrendous rate

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  of 25 or 26 per cent. while wage increases will not follow at the same level. Then, later on, inflation will indeed come down. We have already seen the first signs of this even before this policy has been enforced. The wholesale prices index has been rising at a slower rate. All the signs already exist of a lower rate of inflation, and that is what will happen as a result of the change in monetary policy which was initiated by Lord Barber during the latter period of the last Conservative administration. That policy has been more or less continued during this administration. The gathering recession which is upon us is part of the same overall picture as the lower rate of inflation.
  All that this incomes policy can possibly do is slightly to mitigate the rate of unemployment which would be accompanied by the further fall in the rate of inflation. In so far as it does that it is strange that we are being told that we should thank the trade unions for something which will reduce unemployment. They should be thanking the Government, because that is presumably what they want. They are not giving us anything except a certain degree of freedom, which it seems they have given up willingly.
  The only way in which we shall get our economy straight is to do what the other economies in Western Europe have done. This is essential not merely for dealing with inflation. We must cut this huge public sector borrowing requirement and cut public expenditure. This must be done to prevent still worse inflation in the longer term. It must also be done if the private sector is to survive and if the mixed economy, which most hon. Members want, is to continue. Later, public expenditure could be expanded, when we can afford it.
  Mr. Alan Clark: My hon. Friend said that this was the only way of dealing with inflation, but surely there is another way, and it is just as well for the people of this country to realise it. That way is the total Sovietisation of the economy of this country. If there is total State control of the whole of the economy, of the wages and of the pricing, our inflation would probably be no greater than that of the Soviet Union or Communist China.
  Mr. Lawson: My hon. Friend is absolutely right, but the only way to deal with the matter within the context of a free society is as I have suggested. The irony is that this is the approach the Government have adopted with the nationalised industries, which is where all the real difficulties over wage policies have occurred in the past.
  The part of the White Paper dealing with nationalised industries tells a different story from the burden of this Bill. We are told that the reserve powers will apply only in the private sector. That was made clear by the Prime Minister. Wage increases above the limit in the public sector will not in any circumstances have the reserve powers applied to them. The nationalised industries are told in paragraph 19 that they can pay what they like above the limit but that the Government will not finance them.
  The paragraph concludes:
  "All this means that excessive pay settlements will affect employment in the industry concerned."
  That is what the Government are doing in the context of the nationalised industries.
  Yet the private sector already experiences the discipline of recession, falling profits and low liquidity. It cannot pay high wage increases. The Government are now superimposing the absurd statutory incomes policy on the private sector, whereas the truth is that it is the public sector which needs the discipline already experienced by the private sector. The policy is nonsense. It is a contradiction.
  Why will the statutory incomes policy cause damage? Yesterday my right hon. Friend the Member for Sidcup, in a remarkable speech, painted only half the picture when he said that an incomes policy pursued by a Government must rest on consent. The truth is that any economic policy, in a free society, must rest on consent. In this difficult time we face a great economic crisis, and the measures required to deal with it will be difficult to apply. There will be a period of great hardship. The crucial questions is, whether the policy most likely to gain consent is a statutory incomes policy. I believe that the reverse is the case.

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  A telling indication of this comes in the Tribune Group amendment, which says that the policy
  "will reduce the living standards of working people."
  The fact is that we can no longer go on borrowing at the same vast rate, and this will force living standards to fall. But this fall in living standards will not now appear as inevitable or brought upon the country by the inexorable play of economic forces. It will seem to have been imposed upon the British people as a result of an arbitrary pay limit. The fall in the standard of living will arouse far more hostility than it need have done. It will undermine the Government's authority as a direct result of the Government's opting for a statutory incomes policy.
  An incomes policy is redolent of disadvantages and misunderstandings. It nurtures the idea, for example, that there is a deal and that a quid pro quo must be given—quite apart from the fact that the policy, which at best can do no good, is likely to do considerable harm, and is alien to our ideas of how a free society should operate. As the strains increase, so will pressure for a quid pro quo. The Chancellor announced cuts in public spending, although he did not have the courage to put a figure on them. They will be deferred. There will be premature reflation. All sorts of harmful economic measures will be undertaken. All the other aspects of policy will be sacrificed to preserve the tattered remains of the statutory incomes policy.
  There is, moreover, a special danger when a Labour Government indulge in this policy. History shows that it is when Labour Governments have adopted such policies that the Communist Party has made headway in the trade unions. In the period between 1966 and 1969, when the last Labour Government introduced such a policy, the Communist Party made great headway, and the Liaison Committee for the Defence of Trade Unions grew up. That happened because trade unionists were told that the Labour Party had betrayed them and that the Communist Party was the workers' friend.
  Finally, there is one further disadvantage which my right hon. and hon. Friends in particular should bear in mind. The implementation of a statutory in-
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  comes policy inevitably determines and perverts the nature of the political debate, which becomes focused on the distribution of incomes instead of the creation of wealth. Private enterprise and a mixed economy are the epitome of free Western European society. I do not believe that they can long survive if economic and political debate is perverted in that way.
  7.35 p.m.
  Mr. Neil Kinnock: The hon. Member for Blaby (Mr. Lawson) performed one function for which we should be grateful. He articulated the view held by many members of the Opposition and, what is more important, by people outside Parliament in positions of financial interest. Whatever concessions we make in the form of a policy which is voluntary in its conception but statutory in its application, or a thorough statutory policy, will not fulfil their appetite for changes in economic policy. They think that only massive cuts in public expenditure will resolve the problem.
  If the Government are set up on a course which seeks to win a consensus, or the approval of the friends of the hon. Member for Blaby outside Parliament, by moving towards a statutory policy, they must be warned that that will not be enough. No statutory policy—no matter how stringent, thorough and universal—can satisfy the appetities of those who want to change the balance of power in industry. They think that the only way to do that is by means of massive unemployment.
  Mr. Lawson indicated dissent.
  Mr. Kinnock: No one admits wanting mass unemployment. I do not accuse the hon. Gentleman of that. However, he must face the direct consequences of the economic policy which he and some of his hon. Friends propose. Some members of the Opposition have the courage to accept that fact. They offer mass unemployment as a joy-through-pain answer to our problems. Some people outside Parliament are stupid enough to accept that.
  Other members of the Opposition are not as direct in their approach to the problem. They ask for policies which guarantee mass unemployment, while denying that that is their effect.

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  I regret that I was carried away into following the remarks of the hon. Gentleman. I hope that over the next two or three days—I suspect that we shall be here well into Saturday afternoon—we shall have an opportunity to discuss the wider aspects of the Bill.
  Ever since I became involved in politics and took an interest in economic affairs, I have been informed by authorities that the essence of our problem is wage inflation and that it has been caused and exacerbated by the exercise of monopoly power in wage bargaining. Until recently adequate ways have existed of illustrating that fallacy. Far from being the main cause of inflation, only an increase in disposable income can enable growth to occur. Recently—largely as a reaction to enormous price increases resulting from factors beyond our control, such as raw materials and oil price increases—many wage rises have made a substantial contribution to the level of inflation. I accept that some wage rises play a major part in inflation. We must reduce inflation by means of an incomes policy—not a wages policy. We must evolve a policy for all incomes. A policy on dividends alone is utterly irrevelant. We shall have the opportunity to discuss the matter further in the next few days.
  Given that we must have a policy for incomes, as the right hon. Member for Sidcup (Mr. Heath) said, to be able to enforce that policy in a democracy we must have consent. How do we get the consent? If it is now universally orthodox to accept that we need a policy for incomes and that we have to enforce it, that then becomes the central view of any responsible Government. The question is how we enforce it.
  The social contract was a method of enforcement in which I believed. The social contract gave an opportunity to the trade union movement to accept a series of guidelines in return for a massive increase in the social wage and job security and all the measures for which this movement has striven over 70 years. Regrettably, because we live in a time of major inflation, for reasons over which we have little or no control, that was the last era in which such an experiment should have taken place. Nevertheless, it achieved some remarkable successes.
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  If the essence of the Government's policy were that the only way to secure the enforcement of a wages policy was to get consent and keep consent, trust and assent, we should not be so bruised as we are. The radical part of the Labour Party is bruised, and the bruise extends way beyond the Tribune Group, to which I belong, to fellow-members of the Parliamentary Labour Party and right out into the trade union movement.
  To illustrate how deep and black is the bruise I will read to the House a resolution of the Finance and General Purposes Committee of the Transport and General Workers' Union, to which I belong. On the day before the Prime Minister announced the White Paper "The Attack on Inflation", the following resolution was passed:
  "The Finance and General Purposes Committee endorses the efforts of the TGWU members on the TUC General Council and whilst approving the approach made by the TUC the Committee considers that any development of reserve powers legislation would be against our strong advice.
  Nevertheless the Union will continue to support the Labour Government on the basis of TUC policy (including the Social Contract).
  We further urge all Ministers who share the views of the TUC to remain at their posts with a view to ensuring a united Labour Movement during this difficult period."
  That is the most explicit and graphic illustration of the torture that the British trade union movement is going through. To get on to the Finance and General Purposes Committee it is necessary for a man to come from the shop floor. The members of the committee are not professional, executive trade unionists. They are men who have gone through the struggles of the 1930s and younger men whose starkest experience was the disaster of the years between 1966 and 1970. However old or young they are, these men, although they are sound of mind and in full possession of their faculties, have been prepared to freeze their memories, freeze their instincts and pass that resolution to give the Labour Government its "One Last Chance".
  These men are showing back-breaking loyalty, not the loyalty of sheep, excuse-seekers or the mindless. Even those in the trade union movement who do not agree with that assessment of the position and the action those men have taken would not accuse them of anything worse than having too much trust. Only fools

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  would accuse those men of treachery or timidity, and only bigger fools would mistake their uneasy compliance With the Government's policy for dumb consent to that policy.
  The real danger to the Labour movement lies at that point. An inch—the biggest inch in British Labour history—has been given by the TUC General Council to the Labour Government. If the Government take the proverbial mile —or, should I say, the statutory mile, the unemployment mile or the public expenditure cuts mile—they will deserve and get all the loathing of which the organised British working class is capable. That does not mean survival for our programme or survival for our Government. It means the destruction of both, not destruction by simple opposition but destruction born of contempt and distrust.
  That is what we are gambling with when we approach this matter. There is no bond of personal or collective loyalty to individuals, to the Government or to the Parliamentary Labour Party that will be able to withstand the betrayal of the support which has been given by the TUC General Council to the Government within the past 16 months and most crucially within the last week or so.
  My right hon. Friend the Secretary of State for Employment fully understands that situation. Indeed, more than anyone else in the House he has fought to bring a much more civilised and serene arrangement into being. Now we have to use what we have to try to escape from the disasters that could confound us. He understands that, and some of his ministerial colleagues will understand it, but I am not sure that the understanding is universal in the Cabinet room or, indeed, in the offices of the Government or in the Parliamentary Labour Party. Those who do not understand will have to learn. They can learn the hard way, through a series of conflicts which would make the experience of the hon. Member for Sidcup look like a love-in, or they can learn the other way, by implementing the proposals of the TUC contained in "The Development of the Social Contract", by forgetting the self-destroying nonsense of wages policy enforcement powers and by seeking a Socialist solution to this capitalist crisis.
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  It is not a soft option. If the Government want to prove their virility by undertaking tough measures, the policy contained in our manifesto of a in mental and irreversible shift n the balance of wealth and power is a much tougher option than giving 16-year-old children an apprenticeship of misery in the dole queue, putting their fathers out of work or condemning 58-year-old redundant workers to the death cell of early retirement. That is where the challenge lies, not in taking on the workers, but in taking on the daleks in the Treasury, taking on the sterling holders, taking on the greed of the creditors. Those are the traditional enemies of the Labour movement. When shall we in the Labour movement realise who are our supporters to whom we owe our existence, and when shall we start rewarding them for that? They will reward us with trust, but they understand the position we are in. In our every action we must indicate that we are striving with might and main to bring our policies to fruition so as to keep their trust, affection and support, because without it this policy and the Government have no chance. I think the Government understand that that is the essential challenge.
  In fact, the White Paper and this extraordinary Bill have been presented as shamefaced alternatives, so-called, to unemployment rather than as a proud strategy. The Government would not even publish the Bill defining the reserve powers. We can have an argument about that, as I am sure we shall, at a later stage. It appears that the Bill is regarded as some kind of Dr. Jekyll potion. It seems that the Government are afraid that if they publish it they will turn into hideous Tory monsters. We all know what happened to dear old Dr. Jekyll. However, the Government have imposed cash limits, and there are the possibilities of unemployment in the nationalised industries. The Government propose sanctions against£6-busting local authorities, with unemployment and public expenditure implications. I fear that the Government are well on the road to changing their personality. However, there is still time for an antidote.
  The TUC General Council, in accepting the £6 limit, specified the need for price targets and limitations. It specified

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  a major reduction in unemployment and further improvements in the social wage. My hon. Friends in the Tribune Group have spelt out another strategy. Indeed, scattered throughout the Labour movement there are various alternative strategies to the orthodoxy which the Government once again seem to be embracing like a nervous virgin.
  The question has arisen of whether the Government'spolicy is a temporary palliative. Will the Government's policy get us out of our present problems? What about the long-term and short-term situations? I have had difficulty in finding one of my hon. Friends who disagrees in the long-term with the motion that appeared on the Order Paper yesterday. It seems that everyone is prepared to say that the Tribune Group's policy is great for the "long term". What we have to ask is when the short-term ends and the long-term starts.
  We have been postponing the beginning of the long-term approach for years. Now is the time for action. This is the crisis in which we can develop that action. If we wait for balmier days we know that the very fact those days will be stable and warm will mean that people will say "There is no need for change". It is now, when the great demand is for dramatic and resolute change, that we must take the opportunity of introducing socialist measures.
  It has been explained to us that the previous Labour Government were blown off course. We could attribute that to inexperienced navigation, but if the present Labour Government are blown off course it will not be inexperienced navigation but downright piracy. If that happens we will not be forgiven.
  Mr. Deputy Speaker (Mr. Oscar Murton): I remind the House of Mr. Speaker's request that right hon. and hon. Members should attempt to confine themselves to 10-minute speeches so as to enable all hon. Members who wish to speak to have the opportunity of doing so.
  7.54 p.m.
  Mr. Maurice Macmillan: The hon. Member for Bedwellty (Mr. Kinnock) has made it plain to the House why the Government's policies as put forward in the White Paper and the Bill are incomplete and incompetent. The
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  hon. Gentleman's ultimatum has pointed the dilemma that faces the Treasury Bench and set out the divisions that exist on the Government benches weakening in the support that the Government can command from their back-bench Members for then. policies.
  I believe that no one in the House can have less liking, from experiences of operating them, for incomes policies —voluntary, statutory or voluntary with statutory back-up, whatever that may mean—than myself. However, for all the reasons that have been given by hon. Members from both sides of the House, I believe that such a policy is necessary at this time. I have always believed that the purpose of a prices and incomes policy was limited. In fact, such policies are limited to only two purposes. First, they have to act as evidence that the Government of the day are prepared to stand firm on all their measures. Secondly, they have to protect employers—particularly small employers —and employees from some of the pressures which would otherwise be added to those put upon them by the monetary and other policies demanded by the economic situation.
  We are discussing no new problem. Indeed, as the right hon. Member for Down, South (Mr. Powell) said yesterday, what is remarkable about the subject we are now debating is its staggering lack of novelty. I agree with the right hon. Gentleman. He referred to the previous Labour Government's attempts at an incomes policy. He referred to their determined efforts to destroy our policy in 1972 and 1974. He harked back 10 or 15 years when, as he said, this sort of policy was a new adventure. I believe that even in 1961 we were discussing what was a political as much as an economic problem.
  That is one of the reasons why I welcomed the statesmanlike speech of my right hon. Friend the Member for Sidcup (Mr. Heath). My right hon. Friend made it clear that the policies of a democratic Government and a democratic country must depend upon the political consent of the House and of the people. They depend not merely on the agreement of the TUC or the CBI, important as those bodies may be. For I would remind the House that of the 22 million men and women who work in this country only just one

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  half are members of a union. The TUC cannot speak for them. Some 40 per cent. of our gross domestic product comes from firms employing 500 people or less. Probably many of those firms would feel that their points of view are not fully represented by the CBI. It is important that we should get the widest possible consent, bearing in mind the hardships and difficulties that the country will be asked to face.
  My right hon. Friend the Member for Sidcup then summarised the reasons which have prevented us from running the economy at any reasonable level, without the sort of crisis that we now face, for some 30 years or more. My right hon. Friend was right to lay stress on the imbalances, regional, structural, industrial and political. Only if we can achieve the sort of balance that he described can we get away from these recurring crises and the need for statutory or voluntary policies and the control of prices. Only if we can achieve the coherence which he demanded can we preserve the structure of a free society with an economy which is not, to refer to the words of the Secretary of State for Prices and Consumer Protection, constrained by powerful interests on both sides of industry. This is a political question, for the only way that that can be stopped is if those interests themselves are constrained within the law and are brought to accept the responsibilities that should go with their powers.
  This matter has eluded Governments of both political complexions. It was the strength of "over-powerful subjects" which defeated the efforts of the previous Labour Government when they brought forward "In Place of Strife ". Those same forces, encouraged to their great discredit by Labour Members destroyed the Conservative Government's Industrial Relations Act. In facing the issues of inflation and the economic policies which they require, we must face firmly the political issue of what kind of country we want to be. Nobody as yet, so far as I have followed these debates, has spelt out this issue, which in some ways has been fudged since 1961. It cannot be fudged any more.
  There is a great deal to be done to clarify this issue—in industrial democracy,
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  in transforming the nature of the capitalist system and reforming many of our institutions. If I had time I could go into considerable detail about my ideas in this respect. All I will say now is that to obtain the kind of support which the present Government, or indeed any Government, need in the situation that confronts our nation, there must be far more understanding on all sides.
  We on the Conservative benches must accept that in some industries nationalisation is here to stay. We also have to accept a degree of Government intervention in the private sector. Perhaps we can look to the United States, where such a prospect is not regarded with quite such horror as it is in this country. We must accept legal constraints on economic activity. This is as old as Lord Shaftesbury and the Factories Acts. We must accept that there is a limit to the level of unemployment which is acceptable, not only to the unemployed or to those who might become unemployed but to the conscience of our people as a whole. We must accept that the rights of capital are not unlimited; but we also have the right to demand that the other side of the House accepts that the rights of labour are not unlimited either. It must recognise that free collective bargaining is a function of free enterprise. In a system of State Socialism that some hon. Members would like to see, there is no room for free collective bargaining because there is no market for labour and no free market in anything. We must ask them to accept that in a free society capital investment is generated by the saving of the people and cannot be wholly dependent on taxation for Government borrowing. They must also accept that profit and profitability are as important as production and productivity and that this has major implications and limitations for what they can hope to do in future policies on taxation, and indeed nationalisation.
  I am not suggesting a great degree of consensus, still less some sort of coalition approach, but I suggest that the House will never come to a successful solution to the problems which we are now discussing unless and until each of the major parties makes its own decision—and it is that decision which is beginning to be demanded of politicians by the people.

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  The Labour Party must decide whether its democratic Socialism is the democratic Socialism of West Germany or of East Germany. Conversely, the Conservative Party has to decide whether it intends to revert to a Cobdenite Whig concept or to remain in the traditional rôle of radical Tories. Perhaps we could both take with profit the resolution that when we have decided, we shall stay the same in Opposition as we were in office. In this way I believe that we can meet what my hon. Friend the Member for Blaby (Mr. Lawson) rightly described as the most pressing need for economic recovery. This is to turn the problems which we debate in this Chamber and which affect the lives of all our people away from the problems of distribution to what is far more important—namely, the problems of the creation of new wealth and the spread of its ownership among the people.
  8.6 p.m.
  Mr. Stan Thorne: There appears to be on the part of the Government Front Bench an attempt to suggest that the Trades Union Congress is satisfied with the Bill. My right hon. Friend the Chancellor of the Exchequer suggested that the trade union movement voluntarily agreed to the proposals which were put before the House. I find that extremely difficult to believe. What happened was that a majority of the General Council of the TUC concurred with the Government's proposals. Therefore, it is somewhat premature to say whether the trade union movement agrees or accepts them. The events which we shall experience in Britain in the next four to six months will give us the answer to the question whether the trade union movement supports the measures which we shall consider this week.
  Among those measures reference is made to a£6 maximum, and my right hon. Friend the Prime Minister in his speech yesterday referred to the position of USDAW in regard to the General Council's decision. That union is in an interesting position, because few of its members are likely to receive the£6 maximum involved in this legislation. Many shop workers would be extremely pleased to receive an increase of that amount. It remains to be seen whether its trade union strength—because that is
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  what may be involved in the final analysis—will enable those workers to obtain that£6 a week.
  My right hon. Friend the Chancellor of the Exchequer said that the TUC will oppose any settlement in excess of the£6 limit. In what way will the TUC oppose such a settlement? If, for example, in the engineering manufacturing industry there is a claim supported by highly organised workers who do not subscribe to the decisions we are taking this week, in what way and with what sanctions will the TUC seek to ensure their conformity? The Government have not revealed whether the TUC has spelt out precisely what would arise in this situation. We do not know whether it will be left to some degree of speculation as to the various aspects of this legislation with which I shall deal in a moment.
  It may be true, as the Prime Minister indicated in reply to a question from my colleague the Member for Liverpool, Walton (Mr. Heifer), that shifts have taken place in respect of those who were in the minority when the Trades Union Congress General Council considered this matter, but, as I said earlier, I am much more concerned about the feelings of trade unionists over the next few months as the realisation of what has been decided here comes home to them. I am concerned with the attitude they will adopt, particularly in the period when the real intent of the stautory powers begins to emerge. By the time that the September Trades Union Congress takes place, the movement may be in no mood to give its majority support to the General Council.
  Not long after that, the October Labour Party conference will take place. I hope I am not being mischievous when I ask whether there is any coincidence between the imminence of those two conferences, in September and October, and the fact that we have not had spelt out clearly the powers that the Government intend to use to ensure that their policy is carried through. Is there an expectation that, if those powers are really understood, the Government will not stand a cat in hell's chance of being supported at the TUC? I must admit to being somewhat sceptical about those things. Will the Government's policy on this and on many other issues survive the attacks that

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  will be clearly launched against them at those conferences?
  In my view, the feeling within the movement is clear, that over the last few months the Government have drifted inexorably from the path upon which the tremendous support of the rank and file was engendered to win the two General Elections in 1974.
  There has been a debate of some sort about whether this is a stautory proposal. I am sorry that the Secretary of State for Employment has left the Chamber, because it was clear when he spoke yesterday that he was grappling with a situation in which, behind semantics, he sought to escape the inevitability of his position. The Labour movement is entitled to know, I repeat, what secret powers are involved in the legislation referred to in "The Attack on Inflation".
  The fact that these are, it is said, powers to be used against employers does not make them any more palatable in this situation. The very concept of secret powers, about which this House is unaware, in my view smacks of the corporate State. Preventing employers from paying wage increases is, of course, a very strange phenomenon to many working class people. They have had difficulty over many years in obtaining increases in pay, rather than seeing legislation enacted against employers in relation to what may be paid.
  With rising unemployment, the position that has obtained from time to time—my hon. Friend the Member for Walton, may well have experience of this—has been that employers have increased the amount they are prepared to pay as a result of the shortage of certain skills, but is that to be the position during the next few months? It seems to me that the contrary will be the position. Rising unemployment will ensure that many employers will not even have to pay those increases to attract the sort of skill they require. One wonders just how far it is realistic to talk about preventing employers from paying over the£6 maximum.
  In the final analysis, I suspect that we are again back to the question of the exercise of trade union power, and when we get down to brass tacks we have to recognise that every trade union in Britain today is in business to protect the interests of its members industrially in
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  terms of wages. That is an inescapable fact that we cannot ignore.
  A previous speaker referred to the Government having repealed the Industrial Relations Act. We all welcomed it. The pay machinery associated therewith was set on one side. But it seems to me that we are back on the same road to confrontation with the trade union movement—whose creation this party is—and, in the interests of my constituents and my trade union colleagues, T shall have to withhold my support tonight for what I consider to be a piece of anti-workingclass legislation. I voted against it yseterday. Although I understand that the Conservative Party will be doing one of its usual acrobatic acts, I do not propose to join Conservative Members in the "No" Lobby.
  In the past the Government have moved extremely speedily when faced with what they considered to be an emergency situation. Budget measures were introduced extremely speedily, and various Bills followed. The question that I again ask myself in this situation is whether the Front Bench will have the will to get down in real terms to that irreversible shift of power—this phrase comes back again and again—to working people and their families which is contained within Labour's 1974 manifesto.
  If our economic problems are really to be tackled, a number of essential things must be done, and done speedily. The first is the freezing of prices. Had the Government Front Bench devoted its energies to that question in the same way as it has to this particular piece of legislation, many housewives in Britain today would be applauding the Government with tremendous enthusiasm. The next is to restore collective bargaining. Then, as an urgent matter, we have to tackle the problem of poverty, not by bringing in an increase for one-parent families in April 1976 or 1977 but by special dispensation at the earliest available date. It can be done. Next, we have to slash investments abroad, and sell British overseas investments to the tune of£7,500 million. I would recomend that that be done without any hesitation. Military expenditure must be cut by£1,000 million this year. Import controls must be imposed on inessential imports. The wealth tax, that we have been promised again

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  and again, must be introduced. The economy must be expanded by restoring full employment and encouraging increases in terms of rewards rather than decreases.
  To do that, in my view it is essesntial to expand public ownership into the monopolies, the banks and the financial institutions, and to pursue the nationalisation of the oil industry as a matter of urgent priority. What is more, the expansion of food production is somewhat overdue. Finally, because it is crucial to the policy emanating from the Treasury Bench at present, it is essential to end the de facto coalition which exists in this House.
  These are some of the measures required to put Britain's economy on its feet and to begin the process of social change which is so vital to meeting people's needs. I recognise that the only long-term solution is the establishment of a Socialist society. In the short term, let us at least respond to yet another capitalist crisis with Socialist solutions.
  8.21 p.m.
  Mr. Peter Hordern: In the past two days the House has agreed generally that we are in the middle of a very severe economic crisis. Some of my right hon. and hon. Friends and a number of Government supporters believe that the crisis can best be solved by political means because they feel that economic means are inappropriate to its solution, so severe is the crisis. But solution by political means, especially by a statutory prices and incomes policy—for that is what the Bill is—seems to elevate such a policy into a principle.
  That action does not absolve us as a House from careful analysis of the reasons why we find ourselves in this situation, and still less does it absolve us from taking action now. I dare say that a political solution to the economic crisis may be good in forging national unity. I do not offer a judgment on that. All I say is that it is not a good way of curbing inflation.
  A number of hon. Members on both sides of the House have said that however much we may dislike it—and everyone seems to dislike a prices and incomes policy—we must regret but accept the necessity for one now, so rapid is the rate of inflation. However, they do not like this form of prices and incomes policy.
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  To those who feel like that, I say that if that is the situation—and no one can deny that inflation is proceeding very rapidly—why do not we have a simple straightforward freeze for a period of six months? That is a statutory policy, and it is one which would be seen by everyone to be very rough but simple justice. After that, we could go back to a free economy once more.
  I ask the House to consider the alternative. If we adopt the form of statutory policy proposed by the Government, we shall not get out of it in a hurry. Yesterday the Prime Minister "referred to reentry problems". But there will be deeper problems than simply re-entry problems into what some of us would hope would be a free economy. We would not find ourselves with a free economy. We would find ourselves with permanent organisation already built up, composed of the CBI and the TUC in close conjunction with the Government of the day, deciding what the level of prices and incomes should be.
  Why do we go on adopting prices and incomes policies as the solution for inflationary problems and balance of payments problems? We all have the greatest possible doubts about a prices and incomes policy as a means of controlling inflation—and with very good reason. We know from bitter experience that these policies do not work, and it does not matter whether they are launched at Lancaster House with great ceremony or whether they are launched at an agricultural fair, where I thought the Prime Minister introduced a novel touch by tightening the belt of the nation over a bowl of strawberries and cream. It does not matter where it is done.
  What is the truth about union monopoly power, which is cited as a prime reason for the rapid rate of inflation? Ten years ago the proportion of the gross national product taken up by wages and salaries was 67½per cent. The latest figure which I have is 68 per cent. In other words, after 10 years, all that Jack Jones, Mr. Scanlon, Joe Gormley and all the other mythical figures who are said to be so harmful to the economy have done has been to get their share of the GNP up by ½per cent. If their members knew how little they had achieved they would be surprised, if not amazed. I do not call that a significant achievement.

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  However, that does not mean that union power does not have an effect. It can have a marked effect on unemployment. So there is a good reason for regular consultation with the trade unions, because it means that they can judge for themselves the consequences of their actions. But union monopoly power has nothing to do with inflation.
  Let us consider the consequences of proceeding with a prices and incomes policy. It means that some central authority composed of CBI and TUC members will dictate permanently the level of prices and incomes. We in Parliament will be left to discuss not what the Government propose in any Bill that is brought before us but the findings of this corporate body. I do not regard that as an attractive prospect for Parliament. Nor do I know why we should devalue ourselves so much. It is as though we have found ourselves becalmed at sea. We spent our time wrestling with the sails, when all the time we have a powerful engine at our disposal which is solely under our command; namely, the control of public expenditure. It is a control which every other modern industrialised country uses to the full. We decline to use it at all.
  Every other country controls its public expenditure. We do not. During this past year, no other country has resorted to a compulsory prices and incomes policy, yet it is what we propose. Every other country has reduced its rate of inflation markedly. We have not.
  No one can say that the situation in which we find ourselves is a new phenomenon. It has been going on for years past. However, there is something about controlling public expenditure which sounds intensely unattractive—Scroogelike. We all want, in our own way, to increase public expenditure. But we hope that the bills will not be presented or, if they are to be presented, that they will be presented in such a way that someone else will pay at some time or another. Governments of both parties have been guilty of this.
  We look forward to the exploitation of the North Sea. If it is not the North Sea, it is the Irish Sea. I dare say that when the Prime Minister goes on holiday he will make some discovery in the Scilly Isles. It is always the begging bowl, never the cheque.
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  What can be done in a practical way to solve this problem? I cannot help thinking that the organisation of the Treasury—if I may say so to Treasury Ministers—is archaic. In the old days we used always to work on the basis that the Budget should be balanced. We have a Chief Secretary to do that. What do we find today? We find that neither the Paymaster-General nor the Chief Secretary is a member of the Cabinet. If the Government are serious about controlling public expenditure, both the Paymaster-General and the Chief Secretary should be members of the Cabinet. They should spend far more time on blocking Government departmental expenditure than on blocking loopholes in legislation, on which they seem to spend most of their time.
  No one wants to cut public expenditure, but surely there is now no alternative. The figures simply do not add up otherwise. We were told in the financial statement that the public sector deficit this year would be£7,500 million. We now have the figures for the first quarter, and they show a deficit running at an annual rate of£8,500 million. Supplementary Estimates of some£2,000 million have already been presented to the House.
  All this will have to be financed by the overseas and private sectors. Happily, the overseas sector is improving rapidly at present, and it is possible that we shall be running at a deficit of some£1,200 million for the year. Yet this will put an intense strain on the private sector—individuals and companies—which will have to make up£7,300 million, according to my calculations, to counteract the financial deficit of the public sector. To the extent that this is met, it will be met by running down stocks and by cutting investment. To the extent that it is not met, it will have to be met by boosting the money supply, thus starting the whole process again.
  How did we get ourselves into this mess of a consistently large public sector deficit? During the 13 years of hallowed memory before 1964, industry was allowed to get on with its job, and we had a rate of growth which was moderate by the standards of other countries but nevertheless it was a genuine rate of growth. There was no Government deficit to speak of in those days. Then we had

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  the national plan and the commitment to growth by successive Governments. It is time that we took stock of this policy of growth.
  Although the two parties differ fundamentally on the place of a planned economy, Governments of both parties have tried to get growth by boosting demand through deficit financing, whenever the balance of payments allowed them to do so. This policy has not been followed in other countries to the extent that it has here—indeed, their monetary mechanisms would have made it impossible for them to have done so. The test surely is whether, after 10 years of this policy, we are able to spend less of our resources on imports than we did, and whether we have been able to produce more per head than our competitors.
  The evidence is that we now have to spend twice as much on the same volume of imports after 10 years as do Germany, Belgium and the Netherlands. We have to spend 35 per cent. more than France and Germany and 20 per cent. more than the United States and Italy. As for growth in real terms, over the past 10 years only the United States has shown as little at 50 per cent. more growth than we have. All that has happened is that the Government have taken more and more of the national cake, leaving an ever-smaller share for the private sector.
  To have any hope of satisfying the public sector, individuals will have to accept a cut in their standard of living and companies will have to reduce their stocks and cut investment. I do not doubt that the rate of inflation will ease during the coming months, not because of anything in the White Paper but because of the damage already done to the private sector. If we seek, as we do, a genuine economic recovery, this can be achieved only through a recovery in the private sector and by holding down rigidly the growth of the public sector.
  The people have been asked too many times to make sacrifices for troubles that are not of their making. They will be asked to make many more before many months are out. They do not deserve a quack remedy to carry out this objective. That is what the Bill amounts to.
  Mr. Deputy Speaker (Mr. George Thomas): I would remind the House that time moves on.
  8.34 p.m.
  Mr. Ivor Clemitson: There are those who have sought this week to bury the TUC's pay guidelines phase 1 and not to praise them. However, the funeral oration should contain not a few words of praise.
  It is too easily forgotten that two of the major guidelines were the progress towards equal pay for women and special consideration for the lower paid. There is considerable evidence that there has been a great improvement in both those areas and that both those groups of workers have fared better than average. We should not forget, too, that there are several groups of workers who had fallen behind over the years, from miners to nurses, school teachers and so on, who have also been brought into more equitable positions as compared with others.
  But we must remember that there are those who did not agree with having any guidelines at all. Free collective bargaining, in their view, should be totally unfettered. The "free" must be a free-for-all. I am not talking about those who live in a dream world of perfect competition presided over benignly by the spirit of Adam Smith. I am talking about those who predict and, indeed, will the imminent collapse of the present system. It is quite consistent for them that they think that a free-for-all would expedite the end of the system. For those of us, however, who want to change to a different system but who wish to do it in a democratic manner—that is, to do it as far as possible taking people along with us and doing it with the minimum of suffering in the process—freedom must be exercised with responsibility.
  If we have accepted the concept of voluntary collective bargaining guidelines over the past 12 months, the question becomes whether the proposed more restrictive guidelines are acceptable and, if so, under what conditions, and not whether any sort of guidelines at all are acceptable. First, it must be repeated that inflation is not a short-term problem with simply detectable causes. That has been said, rightly, over and over again during the past three days.
  Inflation is a deep-seated phenomenon of the kind of Western industrial society in which we live. It will not be cured by simple short-term solutions and panaceas. To say that rising costs mean

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  rising prices comes precious close to being a tautology. It is so superficial as hardly to need saying. In this country we are obsessed, and we have been over a long time, with the short run. Since the war we have staggered from crisis to crisis, and the crises have become steadily worse over the years. We have failed, by and large, to come to grips with the underlying causes and to make the fundamental changes which are needed. The motto which all Governments seem to have followed is that in the long run we are all dead.
  Having said all that, however, the short-term immediate problems are with us. Those who point quite rightly to the longer run must also prescribe for the short run as well, because if we do not survive the short run there may not be a long run worth talking about. There is currently a popular song which contains a memorable couplet. I shall not attempt to sing it but it goes thus:
  "There's a load of compromisin'
  On the road to my horizon."
  That is a beautiful piece of poetry. This particular set of compromises represented by the present policy may be some of the compromises we have to swallow on the road to our horizon.
  Clearly raw material prices have, for the time being at any rate, eased off from the hair-raising climbs of last year. Clearly the costs which have risen and are rising most are wage costs. If this vicious circle is to be broken into in the short run, voluntary restraint on wage demands is needed at a more stringent level than was true of phase I of the voluntary guidelines. But our acceptance of this policy must not be unconditional.
  The constantly repeated calls from the Opposition benches over the past three days that we should drop our longer-term plans, whether they be plans for public ownership, plans of investment under public control or plans of movement towards industrial democracy, are the politics of Mr. Magoo. If anybody needs an explanation of who Mr. Magoo is, he is a short-sighted character in a cartoon. There must be no going back on our policies and our programmes. Not only must we not drop any of our policies but we need to integrate them into a coherent strategy and to expedite their introduc-
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  tion. We need to invest more—that is common ground among many hon. Members—and we need to do it under public control of various forms.
  It needs to be under public control, first, because that is the only way in which we can guarantee that investment will take place in the right places and the right amounts at the right time; and secondly, so that the results of investment can accrue in all their various forms to society at large. I would therefore argue, first, that we must not go back on our commitments to deal with the deep-seated causes of our economic and social ills and indeed we should develop them.
  Secondly, we come to the question of public expenditure. What are the arguments for cutting it? They seem to me to be several and mutually contradictory. On the one hand we have those who argue that we should cut public expenditure so that resources are released which will find their way into investment and export. On the other hand we have those who want to cut back public expenditure so that the general level of economic activity will be reduced. The first of those propositions is questionable because it assumes that somehow, by some miracle contrary to all past evidence, resources will be released and will go into investment. Where is the evidence for that?
  The second proposition is unacceptable because it would have disastrous results on the level of unemployment. One certain result of cutting back on public expenditure is that it will directly result in more unemployment—witness what is happening in teaching; and indirectly it will also contribute to unemployment—witness what is happening in the building trade. What we must not do is so to deal with the short-run problems that we find ourselves facing in the wrong direction when and if, as we hope, we get through the present crisis. We must so devise our short-term policies that we do not make it impossible or extremely difficult for long-term policies to have their desired effect.
  We must, of course, be concerned to bring down the rate of inflation and to do so in such a way as to minimise the adverse effect on the level of employment. But we cannot deal with the problems of unemployment sensibly, or plan for the future properly, unless we take full

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  account of the long-term changes which are taking place in employment and which have already taken place over the last 10 or 15 years. We must not go on deluding ourselves that there is a happy coincidence between extra investment in manufacturing industry and more employment in that field of industry. There is ample evidence that it is precisely in those industries where there has been the most investment and greatest increases in productivity that there have been considerable falls in their work force.
  We must, of course, invest more, but if we think that we can produce more, become more productive and more competitive and more fully employ the millions of under-employed people in industry at the present time while at the same time increasing employment in manufacturing industry, I suggest that we are living in a dream world.
  It is precisely here that the real case for public ownership and planning comes in. We must use the possibilities of the situation to improve the quality of life in every respect. In the future more people will inevitably be engaged in public services. There may well be a movement, as there is already in a piecemeal fashion, to earlier retirement. There should be an expansion of educational provision for all ages.
  All of these matters and many more will mean more, not less, public expenditure as the years go by. We must produce the wealth out of which this can come. But if we cut back even further now, beyond the cuts which have already been announced, we shall be queering the pitch for the future even more than we have done already. The obvious example of teacher training comes to mind. It is not to cuts in public expenditure that we should look for the resources to generate wealth; it is to funds which are available and so often misused outside the public sector.
  To sum up briefly, I accept the proposals in the White Paper and in the Bill, with two basic provisos: that we do not cut back further on essential public expenditure and that we do not depart from our long-term structural changes. We must survive the short run in order to be economically alive in the long run, if I may stand Keynes on his head. But we
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  must not slip back into our old, evil ways. We must learn the lessons of the perils of pragmatism.
  Mr. Deputy Speaker: Mr. Graham Page.
  Mr. Graham Page Mr. Graham Page (Crosby) rose—
  Mr. John Page: On a point of order, Mr. Deputy Speaker. Did I mishear you? I thought there might have been some confusion.
  Mr. Deputy Speaker: No. I called Mr. Graham Page.
  8.47 p.m.
  Mr. Graham Page: We usually receive each other's invitations, but not tonight.
  I hope that the hon. Member for Luton, East (Mr. Clemitson) will forgive me if I do not follow his short-sighted Mr. Magoo down the road to Katmandu or wherever it was that he went, or if I cap his couplet by saying that I will not keep my eyes on the distant horizon but on the Bill itself. I hope that I shall not be thought pedantic or legalistic if I do so.
  If I correctly understood what the Chancellor of the Exchequer said in moving the Second Reading, it was that when the Bill becomes a statute it will not contain a statutory policy, because it leaves the creation of the law and judicial decisions on the law to the executive, to the Secretary of State. It is all so vague that it is voluntary.
  I hold the view that legislation should be precise, in order to protect the citizen. The law which the Government have chosen as their instrument in the Bill is the civil law. It is nothing to do with criminal law. I gather that that is why the policy is not statutory but voluntary. However, when one is dealing with law it must be statutory, and we are dealing with a statute which will create law.
  The Bill interferes with the rights and duties of the citizen. It interferes between employer and employee as individuals, or between organised employers and employees, over wage negotiations. In doing so it leaves those rights and duties floating in the clouds.
  The Bill's injunction is that we must keep within the limits imposed by the policy. That is the essence of uncertainty. There are no strict limits set out in the

  669
  White Paper to which the Bill refers us. To say that we must keep to a policy is not a legal phrase. Let us take the simple case of the employee suing his employer for wages in arrear, to whom the employer says "You are not entitled to them. You are asking for more than is in the White Paper." The employee cannot go to the court. He must go to the Secretary of State first to have an interpretation of whether the remuneration is within the terms of the White Paper.
  What will happen? Will the employee get some sort of certificate from the Secretary of State? Will he be heard by anyone? Will he apply in writing? Will the Secretary of State personally hear every claim for interpretation, or will the job be handed over to be decided by an unknown and faceless civil servant? Will the claimant then trot off to the county court with a certificate of interpretation from the Secretary of State which the judge will have to obey? We are left in great doubt.
  In my view the Bill provides that every man is his own legislator by arbitration before the Secretary of State, but at his own expense because there is no legal aid to assist him. I am not sure whether, when the Secretary of State interprets people's rights under the Bill, he will be acting as a legislator or a judge.
  Let us examine the other powers given in the Bill to the Secretary of State, namely, the powers of delegated legislation. I applaud the powers in Clause 2(5) whereby a draft order has to come before the House before alterations can be made. Why was that not used in Clause A new White Paper can be introduced as part of the law and can be law for a month before Parliament has a chance to debate it. Why cannot we use the draft order procedure?
  Clause 2(6) provides the negative procedure. Everyone knows that it is never debated in the House. Therefore, it can go through without debate.
  Clause 6 gives power to the Secretary of State to pay a rent limitation subsidy by any amount he chooses, simply by a stroke of the pen, without bringing the matter before the House.
  Clause 3 provides that the Secretary of State can amend the Price Code and
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  create sanctions for an endeavour to include an increase in wages in a price. I do not know what is meant by that sanction. Does it mean that the Secretary of State can, by order, require a penal reduction if he has said that a retailer must not sell his goods at more than 25 per cent. of their cost to him, because he has slightly increased his employees' wages? This shows the Government's ignorance of and contempt for the sovereignty of Parliament and the rule of law.
  The principle which the Government have enshrined in the Bill seems to be that, so that it shall not be a statutory policy, we are breaching almost every element in the rule of law.
  Under Clause 4, by a mere certificate—it will not be brought before the House —the Secretary of State can alter the rate support grant for any particular local authority. How will the local authorities judge their future policies and rate collections if they have this Sword of Damocles hanging over their heads? How will the expenditure be monitored by the local authorities? How will the Secretary of State know about these wage increases? I assure him that monitoring is a thankless job. I have tried it myself and it is not very effective.
  What guidelines will be issued? It appears that if the rate support grant is to be cut the ratepayers will pay. The Chancellor of the Exchequer said, and I agree with him, that he was reluctant to impose any limits on local authorities concerning the amount of rates which they collected. I think that this would be wise for a short time. The independence of local authorities is not necessarily sacrosanct. They are selling services and goods to the public and there is no real reason why we should not impose some restrictions on the amounts which they charge the public for providing those services and goods.
  What about the increase in the number of local authority employees? I am not sure whether this is the interpretation of the White Paper. If a local authority increases the number of its employees, will it suffer a cut in its rate support grant? For example, what about the 14,000 new employees who will be required to carry out the provisions of the Community Land Bill? Some of them are starting already. For example,

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  Hampshire is already employing and paying people to prepare what in dealing with the Bill we have been calling the LAMS—the Land Acquisition and Management Scheme. What will happen about that? The White Paper states that it will be illegal for employers to do certain things. Will it be illegal under this secret Bill for councillors and officials of local authorities to do what I have described? Will they find that they are criminals by doing it?
  I am getting involved in a Bill—a secret Bill—about which we know nothing. I promised to stick to this Bill. After all, we have sufficient breaches of the constitution in this Bill to which we are asked to give a Second Reading tonight.
  8.56 p.m.
  Mr. James Sillars: I am flattered by the belief of the Chair that in five minutes I shall manage to cover the whole canvas of this subject in a comprehensive manner which some hon. Members who spoke for 41, 44, 23, 21, 20, 18, 17 and 19 minutes did not manage to complete.
  I have sat here since half-past three. It struck me that, as well as a prices and income policy, we should be debating whether the Chair runs a list and, if so, how it should operate. At one stage today there was a wild rumour that the Chair was subject to pressure from the Patronage Secretary, who is not here to confirm or deny that rumour. I am sure that it would be denied by the Chair. Nevertheless, this rumour did float around.
  Mr. Deputy Speaker: Order. The hon. Gentleman is out of order with his references to the Chair. He has very little time. I suggest that he sticks to the main subject of the debate.
  Mr. Sillars: I am aware of what I am saying, Mr. Deputy Speaker. I have been here for some time. Between half-past three and now I have been trying to make up my mind what to say in the five minutes at my disposal. I thought that I should register that opinion with you, however inaccurate it might be, and an inaccurate opinion in this House is not unusual, as we all know.
  In the two or three minutes remaining to me, because I promise to sit down
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  at 9 o'clock, I should like to point out that my main concern about the Bill is its effect on the Labour movement in this country. I am sorry that neither the Secretary of State for Employment nor the Prime Minister is on the Front Bench. The Labour movement, which is important to democracy and progress in both the social and the economic sphere, is in a low state of morale, a poor state of organisation, and in great danger of losing its essential faith in its ability to do a job of work for the people of this country.
  Earlier this week the Prime Minister launched an attack on some members of the rank and file of the Labour Party concerning goings-on tonight in a London constituency. I should like to point out —there are one or two of my right hon. Friends on the Front Bench who might convey this to the Prime Minister—that when he became the Leader of the Labour Party we were opposed to a prices and incomes policy. At that time he inherited a party which was in very good heart and organisationally sound. I think that it is fair for someone else in the Labour Party to ask the Prime Minister whether he has not some responsibility for the situation in which the party finds itself when so-called Left extremists can so easily, as he alleges, infiltrate the constituency organisations.
  I remind the Prime Minister that when he became Leader of the Labour Party he had a slogan—that he stood for "a home, a job, and a place in the sun" for the people of the United Kingdom. Now, a number of years after he became Leader, we have more homeless than ever before, almost 1 million people looking for jobs, and a cloud across the face of the sun of the Labour movement.
  I said I would sit down at 9 o'clock and I will.
  In October, when I went electioneering in South Ayrshire and other parts of Scotland, I was well aware what I meant when I said I would never vote for a statutory incomes policy. I accepted that there were problems in the social contract and that there would be further problems from those interests opposed to the Labour movement succeeding in Government in this country. I took that into account. However much it hurts to be on a different side from my right hon.

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  Friend the Secretary of State for Employment, I cannot vote for a statutory incomes policy tonight.
  9.1 p.m.
  Mr. John Nott: With the Second Reading of the Bill, we commence the third attempt in a decade to enforce control of incomes through statutory sanction. If experience taught the Government anything at all, this attempt should be more successful than the others. I must confess that if this debate is to be any guide, the signs do not look particularly promising. The majority of the TUC General Council has given these measures its blessing, and, were it not for the demands being made by the TUC in return, this could be wholly welcomed. It is for the trade union movement to decide whether it is wise to become implicated in the successes or failures of Governments. I think it might be rather unwise but I leave it therefor now.
  One powerful section of the community has given its consent, and this is obviously a substantial public relations boost for the Government. Whether or not the policy proves to be successful, only time will tell, but the launching of the measures has been helped, in a short-term practical sense at least, by the consent of the TUC.
  Unfortunately, when we come to study the substance of the Bill, the whole package gives the impression of having been hastily contrived. This debate is the first we have had on the specific details of the measure, as opposed to the generalities of the White Paper, and it has shown, as experience will show even more, that the Government have not learned all the lessons they might be expected to have learned on the third time round this course.
  One of the least attractive features of the speeches from the Government Front Bench—although they are not unique in this—has been the repeated calls for patriotism. In one of the many unattractive jibes which the Chancellor of the Exchequer threw across the Floor of the House yesterday from a sedentary position, he shouted sarcastically at my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe): "Tory patriot". He did not mean that, of course. He meant that my right hon. and learned Friend was in some way being treacherous by not agreeing with
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  the Chancellor's own views. The Chancellor should not confuse patriotism with his own peculiar prejudices nor, I would suggest, with his own personal career and record. It would however be quite as wrong to define patriotism and national interest as the exact antithesis of the Chancellor's views as it is for hon. Members or the Press to suggest that the national interest is upheld by voting for a policy with which one disagrees.
  At least we have before us the actual set of proposals, and the debate on the Government's measures has been taken forward more satisfactorily now that we have been able to examine the Bill in detail.
  I think that if the national interest is to be invoked in respect of particular economic and social policies it should at least embrace two features. One would be that they should be broadly acceptable to the major political parties at least, and another that all sections of the community should be expected to share in any sacrifice that is being called for. On the first point there seems to be not the slightest possibility of the Labour Government abandoning any part of their Socialist programme with which we most violently disagree. On the second point there clearly is the widest divergence of views in this House on what "equality of sacrifice" actually means. Therefore in these debates, which will now stretch before us, no doubt, for many years, we might perhaps leave the national interest to one side and just get down to discussions of the policies.
  One or two particular matters have arisen during these debates. I think the first was the very valuable and interesting point by the hon. Member for Liverpool, Walton (Mr. Heifer) when he made the relevant observation in Monday's debate that wages have not actually varied very much as a percentage of the gross national product in the last 20 years. There was some dispute over the figures with my lion. Friend the Member for Horsham and Crawley (Mr. Hordern), who was talking about employment income as a percentage of gross domestic product. Those figures show, however, almost precisely the same story. Incomes policies may come and go, but the proportion of gross national product taken by wages and salaries has remained

  675
  relatively constant throughout the whole of this period.
  I can accept that statutory incomes policies have been successful in the short-term in de-escalating wage settlements. I believe that stages 1 and 2 and, until it was broken, stage 3 of the Conservative policy were successful in de-escalating wage settlements for a short period. Where the majority of my hon. Friends have honest doubts is whether these incomes policies have made the slightest difference over the medium term to the solution of our economic and social difficulties. Some of my hon. Friends would say, and I think some Labour Members would agree with them, that the results have been downright damaging and perverse.
  Let us, therefore, not be deluded in this to think that we are now embarked upon just a short sharp shock which will be successful or otherwise in de-escalating wage settlements. The very method chosen to control income—the£6 flat rate—has set us on a course where the dictation of incomes by the State must seem an almost inevitable long-term necessity, and the Chancellor seemed to me to indicate as much in his remarks.
  I agree with my right hon. Friend the Member for Worcester (Mr. Walker)—and I do not mean to be facetious here —when he said that he was glad that the Secretary of State had not resigned. I am delighted that he has not. Resignation is normally an exercise of personal ego rather than an act of conscience. I hope that he remains in office to fight his corner, but his position, quite frankly, will look more and more exposed as the policies proceed and, more particularly, when the £6 flat rate has to give way to the next phase of the incomes policy.
  Many of my hon. Friends, not least my right hon. Friend the Member for Farnham (Mr. Macmillan) and my hon. Friend the Member for Southend. West (Mr. Channon), have made the obvious point that, as well as trade unionists, there happen to be consumers, working people who are not members of trade unions, the self-employed and employers. There is even a place called Parliament in which, in my naivety, I used to believe that the Secretary of State for Employment actually believed. In my first two
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  years in Parliament I told many of my friends that the right hon. Gentleman was our greatest parliamentarian. My faith in the Secretary of State has been sadly eroded year by year. The Leader of the House has allocated one day and one night for the discussion of the Bill. I hoped that after the long private debates between the CBI and the TUC we might have been treated to something better than that.
  If we are being asked by the Chancellor to back his policy, I hope that something can be done about the language of the Prime Minister, who referred to rogue employers who might seek to poach scarce labour from more responsible rivals by wage increases higher than those allowed. What does the Prime Minister mean by "scarce labour"? The OECD figures forecast 1½million unemployed. What does the Prime Minister mean by "poaching scarce labour"? We are also puzzled about the word "responsible". An employer is not more responsible if he pays lower wages than another for the same work. The Prime Minister used the word "rogue". That implies that there is something criminal about an employer who, for the sake of his business, seeks to attract skills where they are most needed. The most obvious example is an employer who finds it desirable to double wages to meet a delivery schedule for the extraction of oil from the North Sea. That employer, apart from being branded by the Prime Minister as a rogue, as irresponsible and guilty of attracting scarce labour from the pool of unemployed, will also be denounced by his workers as a wicked capitalist exploiter for not paying them the wages he wishes them to receive. He will then either be declared bankrupt under the policy, or branded as a criminal, according to the Bill's reserve powers Bill which we have not yet seen.
  The only rogue and irresponsible employer in the land is the Government. Since 1971 the public sector recruited an additional 500,000 people at a cost of£2·5 billion. The total labour cost of the public sector, excluding the nationalised industries, amounting to about£20 billion, which is about 20 per cent. of the gross domestic product. It is calculated that the number of employees working in health, education and public administration will rise from 4 million in 1971 to

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  5·2 million in 1981—at a cost of over£25 billion at today's wage levels.
  When we speak of public spending and pay, we could perhaps examine our own back yard. New Palace Yard provides an admirable example of what happens with public expenditure. We can learn from the Official Report of last night's debate something of what goes on in public sector pay. I hope that the hon. Member for Bassetlaw (Mr. Ashton) will not mind my referring to his remarks, which he deliberately put on public record. He told a story about the shop stewards, the committee of 13, who went to see the Prime Minister at a quarter to three. They alleged that the Prime Minister said it had all been arranged, and that on Question No. 5 the leader of the liaison committee would stand up and catch Mr. Speaker's eye.
  The hon. Member for Bassetlaw asked the Prime Minister whether he realised that if Members of Parliament got even a£1-a-week rise it would bring down the opprobrium of the Press. The answer, according to the Member for Bassetlaw was that that would be opprobium worth having. I must confess that that is one of the few matters on which I wholeheartedly agree with the Prime Minister.
  My right hon. Friends lay so much stress on the public sector because it is 60 per cent. labour-intensive and exists primarily as an organisation to spend money on providing more expensive and higher-quality services. We all want higher-quality services, but our national resources are insufficient to allow that trend to go on. It has to be reversed.
  In the past 18 months government expenditure has risen by£20 billion, or£4,000 million in real terms, and that is equivalent to the whole of the defence budget. It is also equivalent to the whole of the health and personal social services budget. Our resources are finite, not infinite. It is impossible for room to be found for exports, investment and the reasonable maintenance of personal living standards over the medium term unless the public sector stops sucking in manpower and resources away from the very sectors upon which our personal survival depends.
  A start has to be made in transferring these resources back into the private sector. That will not be done just by holding
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  wages down. Virtually every one of my hon. Friends who has spoken said that he hoped the pay policy would not merely be a palliative. My hon. Friends asked for substantial measures going beyond the pay policy to deal with the problem of resources.
  One of the most depressing moments in the debate was when the Chancellor shouted from his seat "What about the RPI?" Nothing is more destructive of economic policy than RPI-watching. To do the Chancellor justice, he has endeavoured to remove suppressed inflation by refusing to subsidise nationalised industry prices, and he argued to phase out food subsidies and reduce housing subsidies. But, before the Bill has even had a Second Reading, we are nearly back in the familiar old country where if we want the consent of the TUC for wage restraint we have to buy it. The TUC will not give its consent to wage restraint without asking for something in return.
  Let us look at what the Chancellor has already given away. He is already backing away from his commitment to phase out subsidies, although he has said again and again how essential that is. Already he has overturned percentage rates—against the inclination of all people who have had experience of prices and incomes policies—and agreed to a flat-rate basis, which will vastly increase all the problems of re-entry. He has already accepted the principle that as living standards start to fall it may be necessary to take tighter price controls.
  The hon. Member for South Ayrshire (Mr. Sillars) said that we should not, purely as a result of a pay policy, go back on the removal of the deep-seated causes of inflation. The pressures upon the Chancellor to reflate, to subsidise prices and to take all the actions he knows it is wrong to take will grow and grow as unemployment grows. The consent of the TUC to pay restraint will come only if the Chancellor gives up other policies which are just as fundamental to the solution of our problems.
  Mr. Eric S. Heffer: I was just going to ask the hon. Gentleman whether he is aware that some of us feel that the TUC's price was much too low?
  Mr. Nott: I am sure that is the case. No doubt when the Chancellor finds that he can no longer hold the£6 flat pay increase the TUC will demand a much larger pound of flesh so that the policy can be allowed to proceed to stage 2. That is precisely the point that I am making. The tragedy is that half the misery could have been avoided if only the Government had acted sooner in a way that many of us have been demanding for many months.
  This chapter opened at the Royal Agricultural Show. The Prime Minister made reference to what he described as the moaning minnies, the wet hens, the restless heifers and all the rest. In fact, we are back on the same old treadmill once again.
  It is interesting that this policy is being introduced at a time when wholesale prices are beginning to decline. The latest figures show that earnings are probably coming down with the recession. That is even before the policy begins. At the moment commodity prices are helping us. Subject to the actions of OPEC, we may be entering a period of declining world prices regardless of the Government's policy. I think that we can expect the policy to appear to succeed for some time, but what we should be preparing ourselves for now is the upturn in world trade. That was the point made by my right hon. Friend the Member for Worcester.
  When commodity prices start to rise with the upturn in world trade, when industry is restocking, when bank advances are rising strongly and investment confidence returns—that will be happening all over the Western world—the demand upon resources will accelerate. On top of the huge public sector deficits which we now see throughout the Western world there will be the enormous additional pressure of demand. That is when inflation is likely to take off, unless we can put our house in order by transferring resources out of the public sector and into the productive sectors of the economy.
  In 1977 and 1978 we could be talking not about 26 per cent. inflation but about 50 per cent. and 100 per cent. inflation, rates of hyper-inflation. When that happens—I cannot say exactly when it
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  would be—there can be only one end result—namely, a massive slump throughout the Western world of a proportion which will make 1931 look like a picnic. We must prepare ourselves for what some people regard as a likely eventuality.
  I return specifically to the Bill. This has been a wide-ranging debate, but I now ask the Secretary of State for Employment some questions. I do not expect for one moment that he will answer them. He will prefer, as I prefer, to make a more general speech. Nevertheless, I must return to the Bill and ask the right hon. Gentleman some questions which were raised by my right hon. and learned Friend the Member for Surrey, East, my right hon. Friend the Member fcr Worcester, my hon. Friend the Member for Southend, West and the hon. Member for Cornwall, North (Mr. Pardoe). All of them put forward fundamental reasons for objecting to the Bill even if one were to approve of a pay policy. As I understand it, my right hon. Friend the Member for Worcester is hi favour of a pay policy but not this one. That is what I take him to mean.
  At last we have had presented to us an actual policy. We can now debate that policy instead of talking in semantic terms. The first and fundamental question that we all want answered is whether the£6 limit applies to every individual in the public and private sectors or whether it is to apply to payrolls. The TUC annex says that it applies to every individual, but that was not what the Chancellor said. The right hon. Gentleman implied that it applied to the public sector payrolls. That is fundamental to the whole policy. We still have no answer on that matter. What is the position of incremental scales? The whole situation is in total confusion.
  The CBI only a few days ago was wholeheartedly in favour of this policy. We are now debating the Second Reading of the Bill. We have not yet voted upon it, but already the CBI appears to be changing its mind. I quote from the document issued today by the CBI:
  "Parliamentary debates on the White Paper cast severe doubts on the Government's strength of will and on the workability of its programme."
  That is before we have even voted on the Bill.

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  When does the policy begin? What are the sanctions described in paragraph 26 which will be part of the law? It is no use the Secretary of State talking about the flaunting of an unpassed Bill. He must realise that the Bill, as yet unpublished, is being incorporated in law because it is mentioned in paragraph 26, and the White Paper will become part of the law of the land.
  Is the£6 a maximum? If so, it is grossly inflationary when earnings apparently are already falling. The Chancellor of the Exchequer said that it was not an entitlement, but I ask the Secretary of State for Employment to read the TUC's annex which implies that the£6 is an entitlement. Throughout the whole White Paper there is a conflict between what Ministers and the Government say and what the TUC annex says about the policy.
  Mr. Norviraain Tebbit: My hon. Friend may not have seen the statement on the news tapes this evening by Mr. Len Murray implying that it is the TUC's view that the£6 is a sum to which each individual is entitled.
  Mr. Dennis Canavan: As a minimum.
  Mr. Nott: If that is right,£6 for every individual as a minimum will prove to be grossly inflationary. This applies to what we are trying to decide tonight. We have studied the legal definition between the quasi-judicial powers of a pay board or of the Price Commission and the powers contained in the Bill. But as my right hon. and learned Friend the Member for Surrey, East said, there are vital differences between our legislation and this legislation which are fundamental.
  We cannot accept that there has been a continual movement away from the traditional concept of our constitutional law and practice. Sometimes I believe that our judges as well as our Parliament should talk a little less about necessity. Necessity has been the cry of tyrants throughout the ages. The dividing line, as events in India show, between the claims of necessity and the more fragile claims of democracy are narrow indeed.
  Now that the executive is both the law-making power through the control of political parties and the Government,
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  we must be more vigilant than ever in Parliament to make sure that Parliament does not become an instrument of tyranny or an instrument which will end in the destruction of the liberties which we are here to protect.
  This Bill, whatever view one may take of its contents and the threats of the other unpublished measure which it incorporates, will be a statute. My hon. Friend the Member for Eastleigh (Mr. Price) said that the new policy was about as voluntary as a subscription to the Mafia in the city of Palermo. I thought that was an admirable comment on the whole package. Perhaps the Secretary of State for Employment has experience of the Mafia and what goes on in the city of Palermo. He is the expert on the voluntary nature of the Bill.
  Our objection to the Bill is that it incorporates a White Paper, which itself incorporated a document by the TUC, which itself, so far as one can understand, is to become the law of England, Scotland, Wales and Northern Ireland. The TUC document does not contain the kind of consent which we believe is necessary to make a pay policy of this sort stick. The Bill gives to a Minister lawmaking powers of an unlimited nature which can be exercised by him without any appeal. We regard the Bill, regardless of the Government's policy generally, as a constitutional outrage and we believe that it should be withdrawn. On that basis, I ask my right hon. and hon. Friends to vote for our amendment.
  9.30 p.m.
  The Secretary of State for Employment (Mr. Michael Foot): The hon. Member for St. Ives (Mr. Nott) asked me a number of detailed questions, and, much to the amazement of the House, I shall do my best in a minute or two to answer them. I hope I shall be able to deal with all the questions that he raised, and with most of the others that have come from other hon. and right hon. Gentlemen during the course of the debate; but, as he reminded us, and as I remind the House, we have still some further time for consideration to be given to the Bill.
  The hon. Gentleman began his speech by suggesting that in some way or other I had departed from the views I hold about Parliament. That is not the case: I believe that, of course, Ministers are

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  the servants of Governments and the servants of the House. They should be not merely dismissed, when necessary, by the House, but all their deeds should be properly scrutinised by the House. I am not making any complaint that these matters should be scrutinised here. Indeed, when we come to discuss that part of the Bill I shall seek to argue—if I have the time after answering all the detailed questions—that the Bill respects the rights of Parliament perhaps better than some previous legislation on this subject. But let me come to that in a moment.
  Perhaps I may say to the hon. Gentleman that I also would sometimes prefer to discuss some of the wider aspects of this matter, and particularly when I heard the accents of the hon. Gentleman I was shaking my head and wondering where I had heard them so recently. Of course, it was in the speech of the right hon. Member for Down, South (Mr. Powell) that we heard the authentic voice of the official Opposition. We hear a lot about the infiltration of small groups into awkward places at these times, but what sort of group has penetrated the Conservative Front Bench? I would not wish to misrepresent the right hon. Gentleman in any way at all. I would only say to him—and I say it, he knows, with the utmost respect for his eloquence—that his authority over the Conservative Front Bench is much greater than people like to assume, and he should never underrate his powers and the process of conversion which is going on all the time.
  In replying to the detailed questions I shall try to elaborate or to underline the section of the White Paper which appears at the end, and which was agreed between the Government and the General Council of the TUC in regard to most of the particulars. There are one or two matters on which we have differences of view or differences of emphasis, and those differences still prevail, as the hon. Gentleman has indicated, in the case of the£6 entitlement as against the£6 upper limit. There are differences of emphasis in this respect, but we believe that, if we examine these matters carefully and state them carefully, the country will understand. In particular, we do not wish that these matters should be incorporated in specific
  684
  legal enactments, because we believe that that would lead to all the dangers of a full statutory policy, to which attention has been drawn from both sides of the House during the course of the debate.
  First, the£6 should be the maximum increase over the year for full-time adult employees, and pro-rata for part-timers and juveniles. The increase should be made as a straightforward supplement to earnings and should not be reflected in overtime or other premium payments. The£6 limit does not, however, prevent the payment of anything higher which may be necessary for the attainment of equal pay. The statutory obligation to achieve this by the end of the year must be complied with, and that part of the law stands.
  Mr. Heffer: I am sorry to interrupt my right hon. Friend, but perhaps I might ask him to clear up one matter. How would this apply to workers in the construction industry and in other industries who are self-employed—on the "lump"? There is no question of negotiating rates there.
  Mr. Foot: I understand that there are special difficulties about the "lump". Legislation was introduced in the Finance Bill which we hope will go some way to deal with the problem. But it is a difficult one. It is not merely a difficult one in applying an incomes policy. The problem about the "lump" arises with or without an incomes policy.
  I should like first to cover some of the detailed matters raised in the debate, and then possibly there will be an opportunity for further interchanges on some of these matters.
  Sir G. Howe: The first and most important question asked by a number of my hon. Friends was whether the£6 upper limit was to be applied on an individual basis or on a payroll basis. In relation to both the nationalised industries and the private sector, the White Paper says that a firm which makes an excessive pay settlement will not be allowed to pass it on in prices. That implies that a firm is entitled to make a settlement on a payroll basis so long as it does not exceed over all£6 a head. Which way will it be done?
  Mr. FootWe believe that the£6 should be an individual allotment across

  685
  the board on the basis which I have already indicated of the different emphasis between the TUC about entitlement and the question of bargaining within the£6 limit. We agree with the interpretation that the TUC has put on it about the individual application of the£6, except in the case of incremental arrangements, which I shall come to in a moment and which I hope will deal with the point.
  Sir G. Howe: If a firm makes a pay settlement which does not exceed on a payroll basis the arithmetical implication of£6 per head, however distributed, that firm need not apply for price increases. It will not be reflected in the Price Code. There appears to be nothing to prevent the firm distributing the£6 on a payroll basis as it likes.
  Mr. Foot: I think that that is a wrong interpretation of the situation, but if I am mistaken, I shall make arrangements to put it right. However, I do not think that I am wrong.
  I said at the beginning, and I believe that it is the proper interpretation of the situation, that the£6 allotment should be on an individual basis. That is the basis on which it must be conducted.
  Secondly, there should be no improvement in non-wage benefits outside the£6 limit except for any relating to job security or improvements to occupational pension schemes, as I shall explain later. Any other improvements have to be contained within the limit.
  Thirdly, no one earning£8,500 a year or more should take an increase of any kind in the coming year, whether in the form of increments, prior commitments or anything else.
  Fourthly, the policy applies to all settlements implemented on or after 1st August. Any who are due to reach a settlement with an annual operative date before 1st August should do so on the basis of the existing TUC guidelines. The 12-months' interval between major pay increases continues to apply, and no one should bring forward the normal anniversary date of settlement or take an interim increase to evade the policy.
  Then there are the limited transitional arrangements referred to in paragraph 8 of the White Paper. They permit the implementation in full of wages council proposals agreed before 11th July and of
  686
  arbitration awards where the formal reference was made before 11th July. In both these cases the timing of payments is out of the parties' hands.
  In addition, the Government think it right that those who were expecting to implement settlements with anniversary dates between 1st August and 1st September should have the chance to do so if they had reached agreements before 11th July. This provision is made to avoid disrupting arrangements for implementation which are already in train. It will not remove all problems, but the Government believe that it will ease the transition and that it is a reasonable provision to make.
  Against this background let me deal with particular points which have been raised on the pay guidelines—
  Mr. Graham Page rose—
  Mr. Foot: I shall cover the point the right hon. Gentleman raised but, first, perhaps I could deal with some of the detailed questions put to me by other hon. Members earlier in the debate.
  Questions were asked about forward commitments. I have been asked what happens to settlements already made for pay increases in the 12 months after 1st August. Such settlements fall into two categories—the normal annual settlement which has been fixed, for whatever reason, well in advance; and, secondly, current agreements of which the first payment was made before 11th July but where there are commitments to further payments on or after 1st August.
  The first category—annual settlements made in advance—will have to comply with the£6 limit and be renegotiated, if necessary, to bring them into line. The only exception will be settlements with anniversary dates between 1st August and 1st September 1975 which were agreed before 11th July and which are, therefore, allowed to stand under the transitional arrangements that I have described.
  In the case of current agreements, where a settlement has been made in the present round and the first payment was made before 11th July, forward commitments in the form of staggered payments, thresholds or indexation may be paid in full. Any commitments of this kind payable on or after 1st August will be set against the£6 limit, and only the

  687
  balance, if any, can be paid at the time of the annual settlement in the coming round.
  Of course, no payments can be made of forward commitments to people on£8,500 or above. [Laughter.] The hon. Member for Blaby (Mr. Lawson) may laugh about it, but these were some of the questions that some of his hon. Friends asked and which I believe should be answered.
  Mr. Graham Page rose—
  Mr. Foot: I shall deal with the point raised by the right hon. Gentleman later on.
  Sir G. Howe: On the footing on which the Secretary of State has put this policy before the House, are the citizens of this country entirely free to disregard each and every word that has been uttered from the brief he has just read?
  Mr. Foot: Perhaps the right hon. and learned Gentleman would have the courtesy to allow me to answer some of the questions put by some of his hon. Friends. I will, as I promised at the beginning of my remarks, deal with the constitutional question that he put in his speech. I am entitled to answer these questions because there is some confusion over them.
  The right hon. and learned Gentleman asked about personal increments. Incremental and wage-for-age payments which are made according to a well-defined range or scale already in operation before 11th July may continue at the same level as in preceding years for those earning less than£8,500 a year. This is on the condition that, together with the annual pay increase, the payments under such a scheme do not raise the pay bill for the group concerned by more than£6 a head. Merit payments have to be kept within the£6 limit for the individual.
  I was asked about productivity schemes and how they will apply. As far as productivity and payment-by-results schemes are concerned, existing schemes established before 11th July may obviously continue unchanged. However, payments under any new scheme or under improvements to existing schemes will, together with the annual settlement, have to be kept within the£6 a head limit.
  688
  I turn to the question of pensions. This was raised—or perhaps not raised—by the hon. Member for Somerset, North (Mr. Dean), who has been seeking to raise this matter on a number of occasions. The arrangements for payments to pensioners under existing schemes may continue unchanged and are not affected by the pay limit. I think that that disposes of some of the concern that the hon. Gentleman had and which was expressed in his local newspaper in North Somerset, which I read yesterday, which expressed the feeling that this matter had not been clarified. It will also be open to those concerned to decide, if they wish, to continue to calculate pension entitlements on the basis of the rate of pay to which the employer was committed before 11th July, even though that commitment may be limited by the new policy.
  As to improvements in occupational pension schemes, these must in general be subject to the£6 limit. But such improvements may take place separately from that limit where the employer had agreed to them before 1st July or where the parties concerned can show that they have been negotiating, during the three months before that date, on specific proposals for a new or improved scheme to come into force within the 12 months from 1st August next.
  I hope that what I have said on this matter will assist hon. Members who came here eager to have the reply on this question. I understand that that does not apply to every hon. Member, and those who have not been gratified by my replies hitherto will, I hope, be gratified by what I have to say in the next 15 minutes.
  Mr. Paul Dean: I am much obliged to the right hon. Gentleman for clarifying some of the points. Will he explain briefly how he squares what he has just said about the Equal Pay Act with what he said about the lack of improvement in occupational pensions? How is it possible to give a square deal in pensions for women unless he will allow pension rights to be improved along with the improvement in their earnings?
  Mr. Foot: We certainly hope that the arrangements that I have described will assist the occupational schemes to go

  689
  ahead and that they will assist the improvement which the hon. Gentleman and the Government are certainly eager to foster.
  But as regards the equal pay arrangement, that was one of the exceptions— indeed, the principal exception—to which the Government agreed and which the TUC urged. We agreed to it for the very simple reason that the Equal Pay Act is, of course, on the statute book in any case, and we wanted to make sure that it was carried out and fulfilled.
  What I have been describing and what I emphasise once again—and I emphasise it to some of my hon. Friends who have expressed their concern in some ways about entering into such details on this question—is the understanding which the Government reached with the representatives of the General Council of the TUC. We reached understandings with them on the general approach we should make to dealing with the menace of inflation. But we also discussed with them many of these detailed questions which I have been describing.
  We are not saying that we can lay down an interpretation that stands for ever on all these points. Certainly these particular points do not bear with them the force of law, because it is, as I have emphasised, a voluntary policy. [HON. MEMBERS: "Oh."]. When I said yesterday that I regarded this as a voluntary policy and did not regard this Bill, and particularly Clause 1, as a breach of a voluntary policy, this was greeted with some hilarity in the House. I should like to explain the matter further, because I do not believe that what I am claiming can be contested.
  I shall come a little later to the way in which we seek to achieve the purpose of Clause 1. I know that it is a ground for complaint from the Opposition. What I am concerned with at present is the purpose of what we are seeking to achieve in Clause 1—not merely the long-term purpose of how we defeat inflation but how we are to make possible the carrying into effect of the agreement we have made with the TUC on the£6 limit. The question is this. If we did not lift the contractual obligations on employers in Clause 1, it would make the voluntary agreement we have reached with the TUC impossible to carry into effect. Without
  690
  Clause 1, any employer who had made an agreement with his employees to pay above that limit could be subject to legal action demanding that he should pay the full amount. If the Bill did not lift this contractual obligation, we would certainly never be able to carry through, for example, the provision that there is to be no increase for those earning above£8,500 during the period. We have to lift the contractual obligation if the voluntary agreement we have made with the TUC is to be translated into action.
  I must, therefore, emphasise to the House that in my judgment the Bill is a voluntary Bill. If we did not have this provision in it, I emphasise again that it would be impossible for us to carry out what we have agreed with the TUC. Indeed, if the clause and the Bill were to be defeated tonight the effect would be that we could not carry into effect at all the agreement that we have made with the TUC. It would be the equivalent of sabotaging that agreement. Some hon. Members on the other side of the House—I do not know how numerous they are —may wish to sabotage that agreement. Some of them dislike our agreement with the TUC for a variety of reasons. The hon. Member for St. Ives dislikes it because he says the TUC may ask for other things in return, and that may very well be true. But to my hon. Friends on this side of the House I want to say that if we were to lose the Bill we could not carry out the voluntary agreement that we have made with the TUC.
  Mr. Peter Tapsell: While not at all disagreeing with the point the right hon. Gentleman has just made, may I put it to him that a great majority of our fellow-countrymen outside this House particularly those with experience in industry and the City, will regard the whole of this debate as an "Alice in Wonderland" exercise, because the whole country knows perfectly well that we need a proper statutory policy, and that that is what we are going to get in November.
  Mr. Foot: The hon. Gentleman puts his case very fairly but brings me to the exact point about the nature of the Bill itself, and the complaints which have come from hon. and right hon. Gentle-merit against the Bill and, in particular, the complaint of the hon. Member for Cornwall, North (Mr. Pardoe). the hon.

  691
  Member for St. Ives and the right hon. Member for Worcester (Mr. Peter Walker), all of whom are complaining that we have not got the full panoply of a statutory policy for carrying into effect all the provisions they wish to see. Increments, prior commitments, arrangements and everything, according to their desires and claims, should be dealt with by legislative action. It is to that policy that we on this side of the House are strongly opposed, and that is the explanation of the form in which the Bill is presented to the House.
  I am not sure whether the hon. Member for St. Ives is a full supporter of a full statutory policy or not, for he has never declared himself upon it. At any rate, he goes along with his colleagues who have been demanding that we should have produced a Bill with all the massive, complicated ramifications of a full statutory policy. That is what the right hon. Member for Worcester argued for in his speech, and that is what he is going to seek in amendments he has put down for tomorrow, when we shall be able to debate them. I say to the right hon. Gentleman, as I said when I interrupted earlier, that if we had tried to proceed on that basis and were now to say to the TUC "We want to have the whole paraphernalia of a statutory policy, a compulsory policy right across the board." certainly it would not be possible for the Labour Party to carry out its undertaking to continue in co-operation with the TUC. One would never obtain the co-operation of the TUC for that kind of policy.
  Mr. James Prior: I am grateful to the right hon. Gentleman for giving way, because I know that he has given way a number of times already. Will he now answer the question posed by my hon. Friend the Member for St. Ives (Mr. Nott)? Clause 1(1) clearly states that
  "the policy set out in the document laid before Parliament"—
  in other words, the White Paper—is the policy that the Government are following. Paragraphs 25 and 26 of the White Paper talk about reserve powers. Are the reserve powers incorporated in the Bill? Why do we not have a chance to discuss them?
  Mr. Foot: That is a quite different question. The matter of reserve powers was discussed yesterday, and I do not think that any addition to the argument needs to be made now. What I am discussing, in response to the speeches from the right hon. Gentleman's Front Bench, is why our Bill for dealing with the situation is so different from the Bills introduced by the Conservative Government to deal with such matters. The fundamental reason is that we are seeking, as we say clearly in the White Paper, to pursue a voluntary policy, and these are measures designed to suit a voluntary policy, whereas what Conservative Members have argued for throughout most of the day—I have listened to the whole debate—in speech after speech is that there should be a full statutory policy.
  Sir G. Howe Sir G. Howe rose—
  Mr. Foot: Let me deal finally with what the hon. Member for St. Ives said at the beginning and end of his speech. I believe this to be crucial to the success of the whole policy. The hon. Gentleman complained because in our discussions with it the TUC did not talk only about wages and the matters incorporated in some of the provisions of the Bill. Of course not. The TUC also talked about all the other matters of major significance—employment, the provisions of legislation, the Industry Bill, investment. We shall seek agreement with the TUC on those subjects, too.
  Opposition Members have given the game away. They have revealed why it is impossible for them ever to reach agreement with the TUC. It is because they do not want any of those subjects to be raised, because they cannot agree with the trade union movement on any of those major subjects. That is why they are on the Opposition Benches and why my hon. Friends should join together to keep them there.
  Sir G. Howe Sir G. Howe rose—
  Mr. Walter Harrison (The Treasurer of Her Majesty's Household)rose in his place and claimed to move, That the Question be now put.
  Sir G. Howe: On a point of order, Mr. Speaker—
  Question, That the Question he now put, put and agreed to.
  Question put, That the amendment be mad:—
  The House divided: Ayes 260, Noes 320.

  Division No. 296.]

  AYES

  10.0 p.m.

  Adley, Robert

  Fry, Peter

  Madel, David

  Aitken, Jonathan

  Galbraith, Hon T. G. D.

  Marshall, Michael (Arundel)

  Alison, Michael

  Gardiner, George (Reigate)

  Marten, Neil

  Amery, Rt Hon Julian

  Gardner, Edward (S Fylde)

  Mates, Michael

  Arnold, Tom

  Gilmour, Rt Hon Ian (Chesham)

  Mather, Carol

  Atkins, Rt Hon H. (Spelthorne)

  Gilmour, Sir John (East Fife)

  Maude, Angus

  Awdry, Daniel

  Glyn, Dr Alan

  Mawby, Ray

  Baker, Kenneth

  Godber, Rt Hon Joseph

  Maxwell-Hyslop, Robin

  Banks, Robert

  Goodhart, Philip

  Mayhew, Patrick

  Bell, Ronald

  Goodhew, Victor

  Meyer, Sir Anthony

  Bennett, Sir Frederic (Torbay)

  Goodlad, Alastair

  Miller, Hal (Bromsgrove)

  Bennett, Dr Reginald (Fareham)

  Gorst, John

  Mills, Peter

  Benyon, W.

  Gow, Ian (Eastbourne)

  Miscampbell, Norman

  Berry, Hon Anthony

  Gower, Sir Raymond (Barry)

  Mitchell, David (Basingstoke)

  Biffen, John

  Grant, Anthony (Harrow C)

  Moate, Roger

  Biggs-Davison, John

  Gray, Hamish

  Molyneaux, James

  Blaker, Peter

  Grieve, Percy

  Monro, Hector

  Body, Richard

  Griffiths, Eldon

  Montgomery, Fergus

  Boscawen, Hon Robert

  Grist, Ian

  Moore, John (Croydon C)

  Bottomley, Peter

  Hall-Davis, A. G. F.

  More, Jasper (Ludlow)

  Bowden, A. (Brighton, Kemptown)

  Hamilton, Michael (Salisbury)

  Morgan, Geraint

  Boyson, Dr Rhodes (Brent)

  Hampson, Dr Keith

  Morgan-Giles, Rear-Admiral

  Bradford, Rev Robert

  Hannam, John

  Morris, Michael (Northampton S)

  Braine, Sir Bernard

  Harrison, Col Sir Harwood (Eye)

  Morrison, Charles (Devizes)

  Brittan, Leon

  Harvie Anderson, Rt Hon Miss

  Morrison, Hon Peter (Chester)

  Brotherton, Michael

  Havers, Sir Michael

  Neave, Airey

  Brown, Sir Edward (Bath)

  Hawkins, Paul

  Nelson, Anthony

  Bryan, Sir Paul

  Hayhoe, Barney

  Neubert, Michael

  Buchanan-Smith, Alick

  Heseltine, Michael

  Newton, Tony

  Buck, Antony

  Holland, Philip

  Normanton, Tom

  Budgen, Nick

  Hordern, Peter

  Nott, John

  Bulmer, Esmond

  Howe, Rt Hon Sir Geoffrey

  Oppenheim, Mrs Sally

  Burden, F. A.

  Howell, David (Guildford)

  Osborn, John

  Carlisle, Mark

  Howell, Ralph (North Norfolk)

  Page, John (Harrow West)

  Carson, John

  Hunt, John

  Page, Rt Hon R. Graham (Crosby)

  Chalker, Mrs Lynda

  Hurd, Douglas

  Percival, Ian

  Channon, Paul

  Hutchison, Michael Clark

  Peyton, Rt Hon John

  Churchill, W. S.

  Irvine, Bryant Godman (Rye)

  Pink, R. Bonner

  Clark, Alan (Plymouth, Sutton)

  Irving, Charles (Cheltenham)

  Powell, Rt Hon J. Enoch

  Clark, William (Croydon S)

  James, David

  Price, David (Eastleigh)

  Clarke, Kenneth (Rushcliffe)

  Jenkin, Rt Hon P. (Wanst'd & W'df'd)

  Prior, Rt Hon James

  Clegg, Walter

  Jessel, Toby

  Pym, Rt Hon Francis

  Cockcroft, John

  Johnson Smith, G. (E Grinstead)

  Raison, Timothy

  Cooke, Robert (Bristol W)

  Jones, Arthur (Daventry)

  Rathbone, Tim

  Cope, John

  Jopling, Michael

  Rawlinson, Rt Hon Sir Peter

  Cormack, Patrick

  Joseph, Rt Hon Sir Keith

  Rees, Peter (Dover & Deal)

  Corrie, John

  Kaberry, Sir Donald

  Rees-Davies, W. R.

  Costain, A. P.

  Kellett-Bowman, Mrs Elaine

  Renton, Rt Hon Sir D. (Hunts)

  Critchley, Julian

  Kershaw, Anthony

  Ronton, Tim (Mid-Sussex)

  Crouch, David

  Kimball, Marcus

  Rhys Williams, Sir Brandon

  Crowder, F. P.

  King, Evelyn (South Dorset)

  Ridley, Hon Nicholas

  Davies, Rt Hon J. (Knutsford)

  King, Tom (Bridgwater)

  Ridsdale, Julian

  Dean, Paul (N Somerset)

  Kirk, Peter

  Rifkind, Malcolm

  Dodsworth, Geoffrey

  Kitson, Sir Timothy

  Rippon, Rt Hon Geoffrey

  Douglas-Hamilton, Lord James

  Knight, Mrs Jill

  Roberts, Michael (Cardiff NW)

  Drayson, Burnaby

  Lamont, Norman

  Roberts, Wyn (Conway)

  du Cann, Rt Hon Edward

  Lane, David

  Rodgers, Sir John (Sevenoaks)

  Dunlop, John

  Langford-Holt, Sir John

  Ross, William (Londonderry)

  Durant, Tony

  Latham, Michael (Melton)

  Rossi, Hugh (Hornsey)

  Eden, Rt Hon Sir John

  Lawrence, Ivan

  Rost, Peter (SE Derbyshire)

  Edwards, Nicholas (Pembroke)

  Lawson, Nigel

  Royle, Sir Anthony

  Elliott, Sir William

  Le Marchant, Spencer

  Sainsbury, Tim

  Emery, Peter

  Lester, Jim (Beeston)

  St. John-Stevas, Norman

  Eyre, Reginald

  Lewis, Kenneth (Rutland)

  Scott, Nicholas

  Fairbairn, Nicholas

  Lloyd, Ian

  Shaw, Giles (Pudsey)

  Faingrieve, Russell

  Loveridge, John

  Shaw, Michael (Scarborough)

  Farr, John

  Luce, Richard

  Shelton, William (Streatham)

  Fell, Anthony

  McAdden, Sir Stephen

  Shepherd, Colin

  Finsberg, Geoffrey

  McCrindle, Robert

  Shersby, Michael

  Fisher, Sir Nigel

  McCusker, H.

  Silvester, Fred

  Fletcher Alex (Edinburgh N)

  Macfarlane, Neil

  Sims, Roger

  Fookes Miss Janet

  MacGregor, John

  Sinclair, Sir George

  Fowler, Norman (Sutton C'f'd)

  Macmillan, Rt Hon M. (Farnham)

  Skeet, T. H. H.

  Fox, Marcus

  McNair-Wilson, M. (Newbury)

  Smith, Dudley (Warwick)

  Fraser, Rt Hon H. (Stafford & St)

  McNair-Wilson, P. (New Forest)

  Speed, Keith

  Spence, John

  Tebbit, Norman

  Wall, Patrick

  Spicer, Jim (W Dorset)

  Temple-Morris, Peter

  Walters, Dennis

  Spicer, Michael (S Worcester)

  Thatcher, Rt Hon Margaret

  Weatherill, Bernard

  Sproat, Iain

  Thomas, Rt Hon P. (Hendon S)

  Wells, John

  Stanbrook, Ivor

  Townsend, Cyril D.

  Wiggin, Jerry

  Stanley, John

  Trotter, Neville

  Winterton, Nicholas

  Steen, Anthony (Wavertree)

  Tugendhat, Christopher

  Wood, Rt Hon Richard

  Stewart, Ian (Hitchin)

  van Straubenzee, W. R.

  Young, Sir G. (Ealing, Acton)

  Stokes, John

  Vaughan, Dr Gerard

  Younger, Hon George

  Stradling Thomas, J.

  Viggers, Peter

  Tapsell, Peter

  Wakeham, John

  TELLERS FOR THE AYES:

  Taylor, R. (Croydon NW)

  Walker, Rt Hon P. (Worcester)

  Mr. Adam Butler and

  Taylor, Teddy (Cathcart)

  Walker-Smith, Rt Hon Sir Derek

  Mr. Cecil Parkinson.

  NOES

  Abse, Leo

  Delargy, Hugh

  Hughes, Roy (Newport)

  Allaun, Frank

  Dell, Rt Hon Edmund

  Hunter, Adam

  Anderson, Donald

  Dempsey, James

  Irvine, Rt Hon Sir A. (Edge Hill)

  Archer, Peter

  Doig, Peter

  Irving, Rt Hon S. (Dartford)

  Armstrong, Ernest

  Dormand, J. D.

  Jackson, Colin (Brighouse)

  Ashley, Jack

  Douglas-Mann, Bruce

  Jackson, Miss Margaret (Lincoln)

  Ashton, Joe

  Duffy, A. E. P.

  Janner, Greville

  Atkins, Ronald (Preston N)

  Dunn, James A.

  Jay, Rt Hon Douglas

  Atkinson, Norman

  Dunnett, Jack

  Jeger, Mrs Lena

  Bagier, Gordon A. T.

  Dunwoody, Mrs Gwyneth

  Jenkins, Hugh (Putney)

  Barnett, Guy (Greenwich)

  Eadie, Alex

  Jenkins, Rt Hon Roy (Stechford)

  Barnett, Rt Hon Joel (Heywood)

  Edelman, Maurice

  John, Brynmor

  Bales, Alf

  Edge, Geoff

  Johnson, James (Hull West)

  Bean, R. E.

  Edwards, Robert (Wolv SE)

  Johnson, Walter (Derby S)

  Beith, A. J.

  Ellis, John (Brigg & Scun)

  Johnston, Russell (Inverness)

  Benn, Rt Hon Anthony Wedgwood

  Ellis, Tom (Wrexham)

  Jones, Alec (Rhondda)

  Bennett, Andrew (Stockport N)

  English, Michael

  Jones, Barry (East Flint)

  Bidwell, Sydney

  Ennals, David

  Judd, Frank

  Bishop, E. S.

  Evans, Fred (Caerphilly)

  Kaufman, Gerald

  Blenkinsop, Arthur

  Evans, loan (Aberdare)

  Kelley, Richard

  Boardman, H.

  Evans, John (Newton)

  Kilfedder, James

  Booth, Albert

  Ewing, Harry (Stirling)

  Kifroy-Silk, Robert

  Boothfoyd, Miss Betty

  Faulds, Andrew

  Kinnock, Neil

  Bottomley, Rt Hon Arthur

  Fernyhough, Rt Hon E.

  Lambie, David

  Boyden, James (Blsh Auck)

  Fitch, Alan (Wigan)

  Lamborn, Harry

  Bradley, Tom

  Fitt, Gerard (Belfast W)

  Lamont, Norman

  Bray, Dr Jeremy

  Flannery, Martin

  Leadbitter, Ted

  Brown, Hugh D. (Provan)

  Fletcher Raymond (Ilkeston)

  Lee, John

  Brown, Robert C. (Newcastle W)

  Fletcher, Ted (Darlington)

  Lestor, Miss Joan (Eton & Slough)

  Brown, Ronald (Hackney S)

  Foot, Rt Hon Michael

  Lever, Rt Hon Harold

  Buchan, Norman

  Ford, Ben

  Lewis, Arthur (Newham N)

  Buchanan, Richard

  Forrester, John

  Lewis, Ron (Carlisle)

  Butler, Mrs Joyce (Wood Green)

  Fowler, Gerald (The Wrekin)

  Lipton, Marcus

  Callaghan, Rt Hon J. (Cardiff SE)

  Fraser, John (Lambeth, N'w'd)

  Litterick, Tom

  Callaghan, Jim (Middleton & P)

  Freeson, Reginald

  Lomas, Kenneth

  Campbell, Ian

  Freud, Clement

  Loyden, Eddie

  Canavan, Dennis

  Garrett, John (Norwich S)

  Luard, Evan

  Cant, R. B.

  Garrett, W. E. (Wallsend)

  Lyon, Alexander (York)

  Carmichael, Neil

  George, Bruce

  Lyons, Edward (Bradford W)

  Carter, Ray

  Gilbert, Dr John

  McCartney, Hugh

  Carter-Jones, Lewis

  Ginsburg, David

  McElhone, Frank

  Cartwright, John

  Golding, John

  MacFarquhar, Roderick

  Castle, Rt Hon Barbara

  Gould, Bryan

  McGuire, Michael (Ince)

  Clemitson, Ivor

  Gourlay, Harry

  Mackenzie, Gregor

  Cocks, Michael (Bristol S)

  Graham, Ted

  Mackintosh, John P.

  Cohen, Stanley

  Grant, George (Morpeth)

  Maclennan, Robert

  Coleman, Donald

  Grant, John (Islington C)

  McMillan, Tom (Glasgow C)

  Concannon, J. D.

  Grimond, Rt Hon J.

  McNamara, Kevin

  Conlan, Bernard

  Grocott, Bruce

  Madden, Max

  Cook, Robin F. (Edin C)

  Hamilton, James (Bothwell)

  Magee, Bryan

  Corbett, Robin

  Hamilton, W. W. (Central Fife)

  Mahon, Simon

  Cox, Thomas (Tooting)

  Hardy, Peter

  Mallalieu, J. P. W.

  Craigen, J. M. (Maryhill)

  Harper, Joseph

  Marks, Kenneth

  Crawshaw, Richard

  Harrison, Walter (Wakefield)

  Marquand, David

  Cronin, John

  Hart, Rt Hon Judith

  Marshall, Dr Edmund (Goole)

  Crosland, Rt Hon Anthony

  Hattersley, Rt Hon Roy

  Marshall, Jim (Leicester S)

  Cryer, Bob

  Hatton, Frank

  Mason, Rt Hon Roy

  Cunningham, G. (Islington S)

  Hayman, Mrs Helene

  Maynard, Miss Joan

  Cunningham, Dr J. (Whiten)

  Healey, Rt Hon Denis

  Meacher, Michael

  Dalyell, Tam

  Heffer, Eric S.

  Mellish, Rt Hon Robert

  Davidson, Arthur

  Hooley, Frank

  Mendelson, John

  Davies, Bryan (Enfield N)

  Hooson, Emlyn

  Mikardo, Ian

  Davies, Denzil (Llanelli)

  Horam, John

  Millan, Bruce

  Davies, Ifor (Gower)

  Howell, Denis (B'ham Sm H)

  Miller, Dr M. S. (E Kilbride)

  Davis, Clinton (Hackney C)

  Hoyle, Doug (Nelson)

  Miller, Mrs Millie (llford N)

  Deakins, Eric

  Huckfield, Les

  Mitchell, R. C. (Solon, lichen;

  Dean, Joseph (Leeds West)

  Hughes, Rt Hon C. (Anglesey)

  Molloy, William

  de Freitas, Rt Hon Sir Geoffrey

  Hughes, Robert (Aberdeen N)

  Moonman, Eric

  696

  697

  Morris, Alfred (Wythenshawe)

  Roper, John

  Tierney, Sydney

  Morris, Charles R. (Openshaw)

  Rose, Paul B.

  Tinn, James

  Morris, Rt Hon J. (Aberavon)

  Ross, Stephen (Isle of Wight)

  Tomlinson, John

  Moyle, Roland

  Ross, Rt Hon W. (Kilmarnock)

  Tomney, Frank

  Mudd, David

  Rowlands, Ted

  Torney, Tom

  Mulley, Rt Hon Frederick

  Ryman, John

  Tuck, Raphael

  Murray, Rt Hon Ronald King

  Sandelson, Neville

  Urwin, T. W.

  Newens, Stanley

  Sedgemore, Brian

  Varley, Rt Hon Eric G.

  Noble, Mike

  Selby, Harry

  Wainwright, Edwin (Dearne V)

  Oakes, Gordon

  Shaw, Arnold (llford South)

  Wainwright, Richard (Colne V)

  Ogden, Eric

  Sheldon, Robert (Ashton-u-Lyne)

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

  O'Halloran, Michael

  Shore, Rt Hon Peter

  Walker, Harold (Doncaster)

  Orbach, Maurice

  Short, Rt Hon E. (Newcastle C)

  Walker, Terry (Kingswood)

  Orme, Rt Hon Stanley

  Snort, Mrs Renée (Wolv NE)

  Ward, Michael

  Ovenden, John

  Silkin, Rt Hon John (Deptford)

  Watkins, David

  Owen, Dr David

  Silkin, Rt Hon S. C. (Dulwich)

  Watkinson, John

  Padley, Walter

  Sillars, James

  Weetch, Ken

  Palmer, Arthur

  Silverman, Julius

  Weitzman, David

  Pardoe, John

  Skinner, Dennis

  Wellbeloved, James

  Park, George

  Small, William

  White, Frank R. (Bury)

  Parker, John

  Smith, Cyril (Rochdale)

  White, James (Pollok)

  Parry, Robert

  Smith, John (N Lanarkshire)

  Whitehead, Phillip

  Peart, Rt Hon Fred

  Snape, Peter

  Whitlock, William

  Pendry, Tom

  Spearing, Nigel

  Wigley, Dafydd

  Penhaligon, David

  Spriggs, Leslie

  Willey, Rt Hon Frederick

  Perry, Ernest

  Stallard, A. W.

  Williams, Alan (Swansea W)

  Phipps, Dr Colin

  Steel, David (Roxburgh)

  Williams, Alan Lee (Hornch'ch)

  Prescott, John

  Stewart, Rt Hon M. (Fulham)

  Williams, Rt Hon Shirley (Hertford)

  Price, C. (Lewisham W)

  Stott, Roger

  Williams, W. T. (Warrington)

  Price, William (Rugby)

  Strang, Gavin

  Wilson, Alexander (Hamilton)

  Radice, Giles

  Strauss, Rt Hon G. R.

  Wilson, Rt Hon H. (Huyton)

  Rees, Rt Hon Merlyn (Leeds S)

  Summerskill, Hon Dr Shirley

  Wilson, William (Coventry SE)

  Richardson, Miss Jo

  Swain, Thomas

  Wise, Mrs Audrey

  Roberts, Albert (Normanton)

  Taylor, Mrs Ann (Bolton W)

  Woodall, Alec

  Roberts, Gwilym (Cannock)

  Thomas, Dafydd (Merioneth)

  Woof, Robert

  Robertson, John (Paisley)

  Thomas, Jeffrey (Abertillery)

  Young, David (Bolton E)

  Roderick, Caerwyn

  Thomas, Mike (Newcastle E)

  Rodgers, George (Chorley)

  Thomas, Ron (Bristol NW)

  TELLERS FOR THE NOES

  Rodgers, William (Stockton)

  Thorne, Stan (Preston South)

  Mr. Laurie Pavitt and

  Rooker, J. W.

  Thorpe, Rt Hon Jeremy (N Devon)

  Mr. David Stoddart.

  Question accordingly negatived.
  Main Question put forthwith pursuant to Standing Order NO. 39 (Amendment on Second or Third reading):
  The House divided: Ayes 294, Noes 16.

  Division No. 297.]

  AYES

  (10.14 p.m.

  Abse, Leo

  Carter, Ray

  Douglas-Mann, Bruce

  Anderson, Donald

  Carter-Jones, Lewis

  Duffy, A. E. P.

  Archer, Peter

  Cartwright, John

  Dunn, James A.

  Armstrong, Ernest

  Castle, Rt Hon Barbara

  Dunnett, Jack

  Ashley, Jack

  Clemitson, Ivor

  Dunwoody, Mrs Gwyneth

  Ashton, Joe

  Cocks, Michael (Bristol S)

  Eadie, Alex

  Atkinson, Norman

  Cohen, Stanley

  Edelman, Maurice

  Bagier, Gordon A. T.

  Coleman, Donald

  Edge, Geoff

  Barnett, Guy (Greenwich)

  Concannon, J. D.

  Ellis, Tom (Wrexham)

  Barnett, Rt Hon Joel (Heywood)

  Conlan, Bernard

  English, Michael

  Bates, All

  Cook, Robin F. (Edin C)

  Ennals, David

  Bean, R. E.

  Corbett, Robin

  Evans, loan (Aberdare)

  Beith, A. J.

  Cox, Thomas (Tooting)

  Evans, John (Newton)

  Benn, Rt Hon Anthony Wedgwood

  Craigen, J. M. (Maryhill)

  Ewing, Harry (Stirling)

  Bennett, Andrew (Stockport N)

  Crawshaw, Richard

  Faulds, Andrew

  Bidwell, Sydney

  Cronin, John

  Femyhough, Rt Hon E.

  Bishop, E. S.

  Crosland, Rt Hon Anthony

  Fitch, Alan (Wigan)

  Blenkinsop, Arthur

  Cryer, Bob

  Fitt, Gerard (Belfast W)

  Boardman, H.

  Cunningham, G. (Islington S)

  Fletcher Raymond (Ilkeston)

  Booth, Albert

  Cunningham, Dr J. (Whiteh)

  Fletcher, Ted (Darlington)

  Boyden, James (Bish Auck)

  Dalyell, Tarn

  Foot, Rt Hon Michael

  Bradley, Tom

  Davidson, Arthur

  Ford, Ben

  Bray, Dr Jeremy

  Davies, Bryan (Enfield N)

  Forrester, John

  Brown, Hugh D. (Provan)

  Davies, Denzil (Llanelli)

  Fowler, Gerald (The Wrekin)

  Brown, Robert C. (Newcastle W)

  Davis, Clinton (Hackney C)

  Fraser, John (Lambeth, N'w'd)

  Brown, Ronald (Hackney S)

  Deakins, Eric

  Freeson, Reginald

  Buchan, Norman

  Dean, Joseph (Leeds West)

  Garrett, John (Norwich S)

  Buchanan, Richard

  de Freitas, Rt Hon Sir Geoffrey

  Garrett, W. E. (Wallsend)

  Butler, Mrs Joyce (Wood Green)

  Delargy, Hugh

  George, Bruce

  Callaghan, Rt Hon J. (Cardiff SE)

  Dell, Rt Hon Edmund

  Gilbert, Dr John

  Campbell, Ian

  Dempsey, James

  Ginsburg, David

  Cant, R. B.

  Dolg, Peter

  Golding, John

  Carmichael, Neil

  Dormand, J. D.

  Gould, Bryan

  Gourlay, Harry

  Mackenzie, Gregor

  Ryman, John

  Graham, Ted

  Mackintosh, John P.

  Sandelson, Neville

  Grant, George (Morpeth)

  Maclennan, Robert

  Sedgemore, Brian

  Grant, John (Islington C)

  McMillan, Tom (Glasgow C)

  Shaw, Arnold (llford South)

  Grimond, Rt Hon J.

  McNamara, Kevin

  Sheldon, Robert (Ashton-u-Lyne)

  Grocott, Bruce

  Magee, Bryan

  Shore, Rt Hon Peter

  Hamilton, James (Bothwell)

  Mahon, Simon

  Short, Rt Hon E. (Newcastle C)

  Hamilton, W. W. (Central File)

  Mallalieu, J. P. W.

  Short, Mrs Renée (Wolv NE)

  Hardy, Peter

  Marks, Kenneth

  Silkin, Rt Hon John (Deptford)

  Harper, Joseph

  Marquand, David

  Silkin, Rt Hon S. C. (Dulwich)

  Harrison, Walter (Wakefield)

  Marshall, Dr Edmund (Goole)

  Silverman, Julius

  Hart, Rt Hon Judith

  Marshall, Jim (Leicester S)

  Smith, Cyril (Rochdale)

  Hattersley, Rt Hon Roy

  Mason, Rt Hon Roy

  Smith, John (N Lanarkshire)

  Hatton, Frank

  Meacher, Michael

  Spearing, Nigel

  Hayman, Mrs Helene

  Mellish, Rt Hon Robert

  Spriggs, Leslie

  Healey, Rt Hon Denis

  Mendelson, John

  Stallard, A. W.

  Heifer, Eric S.

  Mikardo, Ian

  Steel, David (Roxburgh)

  Hooley, Frank

  Millan, Bruce

  Stewart, Rt Hon M. (Fulham)

  Hooson, Emlyn

  Miller, Dr M. S. (E Kilbride)

  Stoddart, David

  Horam, John

  Miller, Mrs Millie (llford N)

  Stott, Roger

  Howell, Denis (B'ham Sm H)

  Mitchell, R. C. (Soton, lichen)

  Strang, Gavin

  Hoyle, Doug (Nelson)

  Molloy, William

  Strauss, Rt Hon G. R.

  Huckfield, Les

  Moonman, Eric

  Summerskill, Hon Dr Shirley

  Hughes, Rt Hon C. (Anglesey)

  Morris, Alfred (Wythenshawe)

  Swain, Thomas

  Hughes Robert (Aberdeen N)

  Morris, Charles R. (Openshaw)

  Taylor, Mrs Ann (Bolton W)

  Hughes Roy (Newport)

  Morris, Rt Hon J. (Aberavon)

  Thomas, Jeffrey (Abertillery)

  Hunter, Adam

  Moyle, Roland

  Thomas, Mike (Newcastle E)

  Irvine, Rt Hon Sir A. (Edge Hill)

  Mudd, David

  Thomas, Ron (Bristol NW)

  Irving, Rt Hon S. (Dartford)

  Mulley, Rt Hon Frederick

  Thorpe, Rt Hon Jeremy (N Devon)

  Jackson, Colin (Brighouse)

  Murray, Rt Hon Ronald King

  Tierney, Sydney

  Jackson, Miss Margaret (Lincoln)

  Noble, Mike

  Tinn, James

  Jannar, Greville

  Oakes, Gordon

  Tomlinson, John

  Jay, Rt Hon Douglas

  Ogden, Eric

  Torney, Tom

  Jeger, Mrs Lena

  O'Halloran, Michael

  Tuck, Raphael

  John, Brynmor

  Orbach, Maurice

  Urwin, T. W.

  Jenkins, Hugh (Putney)

  Orme, Rt Hon Stanley

  Varley, Rt Hon Eric G.

  Jenkins, Rt Hon Roy (Stechford)

  Ovenden, John

  Wainwright, Edwin (Dearne V)

  Johnson, James (Hull West)

  Owen, Dr David

  Wainwright, Richard (Colne V)

  Johnson, Walter (Derby S)

  Padley, Walter

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

  Johnston, Russell (Inverness)

  Palmer, Arthur

  Walker, Harold (Doncaster)

  Pardoe, John

  Walker, Terry (Kingswood)

  Jones, Alec (Rhondda)

  Park, George

  Ward, Michael

  Jones, Barry (East Flint)

  Parker, John

  Watkins, David

  Judd, Frank

  Parry, Robert

  Watkinson, John

  Kaufman, Gerald

  Pavitt, Laurie

  Weetch, Ken

  Kelley, Richard

  Peart, Rt Hon Fred

  Weitzman, David

  Kilfedder, James

  Pendry, Tom

  Wellbeloved, Jamas

  Kilroy-Silk, Robert

  Penhaligon, David

  White, Frank R. (Bury)

  Kinnock, Neil

  Perry, Ernest

  White, James (Pollok)

  Lamborn, Harry

  Phipps, Dr Colin

  Whitehead, Phillip

  Lamond, James

  Prescott, John

  Whitlock, William

  Leadbitter, Ted

  Price, C. (Lewisham W)

  Willey, Rt Hon Frederick

  Lee, John

  Price, William (Rugby)

  Williams, Alan (Swansea W)

  Lestor, Miss Joan (Eton & Slough)

  Radice, Giles

  Williams, Alan Lee (Kornch'ch)

  Lever, Rt Hon Harold

  Rees, Rt Hon Merlyn (Leeds S)

  Williams, Rt Hon Shirley (Hertford)

  Lewis, Arthur (Newham N)

  Richardson, Miss Jo

  Williams, W. T. (Warrington)

  Lewis, Ron (Carlisle)

  Roberts, Albert (Normanton)

  Wilson Alexander (Hamilton)

  Lipton, Marcus

  Roberts, Gwilym (Cannock)

  Wilson, Rt Hon H. (Huyton)

  Litterick, Tom

  Roderick, Caerwyn

  Wilson, William (Coventry SE)

  Lomas, Kenneth

  Rodgers, George (Chorley)

  Woodall, Alec

  Luard, Evan

  Rodgers, William (Stockton)

  Woof, Robert

  Lyon, Alexander (York)

  Rooker, J. W.

  Young, David (Bolton E)

  Lyons, Edward (Bradford W)

  Roper, John

  McCartney, Hugh

  Rose, Paul B.

  TELLERS FOR THE AYES:

  McElhone, Frank

  Ross, Stephen (Isle of Wight)

  Miss Betty Boothroyd and

  MacFarquhar, Roderick

  Ross, Rt Hon W. (Kilmarnock)

  Mr John Ellis

  McGuire, Michael (Ince)

  Rowlands, Ted

  NOES

  Bain, Mrs Margaret

  McCusker, H.

  Watt, Hamish

  Bradford, Rev Robert

  Molyneaux, James

  Wigley, Dafydd

  Carson, John

  Powell, Rt Hon J. Enoch

  Crawford, Douglas

  Ross, William (Londonderry)

  TELLERS FOR THE NOES

  Dunlop, John

  Stewart, Donald (Western Isles)

  Mr Douglas Henderson and

  Lambie, David

  Thomas, Dafydd (Merioneth)

  Mr Gordon Wilson

  MacCormick, Iain

  Thompson, George

  Question accordingly agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the whole House.—[Miss Jackson.]
  Committee tomorrow.

  BUSINESS OF THE HOUSE
  Ordered,
  That, at this day's sitting, the consideration of Lords Amendments to the Lotteries Bill, the Limitation Bill [Lords] and the Public Service Vehicles (Arrest of Offenders) Bill [Lords] may he proceeded with, though opposed, until any hour.—[Miss Jackson.]

  REMUNERATION, CHARGES AND GRANTS [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  702
  That, for the purposes of any Act of the present Session to limit liability for certatin remuneration; to enable certain provisions of Part II of the Counter-Inflation Act 1973 to be extended and to amend section 2 of that Act; to enable housing subsidy to be increased and to provide for a new grant to local authorities in Scotland, it is expedient to authorize—

  (a) the payment out of moneys provided by Parliament of a new grant to local authorities in Scotland for the year 1976–77; and

  (b) any increase attributable to that Act in the sums payable out of moneys provided by Parliament under any other Act.—[Miss Jackson.]

  LOTTERIES BILL
  Lords Amendments considered.
  LOTTERIES BILL
    Clause 9

      RULES FOR AUTHORISED LOTTERIES
      Lords Amendment: No. 1, in page 7, line 10, leave out "30 per cent." and insert "25 per cent."
      10.22 p.m.
      The Under-Secretary of State for the Home Department (Dr. Shirley Summerskill): I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Speaker: With this we are to take Lords Amendments Nos. 2 and 5, which are in similar terms.
      Dr. Summerskill: The present law limits expenses to 10 per cent. of the proceeds, but that has been found to be too restrictive. In preparing the Bill the Government had in mind a limit of 20 per cent., but strong representations were received that this was inadequate. Hence, the Bill was introduced into the House with the figure of 30 per cent. On further reflection, the Government think that this is an area where tolerance should not be exercised in favour of additional expenditure on expenses, and on balance, having considered the various amounts that have been discussed, we regard an overall limit of 25 per cent. as reasonable.
      Amendments Nos. 2 and 5 are consequential upon Amendment No. 1, and Amendment No. 5 applies the new limit on expenses to Clause 13, which provides for the early raising of the financial limits on lotteries permitted on behalf of societies.
      Mr. W. R. Rees-Davies: I entirely agree with the Government's view that 25 per cent. is more than sufficient, and it should be tightly held. Will the Minister give guidance to local authorities to ensure that wherever possible they use local volunteers and not paid canvassers, thereby keeping down expenditure so that advantage can accrue to the objective of the lottery? That is the real heart of the matter. We do not
      704
      want them to employ paid canvassers when it is possible to avoid doing so.
      10.30 p.m.
      Dr. Summerskill: This is a rather separate point from the point contained in the amendment, but it is covered by Clause 10(3)(a), which reads:
      "the persons to whom and by whom tickets or chances in a lottery may or may not be sold".
      Mr. Rees-Davies: That is true as regards the regulations, but the whole question of whether administrative expenditure will be kept down depends upon whether we can persuade people to volunteer. I hope that the hon. Lady will consider sending some guidance with the circulars and inviting local authorities to use unpaid local help wherever possible.
      Mr. James Lamond: To whom was my hon. Friend referring when she mentioned representations having been received? It was originally intended that the figure should be 20 per cent. Is this not a further unfortunate episode in the sorry tale of the Bill? There was a change from 20 per cent. to 30 per cent. following certain representations, and now we are to settle for 25 per cent. Were there any consultations on the part of the Government before it was decided to move from 30 per cent. to 25 per cent.?
      Dr. Summerskill: The Bill as introduced in this House included a maximum limit of 30 per cent., but in Committee in another place the Earl of Mansfield moved an amendment which would have set the maximum amount which could be appropriated on account of expenses at 15 per cent. of the proceeds. The Government undertook to consider the matter before Report in another place. That is how we came to re-examine the figure.
      Mr. John Farr: I think it is a pity that we are to accept an amendment to reduce the level from 30 per cent. to 25 per cent. Since the Bill left this place about two or three months ago promoters' costs have not decreased in any way. There was discussion in Committee on the proper percentage, and the hon. Lady was gracious enough to make a concession as regards an amendment I moved relating to lotteries over

      705
      £5,000. We are now considering the level of the percentage which can be deducted for lotteries where the total proceeds are less than£5,000. I think that 30 per cent. is about the right level.
      Let us imagine the costs involved in running a small lottery with total proceeds less than£5,000. There is a horrifying list of increased charges. For example, telephone charges have increased by a tremendous amount in the past couple of years. First-class post is now the equivalent of is 6d a letter, and it is due to go up again within days. Promoters have to meet all these expenses in making a success of their lotteries. Their expenses have not decreased since the Bill left this place. It is a pity that we are not sticking firm.
      Dr. Summerskill: I appreciate that a case can be made out for 15 per cent. and that another case can be made for 30 per cent. A case can be made for any percentage between those two levels. There is a difference of opinion on this matter. We felt that a compromise, and an acceptable figure to most people, would he 25 per cent., a level somewhere between the two extremes.
      Question put and agreed to.
      Subsequent Lords amendment agreed to.

    Clause 10

      REGULATIONS
      Lords Amendment: No. 3, in page 7, line 31, at end insert:
      "and in which persons may be invited to purchase tickets or chances".
      Dr. Summerskill: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker (Sir Myer Galpern): With this amendment, we are also taking Lords Amendment No. 4, in page 7, line 36, at end insert:
      "(ee) the use of postal services in connection with lotteries;"
      Dr. Summerskill: These amendments are aimed at making it clear that the regulation-making power given to the Secretary of State by Clause 10 extends to particular matters. The first amendment will enable the Secretary of State to make regulations, should this be
      706
      thought to be desirable, imposing requirements or restrictions on door-to-door visits by lottery ticket sellers and on any undesirable or aggressive selling. This point was made forcibly in Committee.
      The second amendment enables the Secretary of State to regulate for example, who may or may not be sent tickets through the post—which was another point made strongly in Committee. These matters were also raised on Report by the hon. Member for Barkston Ash (Mr. Alison).
      I undertook to consider the desirability of introducing amendments to cover these points, and I am glad that it has been possible so to amend the Bill.
      Question put and agreed to.
      Subsequent Lords amendments agreed to.

    Clause 14

      INCREASE IN MAXIMUM PRIZES FOR CERTAIN LOTTERIES AND ENTERTAINMENTS
      Lords Amendment: No. 6, in page 10, line 8, leave out subsection (2).
      Dr. Summerskill: I beg to move, That this House doth agree with the Lords in the said amendment.
      Mr. Deputy Speaker: With this amendment, we are also taking the following:
      Lords Amendment No. 10, in Clause 19, page 11, line 24, at end insert:
      "() Schedule [Consolidation amendments] to this Act shall have effect for the purpose of facilitating the consolidation of the enactments relating to lotteries and in particular for the purpose of removing anomalies and correcting errors in those enactments.")
      Lords Amendment No. 11, after Schedule 3, in page 16, line 29, at end insert new Schedule A—

  SCHEDULE A

    CONSOLIDATION AMENDMENTS
    The Betting, Gaming and Lotteries Act 1963
    1. For subsection (2)(d) of section 43 of the Betting, Gaming and Lotteries Act 1963 (exemption of small lotteries incidental to certain entertainments) there shall be substituted the following paragraph:—
    "(d) the facilities for participating in lotteries under this section, or those facilities together with any other facilities for participating in lotteries or gaming, shall not be the only, or the only substantial, inducement to persons to attend the entertainment.".
    2. For section 48 of that Act (provision of amusements with prizes at certain non-commercial entertainments) there shall be substituted the following section:—
    "Provision of amusements with prizes at certain non-commercial entertainments.
    48.—(1) This section applies to the provision, at any entertainment to which section 43 of this Act applies, of any amusement with prizes which constitutes a lottery or gaming or both but does not constitute—

    (a) gaming to which Part II of the Gaming Act 1968 applies, or

    (b) gaming by means of a machine to which Part III of that Act applies.

    (2) Where any such amusement constitutes a lottery, nothing in section 41 or section 42 of this Act shall apply to it.
    (3) In relation to any such amusement (whether it constitutes a lottery or not) the conditions set out in subsection (4) of this section shall be observed, and if either of those conditions is contravened every person concerned in the provision or conduct of that amusement shall be guilty of an offence unless he proves that the contravention occurred without his consent or connivance and that he exercised all due diligence to prevent it.
    (4) The conditions referred to in the last foregoing subsection are—

    (a) that the whole proceeds of the entertainment, after deducting the expenses of the entertainment, shall be devoted to purposes other than private gain; and

    (b) that the facilities for winning prizes at amusements to which this section applies, or those facilities together with any other facilities for participating in lotteries or gaming, shall not be the only, or the only substantial inducement to persons to attend the entertainment."

    3. Sections 51 (search warrants) and 52(4) (forfeiture) of that Act shall have effect in relation to offences under this Act.
    The Local Government Act 1966
    4. In Part II of Schedule 3 to the Local Government Act 1966 (fees for licences, registration etc. that may be varied by an order under section 35(2) of that Act) in paragraph 23 (which relates to the Betting, Gaming and
    708
    Lotteries Act 1963) for the words "paragraph 4" there shall be substituted the words "paragraph 16".
    The Local Government (Scotland) Act 1966
    5. In Part II of Schedule 4 to the Local Government (Scotland) Act 1966 (fees for licences, registration etc. that may be varied by an order under section 42 of that Act) in paragraph 26 (which relates to the Betting, Gaming and Lotteries Act 1963) for the words "paragraph 4" there shall be substituted the words "paragraph 16 ".
    The Gaming Act 1968
    6.—(1) For subsections (2) to (4) of section 33 of the Gaming Act 1968 (use of machines at non-commercial entertainments) there shall be substituted the following subsections:—
    "(2) Where a machine to which this Part of this Act applies is used for gaming as an incident of any such entertainment, the whole proceeds of the entertainment, after deducting the expenses of the entertainment, shall be devoted to purposes other than private gain.
    (2A) Where a machine to which this Part of this Act applies is used for gaming as an incident of an entertainment to which this section applies, the opportunity to win prizes by means of the machine, or that opportunity together with any other facilities, for participating in lotteries or gaming shall not be the only, or the only substantial, inducement to persons to attend the entertainment."
    (2) In subsection (5) of that section, for the words "to (4)" there shall be substituted the words "and (2A)".",
    and Lords Amendment No. 12, in Schedule 4, in page 16, line 46, at end insert—

    "1968 c. 65.

    The Gaming Act 1968.

    In Part I of Schedule 11, the entry relating to section 48 of the Betting, Gaming and Lotteries Act 1963."

    Dr. Summerskill: Lords Amendment No. 6 is a paving amendment for Lords Amendments Nos. 10 and 11. The purpose of those amendments is to add a new subsection to the Bill to give effect to the new schedule added to the Bill. All the amendments contained in the schedule are for the purpose of facilitating the consolidation of the law on lotteries. Lords Amendment No. 12 is an additional repeal consequential upon the introduction into the Bill of the new schedule of consolidation amendments.
    Question put and agreed to.

  Clause 15

    ALTERATION OF PENALTIES FOR OFFENCES UNDER PART III OF THE BETTING, GAMING AND LOTTERIES ACT 1963
    Lords Amendment: No. 7, in page 10, line 23, leave out "or 47" and insert "47, 48 or 49".
    Dr. Summerskill: I beg to move, That this House doth agree with the Lords in the said amendment.
    The purpose and effect of the amendment is to ensure that offences in connection with lotteries and similar activities, such as amusements with prizes provided at village fetes and on the pier at the seaside, are all liable to the same penalties under the Bill. The Bill in relation to all these various offences will exclude imprisonment on summary trial and allow a maximum fine of£400. On indictment the maximum penalty as provided by the Bill is two years' imprisonment or a fine, or both. These are the penalties which it is now customary to adopt in relation to offences against the gambling laws.
    Question put and agreed to.

  New Clause A

    COMMENCEMENT ORDERS
    Lords Amendment: No. 8, after clause 17, in page 11, line 12, at end insert new Clause A—
    Commencement orders
    "A. The Secretary of State shall not make an order under section 19(5) hereof until draft regulations shall have been made under section 10 above and such draft regulations have been laid before, and approved by, resolutions of both Houses of Parliament."
    Read a Second time.
    Dr. Summerskill: I beg to move, as an amendment to the Lords amendment, leave out from '19(5)' to the end and insert
    'below appointing a day for the coming into operation of section 1 above until he has made regulations under section 10 above which provide for their coming into operation on that day.
    (2) Regulations so providing shall not be made unless a draft of them has been approved by resolution of each House of Parliament.'.
    Mr. Deputy Speaker: We also take with this amendment the motion to disagree with Lords Amendment No. 9, the
    710
    amendment in lieu of Lords Amendment No. 9, in page 11, line 15, after 'below', insert
    'or of regulations of which a draft has been approved by resolution of each House of Parliament',
    and the following amendments in the name of the right hon. Member for Crosby (Mr. Page).
    As an amendment to Lords Amendment No. 8, after 'hereof', insert
    (other than in respect of sections 13 and 14 above and any provisions of the Schedules hereunder relevant to those sections and other than in respect of section 10 above and this section)',
    and as an amendment to Lords Amendment No. 9, leave out 'commencement of this Act' and insert
    'coming into operation of the regulations made under the provisions of the last preceding section'.
    Dr. Summerskill: The Government amendments will have the effect of securing the substance of the Lords amendments to the Bill while removing what we consider to be undesirable side effects.
    The intention of the other place was to require that the regulations should be subject to affirmative resolution by both Houses of Parliament. The Government did not think that the affirmative resolution procedure was essential in these circumstances, but we fully accept the desirability of there being ample discussion and consideration before the main regulations under the Bill are made. We therefore agree to the Bill being amended so that these regulations will require an affirmative resolution by each House.
    Unfortunately, the amendments made in the other place were not only technically defective but prevented Clause 13 —which was the important clause designed to give immediate assistance to the voluntary organisations and football clubs at present operating lotteries under Section 45 of the Betting, Gaming and Lotteries Act 1963—from being brought into operation before the rest of the Bill.
    The Government amendments, whilst securing the affirmative resolution procedure for the main regulations, will at the same time enable Clause 13, Clause 14 and the consolidation amendments to be brought into operation before the regulations have been made. But the Bill, with these Government amendments which I am moving, will prevent the

    711
    principal provisions of the Bill, which depend upon Clause 1, from being brought into operation until the first and main regulations have been approved in draft, and made.
    Mr. Graham Page: I am grateful to the hon. Lady for the amendments which she has put on the White Paper. Those in my name are in no way in opposition to hers. I think they went down simultaneously before I had read her amendments.
    We agree entirely with the Lords amendment that the regulations should be drafted and approved by this House before the remainder of the Bill is brought into operation, but it was a sort of chicken and egg position, and we found that if one accepted the Lords amendment in whole it would prevent the very beneficial Clauses 13 and 14 coming into operation right away, and those who run small lotteries want to be able to use these two clauses as soon as possible.
    The regulations will not relate to these clauses as I understand it, at all. There are the football clubs which want to get moving, as the season starts, with the new figures included in Clauses 13 and 14. This was the intention of the amendment in my name. I think the hon. Lady's amendment goes further and covers what I have in my amendment to the Lords Amendment No. 8, so I welcome this very much.
    Perhaps the hon. Lady will give us some information first on when she contemplates making a commencement order on the rest of the Bill, other than Clause I—I should have thought it could be very soon, in a month's time, after the Bill has received Royal Assent—and, following that, perhaps she can say when she hopes to have the draft regulations ready to come before the House. I am not asking her to anticipate, forecast and prophesy, but we should like to have a little information on those two dates.
    Mr. Rees-Davies: I should like to reinforce the point just made by my right hon. Friend the Member for Crosby (Mr. Page) and take it slightly further. Will not the Minister agree that she can give tonight a date upon which Clauses 13 and 14 will be brought into effect? The reason one wants to know it now—even if she says it will be in a month's time—
    712
    is that in the case of lotteries for societies preparations can be made. Presumably the Bill will receive the Royal Assent within a week, and I should have thought that it would be quite easy for her to say in regard to Clauses 13 and 14 that societies could work on the basis that they could begin on 1st September. That is the first matter.
    On the second matter, concerning the regulations, I realise that this will take somewhat longer, but would not it be possible again for the hon. Lady to give a clear date, which we would know by the end of September, by which time the draft regulations could be made, so that they could be considered? In the consideration of the regulations I trust that she will bear in mind very carefully the absolute need to have the widest possible dissemination of tickets, and, therefore, the least possible professional doorstep canvassing. It is apparent time and again that people could easily become tired of the concept of lotteries unless these regulations are carefully and compellingly laid, one would hope, certainly within two months of today.
    10.45 p.m.
    Dr. Summerskill: I appreciate that the Bill has some urgency, especially for the football clubs now that the Safety of Sports Grounds Bill is nearly through. But I am afraid that I cannot give a firm date for the commencement order. It will be made in a matter of weeks. That is as near as I can say. Certainly there will be no undue delay.
    As for the regulations, it is very important to get them right, of course. Clause 10 (3) contains a number of different points which we all feel to be extremely important. They require consultations with the authorities concerned, and we want to ensure that the regulations are good ones. Therefore, I have to say that it may take some months for the regulations to be discussed properly. It is better to get the right regulations rather than hurry and get bad or inadequate ones.
    Question put and agreed to.
    Amendment made: After Clause 17, in page 11, line 12, at end insert new Clause A—
    Commencement orders
    "A. The Secretary of State shall not make an order under section 19(5) below appointing

    713
    a day for the coming into operation of section 1 above until he has made regulations under section 10 above which provide for their coming into operation on that day.
    (2) Regulations so providing shall not be made unless a draft of them has been approved by resolution of each House of Parliament.' —[Dr. Summerski11.]

  Clause 18

    ORDERS AND REGULATIONS
    Lords Amendment: No. 9, in page 11. line 13, at beginning insert—
    "After the commencement of this Act".
    Dr. Summerskill: I beg to move, That this House doth disagree with the Lords in the said amendment.
    Question put and agreed to.
    Dr. Summerskill: I beg to move, in lieu of the Lords amendment last disagreed to, in page 11, line 15, after 'below', insert
    'or of regulations of which a draft has been approved by resolution of each House of Parliament.'.
    Question put and agreed to.
    Subsequent Lords amendments agreed to.

  LIMITATION BILL [Lords]
  As amended (in the Standing Committee), considered.
  LIMITATION BILL [Lords]
    Clause 4

      CITATION, EXTENT, REPEALS AND COMMENCEMENT
      10.46 p.m.
      The Solicitor-General (Mr. Peter Archer): I beg to move Amendment No. 1, in page 7, line 6, leave out from 'force' to end of line 7 and insert 'on 1st September 1975'.
      At this stage the House will not welcome a long explanation. But there are clear advantages in a Bill of this nature coming into operation during the Long Vacation.
      Mr. Deputy Speaker (Sir Myer Galpern): The Question is, That the amendment be made—
      Mr, Bruce Douglas-Mann: On a point of order, Mr. Deputy Speaker. Is it in order to discuss other provisions relating to the Bill? If not, may I make some observations with reference to this amendment?
      Mr. Deputy Speaker: The hon. Gentleman may discuss the amendment if he wishes. Any other matters will have to be discussed on Third Reading.
      Question put and agreed to.
      Order for Third Reading read—
      Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent signified.—[The Solicitor-General.]
      10.48 p.m.
      The Solicitor-General: I beg to move, That the Bill be now read the Third time.
      Again at this stage I say merely that most of the matters which have been in the minds of hon. Members have been discussed—
      Mr. John Wells: On a point of order, Mr. Deputy Speaker. Is it in order for a Minister who is not a Privy Councillor to signify the Queen's consent and the Prince of Wales's consent? I think that it is not. Therefore, we have not had the consents given.
      Mr. Deputy Speaker: I thought, quite honestly, that the hon. and learned Gentleman was a Privy Councillor. However, I see that the learned Attorney-General is now present.
      Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent signified.—[The Attorney-General.]
      The Solicitor-General: I beg to move, That the Bill be now read the Third time.
      This is a Bill which I should have hoped would not give rise to opposition among hon. Members. It is agreed on all sides of the House that it is desirable and in the public interest. All the matters which have been raised so far have been discussed fully in previous stages.
      At this stage I propose to move the Bill formally, and if the House thinks it is desirable, I shall reply to any points that are raised.
      10.50 p.m.
      Mr. Bruce Douglas-Mann: I am grateful for the opportunity to comment on the Bill. I

      715
      entirely agree with the Solicitor-General. I welcome the Bill immensely. It provides, in the period until the Pearson Commission, I hope, proposes the abolition of the need to establish negligence as the basis of a claim for damages for personal injuries, help to eliminate some of the anomalies in the present law.
      Much as I welcome the Bill as it stands, I have certain reservations and anxieties. I am a little apprehensive about Clause 2A(7). This is the provision which says that in deciding whether the plaintiff ought to have brought his action earlier, what he needed to know was whether the injury that he sustained was significant. Clause 2A(7) as it stands, says:
      "For the purposes of this section an injury is significant if the plaintiff would reasonably have considered it sufficiently serious to justify his instituting prceedings for damages against a defendant who did not dispute liability and was able to satisfy a judgment."
      As that stands, it means that a plaintiff who knew that he had received a blow on the chest, which had caused him discomfort for a week and perhaps a week's absence from work, who would have had a cause of action sufficient to justify the institution of proceedings in the County Court or a small claims court—a claim for £40 or £50—would be barred from proceeding later, however serious the effects might ultimately prove to be.
      I have certain specific cases in mind where injuries which were thought to be trifling at the time proved, later on, and in one case only, after death, to have been immensely serious. Under the Bill as it stands, they would have resulted in a subsequent claim being barred because the individual would have known that the injury was "significant" within the meaning of the Bill. I accept that under Clause 20 there would be a discretion, but I urge my hon. Friends to consider whether the terms of Clause 2A(7) might not limit that discretion.
      As the Government amendment involves amendments being put in the Lords, would it be practicable for my hon. and learned Friend to insert in page 2, line 34 of Clause 2A(7), after the word "proceedings", the words "in the High Court"? This would ensure that the knowledge of an injury would not be a bar if it would only have supported a claim for trifling damages—but one
      716
      which would nevertheless be worth making if the defendant had no defence and money to pay, even though the majority of people would not make it.
      That is probably the most important defect that still remains in the Bill. I also urge my hon. Friend to seek to ensure that the rules of the Supreme Court are amended to ensure that in the same way as discretion under Clause 2D can be exercised to enable plaintiffs to issue a writ after the time has expired, the discretion should also be exercised to enable a plaintiff to serve a writ which has not been served within the 12 months of the date when it was issued. At present the courts exercise a restrictive approach to the granting of leave to serve a writ in these circumstances, and I trust that in the light of the more relaxed attitude towards limitation that the Bill is generating, the courts will now adopt a somewhat more relaxed approach to the entitlement to serve a writ out of time, where there is reasonable cause for the delay and where the interest of the defendant has not been prejudiced.
      The only remedy for a plaintiff trapped by the Limitation Acts at present is in proceedings against solicitors where there has been default. I am a practising solicitor, so I should declare my interest. Although I have never been proceeded against or threatened with proceedings in those circumstances. I have had to take or threaten proceedings in cases where solicitors have failed to exercise their functions properly on behalf of plaintiffs and I am aware of the immense difficulties of proving that the plaintiff would have recovered damages had it not been for the, often admitted, negligence of his former solicitors. That remedy is a wholly inadequate substitute for proceeding against the defendants originally responsible.
      I hope that my hon. and learned Friend will be able to see that the necessary measures are taken to ensure that this desirable Bill is made even more effective than it is at present.
      10.55 p.m.
      The Solicitor-General: I take the two points which my hon. Friend has raised in relation to the proper limits of the significance test and in relation to the discretion as to the time for service of a writ. I have taken part in too many personal injury cases not to appreciate the

      717
      importance of these two matters. But I am sure that my hon. Friend will appreciate my difficulty—namely, that I knew that he would be raising these points only a few moments ago. He was kind enough to tell me before the debate, but it was only a few moments before.
      Clearly, I cannot give any undertakings tonight, except to say that the Bill will fall to be considered in another place and between now and then I undertake to mention these matters to my noble Friend the Lord Chancellor and to consult him as to what can be done.
      Question put and agreed to.
      Bill accordingly read the Third time and passed, with amendments.

  PUBLIC SERVICE VEHICLES (ARREST OF OFFENDERS) BILL [Lords]
  Not amended (in the Standing Committee), considered.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.
  Bill accordingly read the Third time and passed, without amendment.

  RATE SUPPORT GRANT (INCREASE)
  10.56 p.m.
  The Under-Secretary of State for the Environment (Mr. Gordon Oakes): I beg to move,
  That the Rate Support Grant (Increase) Order 1975, a copy of which was laid before this House on 11th July, be approved.
  Many hon. Members will no doubt find it unusual to be debating a rate support grant increase order just before the Summer Recess. Indeed, it is unusual. In previous years it has become customary to consider increase orders which are intended to compensate local authorities for the effects of past inflation, at the same time as the main rate support grant order for the next financial year, but—and today in particular I do not need to remind the House of this—these are indeed very unusual times.
  718
  The order now before the House increases the amount of rate support grants to be paid to local authorities for the financial year 1974–75. This is necessary to take account of pay and price increases occurring since the amount of the grants was last determined. Before coming to the order itself, I would briefly remind hon. Members of the background.
  As I have already said, the order relates only to the financial year 1974–75. Under the terms of the Local Government Act 1974, my right hon. Friend the Secretary of State for the Environment initially determined the amount of Exchequer assistance to local authorities for 1974–75 at the level of prices obtaining in November 1973. In November of last year the amount of grant was increased by order to the level of prices obtaining at that time. In the normal course, it would have been further increased this coming autumn to take account of pay and price increases arising between November 1974 and the end of the financial year. But, as I have already said, these are not normal times.
  Because of the nature of the services they provide, local authority budgets are particularly susceptible to the effects of inflation and, for reasons which I shall come to, the problems facing local authorities because of inflation were given particular emphasis during 1974–75.
  First, the advice which authorities were given on likely future levels of inflation by the previous administration proved, in the event, to be considerably understated. As a result of this advice many authorities set their rate calls at a level which was later found to be inadequate. In making the first increase order for 1974–75, last November, my right hon. Friend recognised these special difficulties by including in the order an additional sum of£350 million over and above the amount required to compensate for specific increases in costs. As he told the House then, the additional£350 million was intended to wipe the slate clean for the whole of 1974–75. He made it clear—I emphasise this again—that a second increase order for that year would not include any similar form of special payment. He accepted, however, that a second increase order for 1974–75 would be made earlier than usual.

  719
  My right hon. Friend gave this undertaking in response to representations from the local authorities that, until a second increase order was made, they would have to bear the full cost for 1974–75 of the then forthcoming settlement on teachers' pay, which was expected to be substantial. My right hon. Friend has therefore made the order four months earlier than usual.
  Given the need to take account of pay and price increases arising up to the end of March, 1975, this was the earliest the order could sensibly have been made. As it is, local authorities would receive the additional grant during August.
  Turning to the order, under the terms of the 1974 Act my right hon. Friend is required to lay before the House a report of the considerations leading to the provisions of the order, together with detailed calculations of the increase grants. Accordingly, in view of the lateness of the hour, I shall confine myself to the salient points.
  After consulting local authority associations, as he is required to do by the Act, my right hon. Friend decided to accept for grant purposes increases in costs totalling some£395 million. On two matters concerning increased costs my right hon. Friend felt unable to accept the full amounts claimed by the associations. These matters are referred to in detail in paragraph 6 of the report.
  The effect of the increased costs was to raise the total of expenditure eligible for Exchequer assistance to£7,283 million. On this sum by right hon. Friend proposes to pay grant at the same rate as for the main order and the first increase order, namely, 60·5 per cent. This produces an aggregate of Exchequer assistance for 1974–75 of£4,406 million, to which has been added the special provision of£350 million which was made at first increase order stage and which must be carried forward. From the resulting total of£4,756 million, a deduction of£429 million has been made, this being the revised estimate of the specific and supplementary grants. The revised total of rate support grants in respect of 1974–75 thus becomes£4,327 million, to which has been added the sum of£57 million, being the increase in rate support grants in respect of the year 1973–74
  720
  which has been carried forward from the first increase order.
  The increased aggregate of rate support grants included in the order now before the House is thus£4,384 million. My right hon. Friend proposes that the original ratio between the needs and resources elements of the grants, namely 72½per cent. to 27½per cent., should be maintained. Accordingly, he has increased the aggregate amount of the resources element by£167 million and has specified the actual aggregate amount of resources element as£1,083 million, an increase of£64 million.
  No increase is required in the domestic element which meets the full cost to authorities of levying lower rate pound-ages on domestic properties than on non-domestic properties. This is fixed for the full year from the outset.
  My right hon. Friend proposes that the formula for distributing the revised aggregate of the needs element should be the same as for the first increase order, and the order now before the House increases the per capita amount and the weightings for the additional factors so as to maintain the proportions determined for the first increase order. The weighting for the London boroughs and for the City of London remains at 12 per cent.
  The order was made by my right hon. Friend on 8th July. All statutory requirements have been complied with, and it now requires the affirmative resolution of the House before it can take effect.
  11.5 p.m.
  Mr. Keith Speed: I thank the Under-Secretary for taking us through this slightly esoteric maze. Even at this late hour, we are talking about considerable sums of money. As the hon. Gentleman said, this is an unusual time of year to have the order, but we are living in unusual times, with our present inflation.
  I do not apportion blame, but these are difficult sums to cope with. I know that there is a report as well as the order, but the uninitiated may find some difficulty in relating the two. I have found this in my researches recently. In the Treasury Red Book on local authority expenditure, for example, I found totally different figures from those produced by the hon. Gentleman's Department. I do not blame the present

  721
  or previous Government. The situation has been going on for some time. But perhaps we could try to tie matters up, so that the growing interest in local government expenditure may be shared by more people.
  The hon. Gentleman glossed over, by just referring to paragraph 6 of the report, the differences between the local authorities and the Government. My understanding is that the difference of about£24½million relating to teachers' pay was because the Department of Education and Science, which is not a responsibility of the hon. Gentleman, relied on a statistical model, whereas the local education authorities relied on returns from each authority. That being so, it could be argued that the local education authorities might have more accurate figures. The true situation will probably be revealed in two months' time, when we receive the outturn figures. What will happen if those figures show that the local education authorities are right and the Department of Education and Science is wrong?
  I understand that the difference on transport is considerably more—about£80 million. The original forecast was£23·9 million. It was updated last November, on the increased GDP prices, to£28·9 million, and the local authorities claim an outturn of£115¼million. The difference, they claim, is not a cash subsidy but operating expenditure. They think that this should be updated by the pay and price increases.
  I believe that some of the difference is due to deliberate decisions by the local authorities not to raise fares, and that some is due to their inability to get them raised because of the various blocks in the system to any quick increase. I have more sympathy with the latter case than with the former. Local authorities believe that the pay and prices increases between November 1974 and March 1975, which I think are about£17 million, should be met. Can the Minister say a little more about those two differences?
  I should like to say a word about the whole concept of increase orders, and to probe the Government's mind. In inflationary times like the present, it could be argued that increase orders of themselves are inflationary, that they are inflation feeding upon inflation, and that they give
  722
  a guarantee to local authorities that they will be insulated to a certain extent from the effects of pay and price increases. With inflation running at 26 per cent., if we are talking of an increase in real terms it must by definition be more than 26 per cent.
  Cash limits are all the vogue. I shall not repeat all that the Chancellor of the Exchequer said on Monday at the end of his speech, but I wish to quote the following passage:
  "The general presumption will be that the expenditure of Government money, whether directly or in the form of grant, will be within the scope of cash limits rather than the other way round, and I shall need a lot of convincing if it is argued that cash limits should not apply in a particular case."—[Official Report, 21st July 1975; Vol. 896, c. 66.]
  I do not necessarily disagree with that view, but it raises some fundamental questions about increase orders of the kind that we are discussing tonight.
  The Chancellor also talked about the possibility of cutting the capital allocations of local authorities if they spent more on wages and salaries for their employees. Again, this order, as can be seen from the tables, represents extra money to pay for considerable increases in salaries.
  One thing that is certainly needed, in all the problems that we are discussing tonight, is a more corporate approach from the Government. I do not criticise just this Government. This happened in the past as well. It is no use trying to have economies in local authority expenditure and the Secretary of State for the Environment urging them to save money in every possible way if, at the same time, for example, the Department of Education and Science is hawking round the country spare items of cash which it has because local authorities have not spent them. That has been going on for a long time. If we mean what we say about curbing expenditure, these big Departments must get together and start getting to grips with the problem.
  I should like to say a word about the rate support grant formula. There are some examples in the order. I appreciate that the Government are awaiting the report of the Layfield Committee. The Opposition will have something to say about local authority expenditure when that committee has reported.

  723
  I hope that, whatever differences there may be between the two sides of the House about rates, it will be possible in future to devise a simpler formula. I believe that the present one is getting so complex that very few people in this country understand it. My right hon. Friend the Member for Crosby (Mr. Page) is certainly one who does, but there are not many others in any part of the House who do.
  As a Kent ratepayer I was delighted to read in the order that the population multiplier is to be£10·62 rather than£10. However, I am not sure that I am much the wiser. I do not know whether the Under-Secretary is either. This is a matter at which we shall be able to look in the months ahead. I hope that we shall be able to get some simplicity into this maze of complexity.
  We see from Appendix I that manpower costs are the major item. Local authorities have been criticised recently by ratepayers associations, by Members of Parliament and, indeed, by the Press, for junketing and what I call the "strawberries and cream" syndrome. At the moment for any local authority to spend money in that way is insensitive, untimely, and bad for public relations. However, its effect on expenditure is absolutely minimal. People who think that they will save vast sums of money and cut the rates by taking something out of councillors' allowances or cutting out the mayor's annual tea party are deluding themselves. We come to the heart of the matter in this kind of order in which we can see how much extra expenditure is involved in pay increases.
  I do not know whether it is in order to refer to the announcement which was made by the Secretary of State for Education and Science this afternoon, but the 22½per cent. teachers' pay award will have a considerable effect and will no doubt bring about a rate support grant increase order next time round, just as the Houghton award has led to this order. If there are large pay awards to local government staff and if the numbers of staff increase, as they have been doing, there will be considerable expenditure problems for local authorities. If, at the same time, not only the Government—though they are guilty—but this House
  724
  adds to the burdens of local authorities in one way or another, the situation will be even more difficult.
  It is wrong to blame all these problems on reorganisation, as has been done from time to time, not least because inflation and the kind of matters that we are discussing tonight affect London as badly as anywhere else in the country. London was reorganised 12 years ago, so we cannot call that in aid as an excuse.
  On the other hand, if the House accepts the order, as I am sure it will, we must look further ahead. I believe that whatever differences there may be between the parties, there must be a new régime for local authority finance which, in the years ahead, will have to be tougher and more realistic with regard to the resources which are there than the resources which the natural ambitions and aspirations of the great British public feel ought to be there.
  This is something which will hurt all of us. The Government and the House will have to curb their appetite for pressing through more and more legislation and throwing a bigger burden on local authorities, so that they are constantly looking for more money from their ratepayers and the Government. We must face this problem, and the fact that local authorities are very labour-intensive, with 60 per cent. of their costs being represented by wages and salaries. Unless they have to start a major shedding of their manpower, which none of us wants, they must control very tightly the extra money they will be paying out.
  We shall be discussing these matters again later this week, but clearly the order is affected by the Government's lack of control over incomes over the past year. Inflation must be curbed and, as local authorities account for 30 per cent. of public expenditure, we must insist on a new, tougher régime, probably with cash limits, without the sort of order we are discussing now, so that local authorities can play their full part in adding to the financial stability of this country and conquering inflation.
  We shall support the order, but I hope that the hon. Gentleman will give us his views on some of these fundamental questions.
  11.17 p.m.
  Dr. Edmund Marshall: The hon. Member for Ashford (Mr. Speed) has referred to the major complexities that are now part of the formula in calculating the rate support grant. I would like to draw attention to some details in the structure of the needs element in Article 6 of the order, in particular in the table given in that article. In 1(b) of the table the additional factor involved is the acreage of the area of the local authority in excess of 1·5 per head of the population of the area.
  I recognise that this factor is worthy of inclusion because of the problems of local authorities with extreme sparsity of population in their areas. However, I wonder whether the words in column (3) of 1(b) really mean what they say. I understand "that acreage" to mean the acreage in excess of 1·5 per head of the population. In column (3) it talks of:
  "Multiplying that acreage by—(a)£1·80 if it exceeds 1·5 but does not exceed 3".
  I am not sure that "it" is intended to mean the excess acreage. I think "it" refers to the ratio of acres to population. There is something wrong with the wording in this part of the table. I would be grateful if the Minister could comment on it and correct me if I am wrong.
  Also in this part of the table, there is a strange point where the ratio of acreage to population is close to the figure 3·0. Why should there be such a sudden jump from£1·80 per acre to£4·60 per acre when this magical figure of 3·0 is exceeded? Let me take a particular example. The county of Lincolnshire, to which this provision applies, has an acreage of about 1,400,000. Its estimated population in June 1973 was 512,900, which gives a ratio of acreage to population of 2·84. But if it had 30,000 fewer inhabitants the ratio of acreage to population would just pass the figure of 3·0 and the county council would then receive an extra grant of £2 million. Following that, in the table in 1(c), there is a further factor whereby reduction in population helps to increase the needs element of the rate support grant.
  Perhaps here I may take up the point raised by the hon. Member for Ashford in respect of the rate support grant which goes to a county like Kent. I am sure that I should have been able to pick up
  726
  the reasons in the discussions on the original increase order, but, as someone representing a constituency in Yorkshire and Humberside, I should like to know why the non-metropolitan counties listed under 2, 3 and 4 in column (1) of the table should qualify for the extra rate support grant which the table specifies.
  11.21 p.m.
  Mr. Graham Page: I have the greatest sympathy for the Under-Secretary in having to face the sort of figures problems that have been presented to him by the hon. Member for Goole (Dr. Marshall). They were very pertinent figures and queries, because what did not appear on the face of the order, but what I think the Under-Secretary sought to explain, was that the ratio between the needs element and the resources element remains the same. I think that was what the hon. Gentleman said. One has to juggle with figures in order to get that same ratio. I have a hearty distrust of computer figures, having found on one or two occasions when I had to work out the rate support grant that when I tried to get a sparsity factor for Wales it benefited the Greater London Council.
  This was an extraordinary result and it came from the computer. Therefore, I look at such figures, as does the hon. Member for Goole, with some suspicion. However, if I have the Minister's assurance that the intention through all these figures under Article 6 is to keep the ratio of the resources element to the needs element as it is in the main order, I shall accept that without going into the details of the figures.
  I notice that in 1(d) in column (1) of the table in Article 6 that
  "The number of personal social services units in their area"
  is multiplied up so that a fairly substantial figure results. I am glad that this is maintained. The social services unit is perhaps the most important in the needs element, particularly since it is in forecasting the social services expenditure by a local authority that local councils have the greatest difficulty. It is very difficult to estimate what the expenditure will be in the following year, particularly when the estimates are being made in the autumn and the year starts in the following spring. Councils have great difficulty knowing how many problem families

  727
  there will be in any particular area. Perhaps that is the most difficult figure to estimate. The result is that many local authorities put too high a figure, while others set it too low.
  As the Under-Secretary said, there is no change in the domestic element. I should have thought that that fact could have been set down in the Explanatory Note in order that the order would have been better understood. People would then have known that they did not have to read all the later articles—that those articles were there only to juggle the figures in order to get some ratio of needs to resources.
  I am worried about the two matters at issue between the Government and the local authorities. First, about£100 million is in dispute between the Government and local government. Local government feels that it is short of£100 million, which must borne by the ratepayer. I assume that the£395 million will not meet all the price and pay increases. The extra cost must be met by the ratepayer, as the increase order does not cope with all the price and pay increases over the period. The figure of£395 million is substantial and indicates the measure of inflation in the period.
  The Minister said that the advice on inflation given by the previous Government did not put the figure high enough. I agree. However, it is difficult to forecast inflation in this period. The difference between the Government and local government figures was not very great. I recollect that the local authorities asked for an inflation figure of 13 per cent., although the inflation rate turned out to be 26 per cent. The Government figure was 9 per cent.
  In view of the previous debate on the Remuneration, Charges and Grants Bill, we may conclude that there will never be another rate support grant order, as local authorities must not increase their employees' remuneration by more than the specified amount. Local government is labour-intensive. However, there will be a need for the further order. If the local authorities conform to the£6 limit there will be an increase of about£900 million in their expenditure, That must be dealt with later this year and next year. We should not run away with the
  728
  idea that we shall never see another rate support grant increase order. We shall see another such order, but I hope that its amount will be reduced as a result of the legislation which we discussed earlier today.
  I have referred to the amounts to be borne by the ratepayer and the Government. I do not think it follows that if either the rate support grant or the increase order is cut, the local authorities should maintain their anticipated expenditure and throw the cost on to the shoulders of the ratepayers. The independence of the local authority to fix the rates which it shall collect is not sacrosanct. It provides goods and services like anyone else, and I do not see why it should not exercise some restraint and come within the Price Code, which has never been applied to local authorities. In the present inflationary period I see no reason why the local authority should not obey the Price Code, as does anyone else who has to provide services and goods. Perhaps that is a revolutionary idea, but local authorities should not be insulated and isolated entirely from inflation.
  11.30 p.m.
  Mr. George Cunningham: The order, by any standards, provides a huge amount of money in total, and the amounts going to individual local authorities are similarly huge in relation to the resources of the local authority. I find it odd—and something which should be changed as quickly as the House can get round to doing so—that we should discuss these enormous amounts of money without the House having the benefit of the matter's first having been examined by one of the Committees of the House.
  We have a Sub-Committee of the Expenditure Committee which scrutinises the Department of the Environment and its expenditure. The sensible course would be for that Committee regularly to look at such orders as this. The orders could then come to the House with such comments and guidance as the Committee might wish to proffer. We shall get round to doing that in the end, and the sooner the better. It is what other legislatures do, and have done for a long time, to their great benefit.
  In the past, local authorities have tended to be too independent of central

  729
  Government with regard to the level of their expenditure. Local authority expenditure is now a very large part of public expenditure and, with the need for the control of expenditure for macroeconomic reasons, local authorities cannot be allowed to let rip to the degree they have been allowed to do in the past. In particular, the number of staff and the level of salaries of local authority staff must he subject to greater central Government control. Exhortation from central Government is not enough; there must be something tighter.
  I hope that we shall not select certain areas of local authority expenditure which are in general desirable and exempt the totality of items within those areas from the possible axe. We are all in favour of expenditure upon social services by local authorities, but much expenditure within the social services is wasted, and we should not allow our attachment to the need for social work to blind us to that fact. The pruning knife needs to be used within the social services departments just as much as anywhere else.
  London tends to be left behind the rest of the country when it comes to the rate support grant. Despite recent improvements, the factors for determining the allocation and distribution of the needs element tend still to favour those areas of the country which do not have inner city problems. We need to recognise that the extra cost of inner city problems both in the social work sector and in housing is much greater than it is in non-urban areas.
  London is still not included within the regression analysis, which is the basis of the distribution of the grant and, instead, that distribution which London's inclusion in the regression analysis would normally effect is done by means of a rough, rule-of-thumb percentage which is added to the allocation for the London local authorities. That rough, rule-of-thumb percentage has been increased, but it still plucked out of the air. No one can justify it as a figure, but everyone is agreed that the distribution is lower than it would be if London were included in the regression analysis.
  Mr. Graham Page: Surely for 1974–75, about which we are talking, London did very well compared with the rest of the country. My recollection is that London
  730
  was very pleased with the result of this and kept very quiet.
  Mr. Cunningham: The trouble is that in the past London has suffered enormously. Therefore, if one gets a settlement which makes that suffering a bit less great, one tends to be pleased. I do not think anyone—neither the right hon. Gentleman nor the statisticians involved—would deny that London would benefit if the regression analysis included the London local authorities. What London gets is a substitute for that and not the real thing.
  If the enormous amounts of money being paid out in rate support grant do not go in fully deserved measure to the inner urban area of London, we are asking for the inner city problems of the United States in a few decades' time.
  I should like to see more of the rate support grant used for the needs element and less for the resources element, only because that would tend to favour the inner city areas which have high resources but whose excess of needs is even greater than their excess of resources.
  I wonder whether the Minister would say something about the future of the London rate equalisation scheme. It is monstrous that inner London boroughs should at present pay over—in the case of my own borough of Islington—approximately£1 million to a pool to be distributed among the outer London boroughs. I know all the justification which is advanced in support of it—for example, that the inner London boroughs get a concealed subsidy from the City of London, from Westminster and from Camden because our education costs are pooled with theirs, and this does not apply to the outer London boroughs. I understand that superficial justification for it. It is, however, preposterous that a borough like mine, even though it has considerably above-average resources for London, having needs far in excess, social problems far in excess and housing problems far in excess of anything that the outer London boroughs have to cope with—
  Mr. Deputy Speaker (Sir Myer Galpern): Order. I have allowed the hon. Member a great deal of latitude, far more than he is entitled to within the ambit of what is under consideration. I ask him to address himself to the order.

  731
  He has been well out of order during most of his speech.
  Mr. Cunningham: I think we are discussing, Mr. Deputy Speaker, the distribution of the rate support of grant—
  Mr. Deputy Speaker: No. We are discussing the factors which increased local authority expenditure in 1974–75, not the future.
  Mr. Cunningham: I think I am talking, Mr. Deputy Speaker, about the distribution of this expenditure and this revenue in the past as well as the future. Exactly the same factors apply. I was about to come to a conclusion a moment ago, and I shall probably still do so.
  It is, however, an important factor to bear in mind that the London boroughs within the inner city areas at present pay over these huge sums to outer London boroughs which do not have those problems and which, though they have lower resources than some of the inner London boroughs, still have adequate resources for their purpose.
  I know that this matter is being looked at by Ministers in the Department of the Environment. I hope that this will result next year in the inner London boroughs not automatically having to contribute irrespective of their needs and resources to a pool to be distributed among better-off boroughs with lower needs.
  11.40 p.m.
  Mr. Oakes: I am grateful to the right hon. Member for Crosby (Mr. Page), who himself had to handle these matters, for offering me his sympathy. We have spent many productive hours together in Standing Committee and on the Floor of the House discussing such matters as non-designated relevant development. That is nursery talk compared with discussions on rate support grant increase orders.
  The hon. Member for Ashford (Mr. Speed) raised a number of matters. First, he talked about the difficulty he found in understanding the order. I am with him on that. In the White Paper on public expenditure that was published in November last year we included for this year a new table to set out public expenditure by local authorities. This is the first time that local authority expenditure has been brought together in such a comprehensive manner. To some extent
  732
  that meets the hon. Gentleman's point, but I still take the force of his remarks.
  Both the hon. Member for Ashford and the right hon. Gentleman dealt with Article 6. In opening I did not go into the details of Article 6, so as to save the time of the House, but in view of what has been said I owe it to the House to offer some explanation of the matter, despite the time.
  As regards education and the£24½million in teachers' pay, the hon. Gentleman is right in suggesting that the disagreement was between the model figures produced by the Department of Education and Science and the figures given by the local authorities, which they said were based on actual expenditure for the period. The disagreement has been discussed fully by officials on both sides in a cordial atmosphere. Both sides have been able to make some amendment to their first figures so as to bridge the gap. The Department's method of calculation was explained in detail to the association's advisers. They were given the opportunity to identify any source of error in the calculations but they found no substantial fault. The allowance made in the increase order corresponds with the Department's estimate. When I refer to the Department I mean, of course, the Department of Education and Science.
  There is a much greater difference as regards the transport element.
  Mr. Speed: Am I right in thinking that the outturn figures will be available in two months' time? When they are available we shall be able to judge whether the Department's model figures are right or whether the local education authorities' figures, based on actual expenditure, are right.
  Mr. Oakes: I do not know the answer to the hon. Gentleman's question, off the cuff. I shall write to him on that matter.
  As regards transport, as both the right hon. Gentleman and the hon. Gentleman have said, there is a much greater difference. The hon. Gentleman puts his finger on much of the difference when he referred to rate support for fares. We made it clear at the time of the order that it was not the Government's policy to give increased support for fares.
  There was a full discussion of the increase order with the local authorities'

  733
  officials and the Department's officials. Taking October 1973 prices into account, but not that part of the increase that the authorities suffered because of continuing subsidisation of fare support from the rates, the amount was originally£24 million. That was uprated to produce£29 million for the purpose of the first increase order. That took account of price movements to the end of the financial year.
  There was some disagreement between the local authority associations and the Government. As the right hon. Gentleman said, it was a policy matter. I think he was good enough to say that he did not fundamentally disagree with what my right hon. Friend did. There were some other slight differences, but basically the difference of opinion concerned the two sets of figures that were produced. The hon. Gentleman mentioned some of the difficulties we have had in the past with Departments hawking round sums that they have found to be surplus. It is a deplorable practice and we are doing our best to eliminate it.
  We are also doing our best, through the consultative council, which is working very well indeed, and between local authorities and the Department of the Environment, to iron out many of these irritations for local authorities whose efforts are set at naught in seeking to save public expenditure when they discover that neighbouring authorities are having money thrust upon them, or find money being offered when they are trying to cut down. It is not the fault of the Labour Government or of the previous Government. The same type of thing happened when I was a councillor, years ago. I repeat that we are trying to eliminate the practice.
  I appreciate the point that this House should not seek to put any extra burdens on local authorities. The House well knows that every Minister from the Department of the Environment at the Government Dispatch Box spends most of his time warding off such demands, whether from his own hon. Friends or from the Opposition.
  I also appreciate what was said about junketings. In a recent parliamentary reply I made the point that the amount of money involved is small, but I said
  734
  that the psychological damage inflicted is enormous in the present situation.
  My hon. Friend the Member for Goole (Dr. Marshall) raised some detailed points on the schedule. What the schedule does is to uprate the sparsity factor because of inflation. The word "it" referred to by my hon. Friend is governed by column 1. Incidentally, the point about the sparsity factor is raised on both sides of the fence. Some authorities say that the sparsity factor is too low, and others seem to think that it is too great. In this year's rate support grant, and in the year following, we have introduced not only a sparsity factor but a special sparsity factor for limited areas. If there is a limit, the differences on either side of the limit appear to be great. The limit of three appears to be more above than below. If the ratio is high and exceeds a figure of three, it can grow almost as a pyramid in much greater proportion because that number has been exceeded.
  That was the basis on which the figure was fixed.
  I agree that there are difficulties about the presentation of an order and as to some of the ways in which the formula is arrived at. The formula is reached after intensive discussions ranging over a whole year with the local authority associations. Every year we try to improve the situation. Each time that we think we have cracked the problem, we find that the computer coughs up an enormous increase for one authority rather than another. We are working on the matter and seeking to improve the formula this year.
  I assure the right hon. Member for Crosby that the needs-to-resources element as a proportion remains the same. We have operated on a formula of 72·5 per cent. and 27·5 per cent.
  I agree with the right hon Gentleman's remarks about social service units. We have tried to be more precise and more selective in respect of the formula. There have been some bizarre results, but I agree that this is an important item of expenditure. I was not criticising the right hon. Gentleman in previous speeches, nor did my right hon. Friend the Secretary of State for the Environment criticise the right hon. Gentleman in dealing with the 9 per cent. mentioned by the former Conservative Secretary of

  735
  State for the Environment just before the General Election. In fact, the figure turns out to be somewhere around 29 per cent. We can all make mistakes on inflationary figures, and I shall not try to rub the Opposition's nose in it—the same sort of thing could be done to me in return—but we gave the£250 million to local authorities to offset something they really could not have expected of envisaged.
  My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) mentioned London. Although I cannot reply, for obvious reasons, in regard to any future rate support grant, or even this year's—it would be wholly out of order for me to attempt to do so —I can say that for the year in question the weighting for London remained at 12 per cent., and for the year that we are talking about, as was indicated, London on balance—not all of it; there were pockets that still faced very severe increases—came out much better than did the rest of the country. The wave of resentment at rate increases was very much outside London.
  Many of the points raised by my hon. Friend are under serious consideration by the Department at the present time, and by the Layfield Committee, which is specifically considering both the relationship of the needs and resources element and the actual distribution of the needs element. Evidence has been received from the Greater London Council about both of these. It is a matter that both the Department and the Layfield Committee have in mind.
  The equalisation scheme depends upon that factor. It cannot go into it further, because the future of the equalisation scheme clearly has no relationship to this order, which must confine itself, as must the debate, to the expenditure of local authorities up to 1st April 1975.
  I hope that I have dealt satisfactorily with the points that hon. Members have made and that they will approve this order, which is a second increase order for local authorities in regard to the difficulties they have suffered in a very difficult year.
  Question put and agreed to.
  Resolved.
  That the Rate Support Grant (Increase) Order 1975, a copy of which was laid before this House on 11 th July, be approved.

  ADJOURNMENT
  11.53 p.m.
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pavitt.]

  WATER CHARGES (HEREFORDSHIRE AND WORCESTERSHIRE)
  Mr. Peter Temple-Morris: I am very grateful for this opportunity to raise the most important question, as far as Herefordshire is concerned, of our domestic rate support grant as well as the water supply to our county, and, indeed, to deal with the matter not only from the point of view of Herefordshire but also Hereford and Worcester overall.
  I am also pleased that the Minister of State himself is here to reply. To put him at ease straight away, let me say that I know and he knows that I shall have the pleasure of welcoming him to Shobdon next Sunday, and it might be said that the hospitality of Herefordshire will go beyond anything he says tonight. He can be assured of a reasonable welcome in Shobdon, in spite of whatever reply he makes, though I hope it will be favourable and enhance the welcome which Shobdon and North Herefordshire will give him.
  In setting the scene, the first thing to be said is that, while the subject of this debate is referred to as "water supply to Hereford and Worcester", and while it has the support of all five Hereford and Worcester Members of Parliament, I am primarily speaking for Herefordshire itself, and particularly for my constituents in North Herefordshire, as part of the old county. To narrow it down to water terms, it becomes the old Wye River Authority area, which has now become part of the Welsh National Water Development Authority.
  The fact that I have the backing not only—and particularly—of my hon. Friend the Member for Hereford (Mr. Shepherd) but also of the Worcester Members of Parliament—who do not, if I may say so, have quite such a bad situation to deal with as we do in Herefordshire, because they benefit from the Severn Trent Water Authority rates—is a

  737
  measure of their concern for the unity of our new county, and they are supporting me very much in this.
  Before coming specifically to the subject of water, perhaps I may mention the importance of this Adjournment debate to North Herefordshire and my own constituency. It is very considerable. Although the Minister has special responsibility for water, he is also prominent in the Department which is responsible for local government reorganisation. It is not fully appreciated in this House—and, with respect, I do not think that it is fully appreciated in the Department, either—that there are very strong feelings in Herefordshire about its recent merger with Worcestershire. This is not party political, and I appreciate that my right hon. and hon. Friends bear responsibility for local government reorganisation. The Minister and I have had this out on the Floor of the House before. But if the Minister and his right hon. and hon. Friends had been in power at the relevant time, they, too, would have reorganised local government, albeit in a slightly different way.
  At present, over a large number of areas, there is in Herefordshire a certain despair about the way that it is losing out generally over water, not only generally compared with Wales but specifically compared with Worcestershire, in the working out of the merger between the two counties. There is already, born this week, a Herefordshire Survival Campaign. There is in the post at this moment a letter to every Member of Parliament. There is considerable pressure upon all of us—the representatives of Herefordshire and the relevant Ministries—not only over this issue but over such issues as the Hereford College of Education and its survival, because again there is the threat that it will disappear in favour of Worcestershire. All this is exacerbated by the water rate situation, where again we come off worst.
  Perhaps I may turn now to describe the area which I represent, as does my hon. Friend the Member for Hereford, who I see in his place. It is a rural area, bearing many similarities to Wales. It is a low-wage area. It is an area which has suffered and is suffering considerably from de-population. It has many retired and many old people. It has had
  738
  a traumatic local government reorganisation and a water reorganisation. In addition, it needs industry desperately. In competing for all these, it has none of the advantages of Wales. It is sandwiched between Birmingham's industrial area and Wales. We have none of the advantages, and are left behind, out of both. Furthermore, in terms of water, we suffer by not having the same domestic rate support as Wales—a point which I shall come to in a moment.
  As for the rates generally—I appreciate that this is a national problem—in 1974–75 the rates in my constituency went up by a maximum of 115 per cent. In 1975–76, they are up by about 50 per cent. again. As for the water rate, which is a very strong component in this, in 1973–74, before water reorganisation, grossing up the water rate and taking the relevant parts of local government expenditure which went towards water, it was 7p in total. In 1974–75, it went up to 13·8p. In 1975–76, it went up to 16p. Next door, with the large Severn-Trent authority, we find in 1974–75 a rate of 3·6p, going up to the marvellous total of 5·6p this year. These areas are sitting not only side by side but are part of the same local government area.
  I say to the Minister—his Department has responsibility for this—that it is crucial, if this is to work, that Worcestershire and Herefordshire should be given a reasonable chance of combination. But, contrasting them, we find Worcestershire, which has the same relief as we do—the English relief—also has an English water authority, the Severn-Trent. We have Welsh water, and we have even a split district council situation, with Leominster district divided between the two old counties of Hereford and Worcestershire. Its Tenbury or Worcestershire area has a general rate of 62·48p in the pound.
  The Leominster area, which is part of the same district, has a rate of 72·88p. The cause is the difference of 5·6p water rate of the Severn-Trent Water Authority and the 16p Welsh water rate. Malvern Hills has a 10p difference and is another district split between the two councils. I received a letter which mentioned two houses at Holly Bush, near Ledbury, sitting on the border, which are owned by the same person. One house is on one side of the old border and the other

  739
  is on the other side. Their water is piped from the same source, but one pays£7 water rate and the other£17·50. Anything more asinine than that or any greater case for overall equalisation I cannot think of or mention.
  As to the two focal points of Hereford and Worcester cities, Hereford has a general rate of 78·44p but Worcester has a general rate of just 60p. This is because the city of Hereford has suffered the equalisation policy of the Welsh Water Authority without any of the benefits by way of domestic rate support which go to Wales. The net result has been that the general service charge for Hereford has increased this year by 444 per cent. Therefore, the rates for the smaller, more dependent and more vulnerable county of Herefordshire average 10p in the pound more than rates for Worcester. If this new authority is to work, we must give it a reasonable chance.
  I should like to deal specifically with domestic relief. As the Minister knows, we are talking about 33½p in 1974–75, increasing to 36p in the pound for Wales for 1975–76. The figure for the rest of England is 13p, increasing to 18p in the pound. I know that the differentials have narrowed by the magnificent sum of 3p. As I am sure the Minister appreciates, this is a small amount when we are dealing with the total. It is difficult for people in these areas to comprehend the rationality of this—I confess that I find it difficult also—but the effect is that in 1974–75 the Welsh rates actually reduced by 5·1 per cent. on average. Our rates were up by 80 per cent., 90 per cent. or 115 per cent. In an article published in a Montgomeryshire paper last year it appeared that Montgomeryshire was almost embarrassed, because it receives the full benefit of the Severn-Trent Water Authority and the full benfit of the Welsh relief. That, as an anomaly, is one of the best examples we can find.
  I do not want to anticipate the arguments of the Minister tonight. I am sure that he will have much to tell us. Certain specific arguments are advanced on this matter with which I want to deal. First, in giving Wales its increased domestic relief, water is only one factor among others. Perhaps I may quote the
  740
  Secretary of State in his excellent report 1975–76 on the rate support grants when, in dealing with the Welsh rate support grant, he said it was
  "in recognition of the particularly severe impact on much of the Principality of the reorganisation of local government and the water services."
  Exactly the same applies to us. We have had as traumatic a reorganisation as any Welsh county. I came from Wales and I know Wales as well as anyone. We have had just as bad an experience as Wales has, not only from local government reorganisation but from the reorganisation of water.
  We are told that if some benefit were given to Herefordshire it would create a series of anomalies elsewhere. Where? Part of Cornwall is involved, and also a small part of Gloucestershire. If there is a case to be made out, I am sure that it could include Herefordshire rather than be used as an argument against Herefordshire. Just tell us where. That is my only question.
  There is no exact parallel to us. We are an area which is part of a water authority, the principal part of a water authority area receiving extra rate support grant far and above that which we receive. One of the principal reasons is the expensive water which it pays for and, unfortunately, we pay for as well.
  Next, it is said that this is positively the worst time to increase public expenditure. This I accept and acknowledge. The House has paid a lot of attention to that matter recently. One appreciates this, but one is dealing with extra relief which would cost less than£2 million as far as Herefordshire or that part of the Welsh National Water Development Authority are concerned. It is more of an adjustment than a simple increase, because it should have been dealt with in the first place. I would even go so far as to say that if we are so tight financially, surely, bearing in mind that we have so many of the same problems as Wales, it would not be too much to ask that if there was not a penny available, not even under£2 million when public expenditure is so high come what may, we might at least share with Wales, we being such a small proportion of it, that rate support relief which goes to that country for the same reason that we ourselves suffer from.
  Mr. Colin Shepherd: Is my hon. Friend aware that for similar households in Cardiff and Hereford the actual amount of rates paid differs by the extra amount of rate support grant of which Wales is in receipt, which lends strength to his argument?
  Mr. Temple-Morris: Indeed, it does. I am grateful to my hon. Friend. That brings me to my next point, and it follows up what he has said. It is said against us that the Welsh are now paying, despite the extra rate support, as much in rates as are the English. All I can do is to adopt what my hon. Friend has just said, and mention the fact that our neighbouring districts, Radnor and Monmouth, taking into account everything to do with water, were paying in 1974–75 half as much as us. As far as I know, there is no increase or decrease. It is about the same figure. The neighbouring counties down the road are paying about half as much. If one gave some glorious average figure for Wales it would not be sufficient for our area.
  I want to make an appeal to the Minister of State on this question. I have the strong backing of my constituency and my area in this matter. I have the backing of my hon. Friend the Member for Hereford, of the old county of Hereford and the new county of Hereford and Worcester, and of the Welsh district councils and the district councils within our area. I say this with the deputy chairman of the Leominster District Council, Mr. David Joyce, sitting in the Public Gallery and listening to me as I speak. It is encouraging that while these benches may not be too full, at least it is a measure of support that he is here to listen to me.
  Mr. Deputy Speaker (Mr. George Thomas): Order. In this House we never recognise anyone except those who are hon. Members of the House.
  Mr. Temple-Morris: I accept that, Mr. Deputy Speaker, and I apologise. It added a point that I should not have made.
  I should like to mention briefly certain other specifics—briefly, because I have spoken for too long already and almost gone over my time. However, there are certain other matters which I would be grateful to the Minister for touching upon. One is equalisation. The Welsh autho-
  742
  rity has done it. Other water authorities have not. It is felt very strongly by rural areas that this is another example of the way that rural areas suffer as compared with towns, which because of their massive rate revenues in comparison to us, are able to sustain much lower water rates. There is great dissatisfaction over representation on our water authority, and I think that this is common with other water authorities. They are too large for effective democratic representation. Something must be done about this, and at least it must be considered.
  The quality of supply is something which very much affects us. I realise that there are reasons for these cut-backs. Broomy Hill has been postponed due to cut-backs and all the rest of it. The fact remains, however, that I have a petition with me which has been presented on behalf of the parishes of the Pyons with Birley to the Department last year. Mr. John Cleaver, who sponsored that, has been without water for at least 15 days this year, which is more than he was without water last year.
  There is a huge loan debt which adds to the water rate and, as far as I know, there is no sign from the Ministry that it will give water authorities a greater flexibility to raise money at lower rates of interest. I could go on, but I shall not. There are other problems, such as eligibility for the resource element and the "unconnected to sewerage" argument. There are 16,000 domestic hereditaments in Leominster, of which only 6,700 are connected to the mains.
  Why can we not give local councils overall responsibilities for emptying septic tanks and let them do the whole thing, so as to end an argument which will increase rather than decrease. The argument comes back to rate support and the sheer unfairness for Herefordshire, being so close to Wales and sharing their water but not their rate support.
  12.12 a.m.
  The Minister of State, Department of the Environment (Mr. Denis Howell): The hon. Member for Leominster (Mr. Temple-Morris) has put his case extremely attractively, as he always does. He preceded it by even more attractively assuring me of a warm welcome in his constituency on Sunday when I shall be on one of my sporting visits. I am sorry

  743
  that the disappointing answer I am about to give will be a prelude to that visit, but I am delighted to know, from what he said, that that will in no way reflect on the hospitality and the welcome I shall receive.
  The hon. Member honestly told us that he knew that the reorganisation about which he is complaining, of water and local government, was imposed on the people of this country by his own side. He sought to mitigate that by saying that he thought we would have had a reorganisation. He is right. We would have done, but the differences would not have been as marginal as he told us, but would have been major differences, because we were not proposing to have a divided responsibility for local government imposed on us. We were in favour of unitary authorities, and that is a different kettle of fish from the situation in which we find ourselves, which has led the ratepayers into a state of great consternation.
  I advised the House, in company with you, Mr. Deputy Speaker, when you were not in a neutral position, to oppose water reorganisation and local government reorganisation for the very reason about which the hon. Gentleman has been speaking. The consequences were clear to us before the Act was passed by the previous Conservative administration.
  I am rather startled at the hon. Gentle-mans asking me to deal with the consequences, which we foresaw, of an Act which hon. Members opposite or their predecessors voted for. I am even more astonished when he tells me that his pleas have the backing of all the Worcestershire MPs. We are in this intolerable mess precisely because the right hon. Member for Worcester (Mr. Walker) was the man who imposed this nonsense on the country.
  Mr. Temple-Morris: If the Minister foresaw the problem so clearly, we should be most interested to know how, now he is in power, he will deal with it.
  Mr. Howell: I cannot adequately answer that unless the hon. Member assures me that when we come to deal with it we shall have the support of his right hon. and hon. Friends in unscrambling the egg.
  744
  I do not want to spend more time dealing with the consequences of the Act because I have great sympathy with the hon. Member and appreciate the hardship it is imposing on Herefordshire and parts of Worcestershire. The Water Act 1973 took the management of water services out of the hands of local authorities entirely. It made them self-financing operations.
  What the Conservative Government did—and I never cease to be amazed—was to create 10 separate nationalised industries, nine in this country and one in Wales, and take them out of local government. They also divorced water charging from general rate policy. As a result, each water authority is, under statute, a totally independent authority. Ministers have no power to intervene in their pricing policy, and they are managed just like the gas and electricity boards. They are now totally independent of the democratic procedures of which the hon. Gentleman spoke. It is for each water authority to decide what charges are needed to carry out its obligations.
  The authorities vary. Their debt burden varies. One of the reasons why there is a considerable difference in pricing policy is that the loan charges inherited by the Welsh National Water Development Authority, for example, are very different from those of the Severn-Trent authority or the North-West authority. Therefore, we do not have the powers to do what the hon. Gentleman asks us to do.
  The hon. Gentleman asked me to say something about equalisation. My right hon. Friend the Secretary of State advised all the water authorities to go easy on equalisation, because we knew that in a precipitate equalisation policy, although some people were likely to benefit, many people would have considerable additional burdens imposed on them at a difficult economic time. But we have no power to instruct the authorities.
  I am glad to say that the regional water authorities in England acceded to our advice. But the Welsh are a very independent people, as you well know, Mr. Deputy Speaker, and they decided to go for full equalisation in one year, which has added considerably to the burdens of parts of Hereford and Worcester. However, I am told—although this is little comfort to the hon. Gentleman—that the effect of that traumatic equalisation on

  745
  Hereford and Worcester, outside the city of Hereford itself, is less than in many parts of Wales.
  There is the difficulty that Hereford and Worcester have their water rates determined by a Welsh authority, whereas parts of Wales, including Montgomeryshire, have them determined by an English authority, the Severn-Trent authority, because one of the principles of the Water Act is that water is now managed on a hydrological, geographical basis.
  It is true that rate equalisation affects large parts of the South-West, not just Cornwall but Cheshire. I have received deputations led by Conservative hon. Members about the effects on parts of Cheshire of the Welsh authority's policy, making the very point that the hon. Gentleman made, that in parts of Cheshire people are having to pay those charges without having the rate support of people just over the boundary.
  I looked into the matter carefully to see whether it was possible to give differential rating assistance in England. There are most formidable difficulties. I have had to reach the conclusion that it is impossible for us to proceed down the road of differential policies in England as between one county and another or, as in the case of Cheshire, one part of a county and another. When special relief was given in Wales for one year, 1974–75, whilst the effect of water reorganisation was a significant factor, there were others that were equally compelling, particularly the overall effect of local government reorganisation in Wales, which in the Government's judgment had more financial impact there than in England.
  We cannot help the water charges through rates because the previous Government, when they established the Water Act, took the water service out of local government and away from the possibility of rate relief. Water charges are nothing to do with the general rating system, although, for convenience, many water authorities still have their charges collected by local authorities and base them on the rating system.
  The hon. Gentleman asked what we intended to do about this matter. This
  746
  policy was supported by his hon. Friends. The Chancellor has made it clear that there can be no question of further general subsidies for nationalised industries. They must stand on their own feet financially. I understand that is also the policy of the Opposition. Therefore, there can be no question of more Treasury subvention to the new water industry.
  We are just as unhappy at the consequences of this policy as the hon. Gentleman. Our difficulty is: what period should we allow to run before looking at it? There has been a tremendous upheaval in both local government and the water undertakings. The Government have said that they will allow a period of two years for this system to settle down before looking at the consequences. In all conscience I do not think we could have a shorter period. Those two years are nearly up and we are preparing for that review. We welcome what the hon. Gentleman said and will take his points into account when we come to review what, if anything, can be done about general water policy. There may be difficulties.
  We must look at water policy in two ways: first, nationally, and, secondly, in the way that it is administered in the regions. I have a great deal of sympathy with the hon. Gentleman's point about the fantastic size of the regional water authorities. They are based on the hydrological principle. For example, the area covered by the Severn-Trent Water Authority starts in mid-Wales, goes right across the industrial Midlands to the East Midlands and finishes near Lincoln. In terms of democratic accountability or management, that is nonsense. However, that is the result of taking the hydrological concept to its utter logical conclusion. We want to look at and consider whether that is right or wrong.
  I assure the hon. Gentleman—
  The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to Standing Order.
  Adjourned at twenty-three minutes past Twelve o'clock.

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

LORD GREGSON
John Gregson, Esquire, having been created Baron Gregson, of Stockport in Greater Manchester, for life—Was, in his robes, introduced between the Lord Bowden and the Lord Hinton of Bankside.
LORD KIRKHILL
John Farquharson Smith, Esquire, having been created Baron Kirkhill, of Kirkhill in the District of the City of Aberdeen, for life—Was, in his robes, introduced between the Lord Hughes and the Lord Hoy.

"BABIES FOR BURNING"
2.40 p.m.
Lord HOUGHTON of SOWERBY: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the Director of Public Prosecutions has now completed his consideration of the police evidence relating to the allegations of criminal conduct contained in the book Babies for Burning and whether any charges are being brought against individuals named in that book.
The MINISTER of STATE, HOME OFFICE (Lord Harris of Greenwich): My Lords, the Director of Public Prosecutions has not yet completed his consideration of the police evidence relating to the allegations of criminal conduct contained in this book.
Lord HOUGHTON of SOWERBY: My Lords, can my noble friend say when this will come about? After all, these allegations were made last year and investigations—
The Earl of LONGFORD: Order, Order! Question!
Lord HOUGHTON of SOWERBY: My Lords, will my noble friend please keep quiet when I am asking a question?
The Earl of LONGFORD: I say, Question!
Lord HOUGHTON of SOWERBY: My Lords, I ask my noble friend to keep quiet while I am asking a question.
The Earl of LONGFORD: I say, Question!
Lord HOUGHTON of SOWERBY: I want no insolence from my noble friend.
The Earl of LONGFORD: I repeat, Question!
Several Noble Lords:Order, order!
Lord HOUGHTON of SOWERBY: My Lords, may I have silence in the House while I ask my question? I am asking my noble friend when this will come about. I was asking whether he was aware that these charges were made last year, and that other questions relating to this book have been investigated since. I am now asking when the Director of Public Prosecutions will be in a position to decide whether, on the evidence he has obtained, any criminal charges can be made resulting from what was said in this book.
Lord HARRIS of GREENWICH: My Lords, I think the Director expects quite soon to come to a decision on this matter.

NORTH ATLANTIC: HYDROCARBON EXPLORATION
The Earl of LAUDERDALE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether agreement has yet been reached with the Republic of Ireland to delimit British and Irish areas of the Continental Shelf for hydrocarbon exploration and whether any contentious questions have arisen regarding sovereignty over the islands in this sector of the North Atlantic.
The PARLIAMENTARY UNDERSECRETARY of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Goronwy-Roberts): My Lords, no agreements have yet been reached between the United Kingdom and the Republic of Ireland on the delimitation of their Continental Shelf boundary. I know of no challenge to British sovereignty over any islands in the area.
The Earl of LAUDERDALE: My Lords, without wishing to extend the Question into suggestions that might be challenges to sovereignty, introduced by the noble Lord in his Answer, may I ask him this supplementary question? Has any question of any kind arisen with regard to the position of Rockall?
Lord GORONWY-ROBERTS: So far not, my Lords. The island of Rockall was annexed to the Crown in 1955 and it was made part of Scotland by the Island of Rockall Act 1972. To the knowledge of Her Majesty's Government, no other State has laid claim to it.
The Earl of LAUDERDALE: My Lords, having asked whether any other State has laid claim to the Island of Rockall, can the noble Lord answer this further question? Has the matter arisen at any international gathering at which Britain and Ireland were present, such as the Summit?
Lord GORONWY-ROBERTS: Not to my knowledge, my Lords. The Prime Minister of the United Kingdom and the Prime Minister of the Republic of Ireland discussed the question of the delimitation of the Continental Shelf boundary on 15th July at the Brussels meeting. The exchange was, as usual, amicable. It was decided that both countries should endeavour to settle this question by negotiation. We expect discussions to take place in the next few months.
The Earl of LAUDERDALE: My Lords, may I thank the noble Lord for his more informative reply?
Viscount MONCK: My Lords, can the noble Lord inform the House whether the people of Rockall will be consulted on this matter?
Lord GORONWY-ROBERTS: My Lords, if there were any people I have no doubt that they would be consulted.
Lord CAMPBELL of CROY: My Lords, does the noble Lord realise that exploration will be held up until there is agreement on the median lines in the important areas, to the North and West of Britain, of the Continental Shelf? Is the noble Lord also aware that, as the Minister who was responsible for introducing the 1972 Act, I trust that the bird population of Rockall will be well looked after by Her Majesty's Government?
Lord GORONWY-ROBERTS: My Lords, we shall do our best to take care of the birds. On the noble Lord's other point, I agree that we regard this matter as one of urgent importance.
The Earl of HALSBURY: My Lords, could the noble Lord give an undertaking that on the difficult and delicate question of when is a Continental Shelf not a Continental Shelf, the voice of geology will be allowed to make itself heard?
Lord GORONWY-ROBERTS: My Lords, it seems that the voice of geology and geography is already fairly clearly audible in this House from the very Back Bench of the Conservative side. More seriously, geology is, of course, of as much importance as geography and, indeed, politics in these matters.

SQUATTING
2.45 p.m.
Viscount HANWORTH: 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, bearing in mind the increased problem of evicting squatters and the fact that many foreign students regard Britain in this respect as a haven, they will now make squatting a criminal offence.
Lord HARRIS of GREENWICH: My Lords, the Government recognise the urgency of this matter and the strength of public concern over it. My right honourable friend the Home Secretary would prefer not to consider amendments to the criminal law until the Law Commission's report on Conspiracy, which will deal with offences of entering and

321
remaining on property, is available. The Government are confident that the Law Commission will have regard to the urgency of the problem in the preparation and completion of their report.
Viscount HANWORTH: My Lords, I thank the Minister for his reply. May I ask whether any encouragement is being given to local authorities to license squatting where there is unoccupied property belonging to the local authority? There is the problem of housing these people, and if it can be done properly it is beneficial.
Lord HARRIS of GREENWICH: My Lords, that is a matter for my right honourable friend the Secretary of State for the Environment, but I will gladly draw his attention to what the noble Viscount has said.
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that until comparatively recently the blatant unfairness arising from this ancient Statute was not known either by those who wanted to exploit it or by those who may be the victims of it? It is now well known on all sides that this weakness arising from this ancient Statute exists. We know that there are certain sections of the community who will rush to take advantage of it. In those circumstances, I am certain that the nation is of the opinion, now they are aware of it, that both sides ought to get together to deal with it in both Houses of Parliament. Is the noble Lord aware that that is the feeling of the nation and that the House ought to act upon it?
Lord HARRIS of GREENWICH: My Lords, as the noble Lord will no doubt be aware, the Law Commission published a Consultative Working Paper on this matter in June of last year. Since then they have received a substantial number of comments. They are now considering the matter and will revise their proposals in the context of those comments.
Lord MERRIVALE: My Lords, can the Minister say in what other countries of the European Community squatting is not a criminal offence?
Lord HARRIS of GREENWICH: My Lords, not without notice.
Baroness GAITSKELL: My Lords, is the noble Lord aware that although certain squatters are almost criminal the nation is also very worried about the homeless, and that in many cases, the two things go together?
Lord HARRIS of GREENWICH: My Lords, this is one of the matters which was considered very carefully by the Law Commission and which I am sure will again be considered very carefully before they publish their revised proposals.
Lord LEATHERLAND: My Lords, can my noble friend tell me what is the legal position of a nice, quiet Mr. Jones who returns to his suburban home with his family after being on holiday and finds it inhabited by half a dozen long-haired, lousy louts? Is he entitled to exert force to get rid of them?
Lord HARRIS of GREENWICH: My Lords, I think it is undesirable to answer hypothetical questions of that kind. I hope that the person concerned would summon the local police who, I am sure, would take appropriate action.
Baroness YOUNG: My Lords, while welcoming what the Minister has said regarding the Government's recognition of the urgency of this problem, may I ask whether he can be more specific about when they intend to legislate for what is causing a great deal of public concern to innocent people?
Lord HARRIS of GREENWICH: The Government are well aware of the urgency of this problem, but clearly they cannot publish their proposals until they receive the final report of the Law Commission which is expected early next year.
Lord DRUMALBYN: My Lords, can the noble Lord say what is the appropriate action for the police to take?
Lord HARRIS of GREENWICH: My Lords, this is one of the many points which was at the back of my mind when I indicated that I did not think it was appropriate to answer hypothetical questions regarding how the police would handle a particular situation. It would depend upon what happened. There is no difference between this side of the House and the other regarding the

323
urgency of this problem. It was recognised by our predecessors who referred the matter to the Law Commission.
Lord HALE: My Lords, is the noble Lord aware that there is the strongest possible inhibition on the part of the British police force, either against interfering in questions of tort—but not of crime—or against entering a house and taking action, and I frankly do not believe there is any action they can effectively take? Will not the noble Lord reflect on the matter and feel that giving this advice to call in the police in domestic disputes may be a very unhappy statement to have made?
Lord HARRIS of GREENWICH: My Lords, I indicated that I thought they would be wise to consult the police about their rights. That seems to me to be a perfectly reasonable statement to make in answer to the question. I cannot conceivably reply to hypothetical questions about what action the police would take in certain circumstances. It would depend on a large number of factors; but, as I indicated, this is a serious matter and it is being treated with seriousness.
Lord PANNELL: My Lords, is it not a fact that the tenor of the Minister's reply is that we cannot do anything on a great variety of subjects until the Law Commission report on all of them? I hope I do not do his right honourable friend an injustice, but is the theory behind this that we cannot do anything until we know about everything?
Lord HARRIS of GREENWICH: No, my Lords; the question is a little simpler than that. The previous Government referred this matter to the Law Commission; they published their preliminary views, comments have been received and we expect their final report early next year. The Government will then come forth with their legislation.
Lord DERWENT: My Lords, is the noble Lord saying that we are not going to have any result until next year?
Lord HARRIS of GREENWICH: My Lords, this is a highly complicated question of law. It is quite impossible to put forward legislative proposals until we receive the final report from the Law
324
Commission on this matter, and that report we expect in the early part of next year.
Lord LEATHERLAND: My Lords, is my noble friend aware that the hypothetical example which I quoted is rot a highly complex affair, and is he further aware that I have known of cases in which the police have been called and have confessed their inability to take any action?
Lord HARRIS of GREENWICH: My Lords, that is certainly one of the matters that we can look at when we receive the report of the Law Commission.
Lord RAGLAN: My Lords, is my noble friend aware that there are hundreds and, perhaps, thousands of perfectly sound empty houses around London? Is he aware that these incite people to occupy them, and many otherwise quite law-abiding citizens do so in order to make use of a commodity which they feel should be used and not left empty?
Lord HARMAR-NICHOLLS: My Lords, is the noble Lord aware that next year is not good enough? Things will happen between now and next year; everybody is aware of it and the Government, with the support of the Opposition, ought to do something about it at once.
The LORD PRIVY SEAL (Lord Shepherd): My Lords, this is clearly a matter on which the House has great concern. I would have thought that what has transpired at Question Time, and what my noble friend has said has indicated a serious view of the situation, but that we have probably gone as far as we can and we ought now to move to the next Question.

CORONER'S COURTS PROCEDURE
Lord JANNER: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have considered revising the procedure of coroner's courts with a view to avoiding prejudice in the event of subsequent trials.
Lord WELLS-PESTELL: My Lords, as soon as legislative opportunity affords, the Government intend to abolish the duty of a coroner's jury, if their verdict is murder or manslaughter, to name the person they find guilty of causing the death, and the coroner's consequential duty to commit that person for trial.
Lord JANNER: My Lords, may I ask my noble friend what he means by "as soon as" the Government are prepared to bring in legislation? Is he aware that the Brodrick Committee on the whole matter of coroner's courts started 10 years ago, that it is already two years since the Report was issued, that the general public are very concerned about the results that can and do ensue in consequence of verdicts that are given in the coroner's courts, and that the Law Society years ago gave the opinion that some of the present provisions should be removed? Is it not time that some action was taken, and if the Government are not prepared to do it will they say that they will assist me or some other Member of this House in introducing a Private Member's Bill in order to deal with the situation?
Lord WELLS-PESTELL: My Lords, I think I can say that the Government will not assist my noble friend in such an endeavour. It is difficult to say when legislation may be possible. An opportunity may occur in a general Bill, and the Government are considering that at the present moment. A careful study has been, and is being, made of the Brodrick Report and I hope that the Government may be in a position—I say that I hope, and I use the word "may"—to make a statement before the Recess.
Lord HALE: My Lords, can the noble Lord give a single example of any useful purpose that the existence of coroner's courts ROW serves?
Lord WELLS-PESTELL: My Lords, this is perhaps wide of the Question but, generally speaking, an inquest is not concerned with criminal liability. It has always been a duty of the coroner's court to deal with certain types of situation, and it could well be argued that there is a function for the coroner's court but not, perhaps, when it involves a criminal decision.
Lord PAGET of NORTHAMPTON: My Lords, would the Minister say whether, while this matter is being considered, the usefulness of coroner's courts at all will also be considered? It is an ancient procedure, but certainly I believe it now to be obsolete and it would be far better abolished completely.
Lord WELLS-PESTELL: My Lords, the scope and function of the coroner's court is being considered along with the matter raised by my noble friend Lord Janner.
Lord JANNER: My Lords, can my noble friend at least deal with a situation in respect of which the Government have already declared themselves prepared to act, where prejudice arises in consequence of verdicts that are given? Take, for example, my Lords, a case at the present moment, the Lucan case—
Several Noble Lords: No!
Lord JANNER:—and similar cases where magistrates' courts have refused to allow a case to go on after a verdict has been given in a coroner's court. Can he not do something about that?
Lord WELLS-PESTELL: My Lords, we are all aware of these examples, and, as my noble friend has pointed out, there has been a Committee under the chairmanship of Judge Brodrick considering these matters. That Committee has reported and the Government are now considering how best to deal with these matters. Although there has been some interval of time, if you are going to change something which has been going on for a good many years, you must be absolutely certain that the course of action you are recommending is the right one.

GOVERNMENT STATEMENT
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, with the leave of the House my noble friend Lord Beswick will repeat a Statement on the textile, clothing and footwear industries at a convenient moment after 3.30 p.m.

BRITISH NATIONAL OIL CORPORATION
2.59 p.m.
The MINISTER of STATE, DEPARTMENT of ENERGY (Lord Balogh)The MINISTER of STATE, DEPARTMENT of ENERGY (Lord Balogh) rose to move, That this House takes note of Her Majesty's Government's proposal to establish the British National Oil Corporation and related proposals to meet the urgent need for efficient and continuing development of the United Kingdom's petroleum resources. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. Noble Lords will understand that I am grateful for being allowed to introduce the debate. This topic is one of the most important to come before this House in recent years. The issue is nothing less than the choice of policies the United Kingdom should follow as a major oil producer. It is hard, even now, to think of this country as a major producer, so rapid has been the change in the last few years, but that is what we shall be. Throughout the 1980s we should be capable of producing 100 to 150 million tons a year, and perhaps more than that in some years.
At this level of production our output will be as great as the present output of more familiar producers like Kuwait, Libya and Canada and we shall be one of the world's leading producers. The benefit to our balance of payments will run into tens of thousands of millions of pounds over the life of the oilfield. Having striven in earlier years to arouse interest in this great opportunity which Britain was offered, an opportunity which, noble Lords will recall, I have argued should be greater than it is, some of us are quite glad to see our labours bearing a good harvest for the nation. This is the sixth or seventh time that I have addressed your Lordships on the problem of British Shelf offshore oil and gas. I hope that as exploration work progresses there will be increasing reason to refer to the British shelf as a whole rather than to the North Sea. I hope, also, that our debate on this Motion will cover the whole background to the Petroleum and Submarine Pipelines Bill, and so ease the passage of that Bill when we receive it from another place.
Before I discuss the Government's policy in more detail, may I make three
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general points? The first follows from what I have just said and will be readily accepted by everybody here. It is that it is enormously important to us to work out the right policies for the United Kingdom as a major oil producer. My second point is that getting the policies right is extremely difficult it is a matter of careful judgment and balance. In particular, we need to strike a just balance between the need for the Government to have adequate control over, and adequate revenue from, the oil and gas, and the oil industry's legitimate commercial interests which must in no way be neglected. The contribution which the oil industry has made and continues to make is remarkable. I would be the first to acknowledge this. The rapid development of the North Sea in the last few years owes a lot to their knowledge, resources and willingness to take risks. We must continue to attract their investment and support their activity here.
But I spoke of a balance with the nation's interests. I believe that the PAC Report has shown that the balance had not been secured in the 1964 Act, and the various licensing rounds that were undertaken by Governments formed by both Parties. Even a cursory review of other countries' policies, countries which were and remain successful in attracting and holding the interest of the companies, shows that we had failed to secure a fair share for the nation of God's splendid gift to Britain. Maybe the present balance was at one time right. That was when the North Sea was unexplored and the chances of finding oil had been proven only little. My own belief is that this ceased to be true as cumulative evidence emerged, exemplified in 1970 by Forties field, of one of the world's largest oil-bearing regions in the North Sea. By now it is beyond dispute that the public interest demands a new deal. The task that now confronts us is to get the balance right. By tilting it too much to one side or the other, the cost and the penalty might be very heavy, and we are in no position to forgo relief on our balance of payments of the magnitude which North Sea oil production promises. As we have been totally non-discriminating on the issue of licences, obviously foreign enterprise, and thereby the balance of payments, is being burdened.
My last general point is this. I said earlier that it is still hard to think of the United Kingdom as a major producer of a vital raw material. But the revolution in our economic prospects brought about by North Sea oil must be accompanied by a revolution in our thinking. It is not easy to change the habits of thought appropriate to an oil-consuming and oil-importing nation. I shall say more in detail about this later, but I want to make straight away the fundamental point that in such a novel situation we must be willing to consider novel policies. Above all, we must not just look at what our own history and past political debate tell us would be the right policy; we must also look at the outside world, and try to draw lessons from what other major oil producers have done.
The Government's proposals were outlined in the White Paper of July 1974. Briefly they fell into four parts: new tax arrangements to increase the nation's take from North Sea oil and gas; participation by the nation in oil and gas; greater control by the nation over operations in the North Sea; and measures to help Scotland and the other development areas. Legislation has been put forward by the Government under all four heads. The Oil Taxation Act, which provided for the new tax arrangement outlined in the White Paper and which was debated in the House in April, is now law. The Bills to establish the Scottish and Welsh Development Agencies are now before Parliament. The remaining two objectives—greater national participation and control—will be achieved under the Petroleum and Submarine Pipelines Bill which is now in another place, and will I hope be coming before your Lordships' House very shortly. It is on one of the main proposals in that Bill that I should like to concentrate this afternoon.
Lord ORR-EWING: My Lords, would the noble Lord be kind enough to give way? Can he give us some indication of the programme? The Bill is still in Standing Committee in another place. The noble Lord said that he hoped it would be coming before your Lordships' House very shortly. There will be opportunities for a full Report stage to pass through another place, and also a Third Reading. I hope that before the Bill comes before our House we will have ample opportunity
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to consider Amendments made in another place. When does the noble Lord foresee the Bill coming before this House?
Lord BALOGH: My Lords, I should not like to trespass on the duties as Chief Whip of the noble Baroness, Lady Llewelyn-Davies of Hastoe, because that course of action would be fraught with danger for me. Therefore, I suggest to the noble Lord, Lord Orr-Ewing, that he puts down a Question to the noble Baroness, rather than asking me. However, I hope that we shall get the Bill in due time before we adjourn. I am sorry I cannot be more definite, but it would be fraught with danger for me to trespass on that ground.
My Lords, let me take participation first, and admit straight away that to many people it is rather a bogy word. I am sure that some noble Lords would share this view. It reminds them of the familiar arguments we have had since the war about the rights and wrongs of nationalisation. I should like to take it out of that essentially British context and put it in a worldwide oil industry context. Participation is not the same as nationalisation. I cannot stress that too often; it is participation. We are not proposing to nationalise the North Sea. I repeat that participation is a means of partnership between the Government and the oil companies. Our objective is to obtain by negotiation—and when I say "negotiation", I mean free negotiation—51 per cent. participation in commercial oilfields regulated by current licences.
In the Government's earlier discussions with the companies, we outlined our general approach to the negotiations. In particular, we made it clear that it was not the intention of the Government to increase the level of Government take through participation. The level of Government take is determined by royalty, corporation tax, and the new petroleum revenue tax. Thus, the companies would be left financially no worse off as a result of participation; nor would they be left any better off. We are now discussing how this should be achieved.
My Lords, at the same time we outlined our proposals on the contribution that the British National Oil Corporation might make to development costs, and how it might be rewarded for any contribution it may make. In addition, we

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expressed willingness to enter discussion about the disposal of BNOC oil, and about terms to be incorporated into operating agreements to ensure that minority interests are safeguarded. We believe that the proposals we are putting forward are fair and reasonable, and from reports I and my colleagues have received it would seem that the companies recognise this too—not only those companies which have publicly declared a willingness to enter into negotiations but others, too, who for one reason or another do not yet wish to make any public statements. I quite see their point. No longer do they see us as ogres but they recognise our desire to ensure that development is not delayed, and in particular that the interests of those who are putting up large sums of money, including the banks, must be protected.
The State Oil Company, about which I shall say more later, will enter into the consortia which exist to exploit fields as a 51 per cent. partner, the present private sector partners retaining the remainder. Here, then, is a practical example of the balance of interests I referred to earlier. The private sector will retain their stake and operational function. No one thinks that their knowledge and resources should be displaced. What will happen is that the State will acquire a direct title to 51 per cent. of the oil and the State Oil Company can learn from its partners what it needs to know if it is to develop, as we hope it will, a full national capability in all branches of the oil industry. This will take time, and no one expects the operators in existing consortia to be replaced. We are willing to enter into discussions with the industry to lay down safeguards lest red tape should be in the first period impede the smooth execution of development and extraction operations. But we have a duty and a right to know what is going on.
We have tried to evolve the details of our new order in close consultation with the industry. In a number of respects, to which I shall refer later, we have modified our proposals. I cannot pretend that the great captains of the industry are in all respects delighted. It would be unnatural for them to feel elation when a fat golden calf left unprotected in their field by unprofessional amateurish previous
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Governments is helped to escape leaving behind it a thinner and smaller but still very delectable lamb.
Lord ORR-EWING: My Lords, as the noble Lord referred to all previous advisers as amateurs, perhaps he could give the names of the professionals who are advising the present Government?
Lord BALOGH: My Lords, I am. We shall see whether I have earned my naturalisation. I should like to ask noble Lords and them, once more to contemplate what we have done with objectivity and reflect whether they would or could in the circumstances have done otherwise. We could not leave operations vital to the country practically without any control, including control over the pipelines.
With the exception of the United States, every other major oil producing country in the world is developing State participation in the oil industry, without any exceptions whatever except the United States. This is true not only of the OPEC countries but also of such countries as Norway, Denmark, Holland, Ireland, Australia, Canada and New Zealand. Just recently Egypt, in dangerous waters liable to great physical risks, was able to attract the very same companies we are dealing with, obtaining up to 85 per cent. participation without payment or investment, with the profits on the remaining oil of between 15 and 25 per cent. being taxed at 50 per cent. I am sure noble Lords on all sides will marvel at our reticence. But we want genuine negotiations and willing cooperation, and we are willing to pay for it. I think in the long run that would be in the best interests of the country and of the companies.
I said earlier that we must be ready to consider novel policies and to draw on the experience of other oil-producing countries. It is in this worldwide context that I should like your Lordships to consider the Government's proposals. We are doing only what every other major oil producer has found it in its interests to do. The reasons are not hard to find. The dependence of modern industrial economies on oil, the worldwide nature of the oil industry's operations, the vast size of the resources needed; all these have dictated all over

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the world the need for a direct Government stake in the oil industry.
Your Lordships, I am sure, will already be aware that four companies, Burmah, Deminex, Tricentrol and Blackfriars, have announced that they accept the principle of participation, and our discussions with them are continuing. More recently, the Chairman of BP has accepted on behalf of his company the principle of participation on the basis of the proposals put forward, and we have been in discussion with the company for some weeks regarding the details of an agreement. This is a very great step forward and I want to acknowledge it. I do not intend to give any further details of these discussions, since I do not think it is in either the nation's or the companies' interest that these negotiations should be conducted publicly. I can, however, inform your Lordships that we are also in serious discussions with a number of other companies, large and small, British and foreign, and I am sure we can reach a reasonable agreement with them. Your Lordships may also be aware that a number of companies who hold North Sea licences but who have not yet been successful in making a commercial discovery, have also indicated that they would be willing to undertake constructive discussions with the objective of achieving State participation in the event that they find commercial fields.
Participation necessarily involves the creation of a State Oil Company, and the proposals to set up the British National Oil Corporation are at the heart of the Petroleum Bill which I have mentioned. The importance of oil makes it essential for the nation to have a direct capability in oil exploration and production, and eventually, perhaps, in downstream operations. I said earlier that we recognised the value of the contribution made by the oil companies and we wanted them to continue to stay here. But it is only prudent to build up our own knowledge and expertise, only prudent not to remain fully dependent on the private companies. This is certainly the conclusion reached by other oil-producing countries, and indeed we have across the North Sea the example of the very recent, but already very successful, State Oil Company in Norway, Statoil.
Of course, we realise that the growth of the British National Oil Corporation
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must be gradual. It will have a lot to learn, and one of the advantages of participation in current licences is that it will be able to learn the business from its private sector partners. Its rate of growth will depend on the participation negotiations and on the timing of future licensing rounds. Eventually, we want it to hold licences on its own account, especially as it can play a most important part in conservation, akin to the so-called Naval Reserves in the United States.
I said that the Government's proposals were for greater national participation and greater national control, and I should like now to describe the Government's proposals on control. I do not think anyone would argue against adequate national control over operations in the North Sea, and there are several serious gaps in our present arrangements. Let me give the House a few examples of them. First, there is no control over the rate of production. This is a particularly serious gap, given that oil and gas are finite assets of enormous value to the nation, and do in the ultimate belong to the nation. Future generations may pay heavily—and not so future either—if we do not control their depletion with care. At the same time, as my right honourable friend's Statement in the other place shows, we shall take into account the legitimate interests of the companies in pursuing the depletion policy and we have given them an assurance that for the moment that power will not be exercised.
Secondly, there is no obligation on the licensees to explore after the first six years. For the remaining 40 years they can hold the licence without having to do any further work. This is absurd. Thirdly, there is no adequate provision for the Government to receive certain financial and technical information from the licensees. In view of the importance of getting our policies right, I need not emphasise the need for the Government, and the nation, to be properly informed. Fourthly, there is no adequate control over the flaring of gas which is obtained together with oil. Flaring is sometimes unavoidable, but it always means the waste of fuel which the nation desperately needs and must, therefore, be rigorously limited and permitted only in cases where it is unavoidable technically.
Fifthly, there is no adequate control over dealings in licence rights. Licences

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have been granted by discretion for no initial payment, except for one small block. The Government can carefully choose one company to receive a potentially valuable licence and then find that, in effect, the benefits of the licence will be enjoyed by another company. This is also absurd. The Government are proposing changes to close all these gaps. I hope that that illustrative list will have shown that no responsible Government, whether Conservative or Labour, could have done otherwise. We have discussed the changes very carefully with the industry and have made several adjustments to our original proposals in response to their representations.
I said earlier that we have modified our proposals in a number of respects and perhaps I should mention the three most important modifications. First, exploration programmes required additional to those relating to the initial term of the licence will only be those which a conscientious licensee with adequate resources would carry out anyway. Secondly, and perhaps most importantly, we have modified the provisions relating to depletion powers. From the time of the approval of the development programme, the licensee will know the maximum extent of cutback or increase in production which the Government can require; that is to say, neither they nor their bankers will be under any risk. Thirdly, in respect of pipelines, we have made it quite clear on the face of the Bill that a pipeline owner who is required to change the route of pipeline to accommodate a third party, which again is absolutely essential, is to be fully reimbursed. I would not say that the industry wholly accept these changes, but I hope they would agree that we have responded sympathetically and effectively to what they told us.
There are, of course, those who deny that we have considered the legitimate interests of the companies. They point to the level of activity in the North Sea, which they say will decline as a result of Government policies. I should like to call the attention of noble Lords opposite—and especially noble Lords on the Front, Second and Third Benches—to a Report of the NEDC about process plant. We have seen that their expansion is fully
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in swing and that we are about to receive a number of further orders, and we cannot complain. The mobile rig exploration in the first half of this year was higher than ever before. There have been no fewer than 17 new discoveries, 12 of them since the end of March and therefore not recorded in the Report to Parliament. Enough oil has now been discovered to take us up to self-sufficiency by 1980 and beyond.
Secondly, the last 12 months have seen oil development coming to fruition. Seven production platforms have been completed, towed out and installed, and two more are on the way. One field is already producing oil, four will be on stream this year if all goes well, and seven by the end of next year. A very substantial relief will be afforded to our national income and our national balance of payments. Thirdly—and more generally—expenditure and activity necessary to lift us from being 100 per cent. oil importers to being self-sufficient are on an enormous scale. This level of activity will continue for a few years. What happens after that depends in part on the rate of new discoveries and perhaps on further offshore licensing by the Government, which is under contemplation.
I shall not try to translate the question of the level of activity into quantified hypothetical predictions. I find that that is a pastime better fitted to the Opposition than to the Government. I leave that to those who seem quite uninhibited by the many risks and variables inherent in offshore petroleum exploration which makes forecasting in the area a particularly hazardous business. But if we stick to the evidence before us, there is no doubt that those who currently use gloomy predictions as a means of attacking the Government's policies are not well advised. You see, my Lords, my reticence in not using any further adjectives.
There are other proposals in the Petroleum Bill, and no doubt we shall be discussing these in detail later, I am sorry to say. I have this afternoon concentrated on national participation and control, which are at the heart of the Government's proposals. I know that there are aspects of them which some noble Lords may not at first sight like—that would be understating it—but I

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appeal to them to consider the new situation in which the United Kingdom is now placed, and to set aside the controversies of the past. The Government's proposals are aimed at ensuring that we get the full national benefit from the novel situation in which we find ourselves, and I commend them to the House. My Lords, I beg to move.
Moved, That this House takes note of Her Majesty's Government's proposal to establish the British National Oil Corporation and related proposals to meet the urgent need for efficient and continuing development of the United Kingdom's petroleum resources. (Lord Balogh.)
3.28 p.m.
Lord CAMPBELL of CROY: My Lords, I am sure that we are all grateful to the noble Lord, Lord Balogh, for having arranged this debate today and for his introductory statement. The Government are giving us an opportunity to assess the present situation, and they invite us to take note of their proposal for the British National Oil Corporation and what they describe as "related proposals". There is a Bill in another place which will reach us in due course, and I am sure we shall want to examine it fully when it arrives. The noble Lord indicated that it might come here for Second Reading at a time which he said could be "inconvenient", but he was not prepared to answer directly the queries of my noble friend Lord Orr-Ewing. It is not a matter for discussion now, but as he has referred to it, I very much hope that it will be possible for that Bill to be considered at a convenient time.
Today we have this opportunity to assess the situation reached in Britain's bid to extract offshore oil as an urgent operation of great importance to our economy. It is less than four years since the first commercial oilfield was announced in the North Sea, and only six years since the first traces of oil were discovered. The noble Lord mentioned the Forties field as having been discovered in 1970, but I would remind him that it was not appraised and announced as commercial until the second half of 1971. We agree with the statement in the Motion that there is an urgent need for the,
"efficient and continuing development of the United Kingdom's petroleum resources."
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We agree especially in view of the world price of oil as it has been for the last year and a half. Of course I would remind your Lordships that it could well drop in future years, but that movement is unlikely during the next year or two.
Apart from the terms of the Motion, I detected nothing in the noble Lord's speech which referred to the urgency of the present situaton. Our balance of payments can be relieved of the present very heavy burden arising from oil imports, and we shall also have an additional source of energy, though much more expensive to produce than oil from the Middle East and some other of our traditional sources. We ought to be assisting this operation in every possible way. This is an operation to win as much oil as possible in the next five years—that is, until we reach self-sufficiency, which should be in about 1981. We hope it will be 1981. Then we can consider the optimum rates of annual extraction for later years. Therefore, we feel that this is an extremely urgent matter but we do not think that establishing this kind of oil corporation is the best way of hastening and helping these operations. Rather is it more likely to hinder, and the uncertainty which has been caused over the last year and a half arising from the Government's proposals, and their vague threats of nationalisation and intervention, have already caused a regrettable slowing down in the British offshore programme.
This is especially unfortunate because the rate of discovery has been fast in the three years from the end of 1971 to the end of 1973 compared with discoveries in other oil provinces in other parts of the world. This was largely due to improved methods of exploration in offshore oil. I agree with the noble Lord that we in Britain have received an uncovenanted gift from Nature previously unknown to us, just when we are in economic difficulties and standing most in need of its benefits. While offshore oil can greatly help us, it is not a bonanza and it is not a panacea for all our economic maladies. The efforts needed to win this oil are of daunting dimensions. The advanced technology needed has had to be developed as the operations have moved into deeper and more difficult areas of the North Sea. Enormous sums are required for investment some years

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before any return can be expected from it. It was not possible to get started on operations in the North Sea from our own resources alone. Both on the frontiers of technology and in capital for investment we have successfully enlisted the help of the world's leading exponents. Britain ought to be encouraging in every way these massive joint ventures. We should also be playing a rapidly increasing part in the engineering and industrial effort and in the growing business of supplies and support for the offshore operations.
We should recall that in 1971 the large majority of the fields now known had still to be discovered, and they were later found at intervals over the following three years. Four years ago there was no way of telling how much oil in our Continental Shelf would be commercially accessible. The jigsaw has been fitting into place since then. In those circumstances, it is remarkable how quickly the operations were started in what, for this country, was a completely new industry. It is remarkable also how much capital has been raised. Our criticism of this Government is that they have killed the momentum from that early start and allowed this great enterprise to drift into the doldrums of doubt and uncertainty. I use a nautical metaphor, and it is appropriate. This is a maritime industry. We are a maritime nation and we should excel in this venture. Instead of the spirit and vigour of the British merchant venturers of the past, which were certainly evident from 1971 to 1973, the Government have introduced the paralysing potion of bureaucracy.
Let us look at the outward signs of this slowing down, in case noble Lords opposite should contest the point, first on exploration, and secondly on production. Exploration and appraisal drilling should be continuing at an increased rate. There are many who estimate that the amount of oil which has now been discovered is only about half that which will eventually be discovered in the United Kingdom Continental Shelf; the rest is likely to be in smaller oilfields, less easy to find, but we shall certainly need it in due course. Therefore, an argument which has been used from the Front Bench opposite, that exploration rates are not now necessarily needed to be so high,
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falls to the ground, because in due course we will require this oil from the more difficult fields. There are fewer drilling rigs now than have been estimated in the last year or two, and even by the Government as recently as the spring of this year. A year or two ago the trade journals and informed commentators reckoned that there would be an average of about 40 drilling rigs operating in the British sector at any one time this summer. The Government's brown book of April predicted an average of 30 rigs for 1975, and in a reply to me on 27th June in your Lordships' House, the Government stated that there were only 26 operating. That was at the height of the summer drilling season.
In a survey carried out recently, by approaching all the individual operators in the British sector, forecasts have been made as follows: for 1975 an average of only 25 drilling rigs, and for 1976—and this is significant—an average of only 20 rigs. I would remind your Lordships that these rigs need very little maintenance. They are operated on the basis of being at sea, if possible, for 365 days of the year. This is a severe reduction and it cannot be ascribed simply to the recession and high inflation. I can tell any of your Lordships who may be in need of the services of a rig that they would have no difficulty in hiring one at present. I understand that they are easily available; there are many spare ones.
I now turn to production, and here the platform situation is a good indicator. A year ago the Government expected that up to 1980 between 55 and 80 platforms would be required for the British sector. Now, in the light of the changed situation, nearly a year after that August estimate, it is clear that it is wrong. The National Economic Development Council expect orders for platforms in the foreseeable future to be between 28 and 34, and I do not agree with the noble Lord's interpretation of that survey that many orders will be coming in. I regard it as a much more realistic and less promising survey in its results.
Moreover, the new Secretary of State for Energy, Mr. Benn, has already appraised himself of the changed situation and admitted publicly his concern about it. During a two-day visit to

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Scotland last week, he was reported in the Press as follows:
"After a meeting with the Scottish Trades Union Congress yesterday he agreed to write to the Chairmen of all the oil companies asking them to advance orders as quickly as possible".
That is orders for platforms. He went on:
"It is absolutely critical that we do not lose our capability through this gap in orders and then find platform orders going abroad".
The report then said:
"Mr. Benn said he could understand that it was not easy to accelerate orders when the exact spot for which they were needed was not known."
This comes back to the question of the exploration effort and the development programmes which are necessary before companies can take their decisions about ordering platforms. I will revert to production platforms later.
The Government cannot continue, in the light of the information I have given, to pretend that there has been no slowing down in the programmes for British offshore oil. I agree that one reason is the rate of inflation, and the Government must take some responsibility for that. But it is also due to the Government's own proposals, particularly on taxation and intervention. One reason for the slowing down is the long delay before the Government's proposals appeared. The noble Lord may say that this was because the Government carried out consultations with those concerned, and of course it was right for them to do that, but a year is a long time in the life of an industry which itself is little more than four years old. The final proposals from the Government on taxation did not appear until March this year and the Petroleum and Submarine Pipelines Bill did not appear until April this year.
We had a debate in your Lordships' House on taxation on 10th April and I will not go over that. I shall just remind your Lordships that the Government chose the wrong system initially, and that was a petroleum revenue tax. This is to be levied on each oilfield in isolation, with no losses to be offset against other fields in the United Kingdom Shelf. I acquit the noble Lord, Lord Balogh, himself of this mistake; it is perfectly clear that he would have preferred an excess profits tax, as would we on this side of the House, and the noble Lord must have
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lost the argument initially. Indeed, he claimed in the debate on 10th April that the drastic and dramatic changes which had been made in the taxation Bill—made on Report in another place after the Government had been pressed by my right honourable and honourable friends—had converted the tax into an excess profits tax, and that was the point in the first sentence of his winding-up speech.
Although they were great improvements to the taxation system, it was apparently too late to start again with a different tax. We cannot agree that it is now virtually an excess profits tax, as the noble Lord, Lord Balogh, suggested, but we do agree with him that it would have been much better if it had been and had started as such. The result of this taxation system is that it is satisfactory for prolific fields which are easy to work but it is discouraging for marginal oilfields, and oilfields can be marginal however large they are, whatever their size. As a result, the companies are having to review their plans and much of the oil in fields which are difficult to work may be left in the seabed and never extracted. Indeed, the Government are doing what the North Sea winters have so far never achieved; they are freezing some areas of the seabed and leaving the oil in cold storage.
One point on PRT was the anomaly to which I referred; namely, that a small marginal field could be paying tax and not qualifying for the full oil allowance of 10 million tons tax-free. That is the kind of field which ought to receive special consideration; otherwise, it may not be developed at all. The noble Lord, Lord Balogh, said in his reply that I was wrong and he added that sometimes I was wrong. I freely admit to fallibility on many occasions, but as it happened I wrote to the noble Lord afterwards giving him an example of a field and the production profile, and he wrote back to me agreeing that it could occur and could indeed produce a situation in which such a field was paying PRT and not getting its full allowance.
The noble Lord raised the question of professionals and amateurs during his speech and on that one, although a pro, he did lose game, set and match and I fear that it may be Britain who will lose if fields of that kind are not developed because of the companies and

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consortia concerned estimating that it is not worth developing them. The noble Lord also referred to a golden calf which previous arrangements would have made available to greedy oil companies. But the tax system had not then been formulated; it was still to be filled in. A tax system was not yet necessary, because the oil did not start to flow until a few weeks ago and the first profits were not going to be made for some time. So the tax system still had to be formulated, and far from removing any imbalance the Government have created an imbalance. There may not be a golden calf but there is a fatted calf for the prolific fields. An excess profits tax would have applied fairly to large and windfall profits. Thus the Government, I believe unintentionally, have produced an unfair system of oil taxation which penalises the marginal fields and will probably lead to much of the oil being left at the bottom of the sea.
I come to the proposals for public ownership and 51 per cent. participation. On the proposed British National Oil Corporation. We cannot see how the establishment of yet another public body will help with the urgency of this situation. It is simply creating another dinosaur, trampling over existing arrangements and causing confusion. The Government are proposing that this Corporation should engage in virtually all activities connected with oil, including what are known as "down-stream activities"—for example, operating petrol stations by the roadside—but they hasten to add that this will be done commercially in competition with others. But in the offshore operations—and this is our immediate concern—the Corporation is to be both a partner in consortia and a competitor, and it is to be exempted from the petroleum revenue tax.
There is to be this special dispensation. The Government have stated that this is simply an accounting matter so that money does not come into a public body and just go out again. If the Corporation is operating in partnership, then the estimates and conclusions which it will make about the future and planning its investment are likely to be very different from those of its partners in a consortia, because the Corporation will not be paying PRT while they will. And
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then, when the Corporation is in competition, if it is paying no tax and it is operating on its own, the Government must explain—and perhaps the noble Lord, Lord Hughes, will explain—how it will not be at an advantage over other companies operating in the United Kingdom Shelf.
Another point is that the Corporation appears in structure to be entirely different from other public corporations in the nationalised sector. Why is this? Why is its proposed relationship with the Government to be so different from the relationship of the nationalised industries with Ministers? I cannot resist referring to an article in the last issue of the Economist in which it was stated that the chairmanship of this Corporation had been hawked around to many people who had refused, despite an attractive salary. Of course we do not want an indication of names, but it would be helpful if the Minister could confirm or correct whether that article was right. On the question of 51 per cent. participation, the noble Lord, Lord Balogh, said, "This is not nationalisation". Why, then, is it 51 per cent.? Reasons have been given—for example, the need of the British nation to have title to the oil or a stake in it—but it already has. This oil is British and there is no doubt about that.
Everything that the noble Lord described today as being required for the State can be carried out through licensing, taxation and depletion control. What he had to say confirmed this. The participation which is still going on, and which is causing a good deal of anxiety in industry, consists of private talks with individual companies through approaches carried out through the Chancellor of the Duchy of Lancaster, Mr. Lever, for whom we all have great respect. From him come short, cryptic statements offered with his usual endearing inscrutability. Of course he is right to play this slowly if he is not to cause more delay to programmes which should be treated as urgent. The noble Lord repeated one such statement today, that four companies have agreed in principle, but nothing more is being said about it.
All this is causing, and is contributing to, uncertainty. The exercise appears to us to be largely for the benefit of the Left Wing of the Labour Party. The

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majority of the country, and probably the majority of the Labour Party, are not in favour of further large adventures into nationalisation. But in this exercise we detect political motives, and we certainly have some sympathy with noble Lords who sit on the Government Front Bench. But I ask: is this exercise to keep a small, but influential, minority in the Labour Party fold? Mr. Prentice, who is having some troubles today, stated recently that the Labour Party was a coalition of groups with different views. That is very proper in our democratic system. But I hope that this 51 per cent. participation, with its nationalisation overtones, is not being carried out, for example, to propitiate people like the group who are today trying to oust Mr. Prentice. They must surely be a small minority whose views should not predominate. The noble Lord, Lord Balogh, has himself in the past written strictures on nationalisation for nationalisation's sake. I will not quote extracts, but I have in mind particularly an article he wrote in October 1973. This exercise of 51 per cent. participation may be purely political, but it could dangerously delay the urgent programmes for offshore oil.
The noble Lord said a lot about depletion policy. We believe that we should be self-sufficient by 1981, provided the programmes are not seriously delayed; and we agree there should be overall control of annual production after that. But it is not necessary that there should be arbitrary decisions at short notice, because these could cause heavy financial losses to companies concerned. We welcome the improvements to the Bill which have been made in another place, and to which he referred, whereby production authorisations would be negotiated with companies, and would include lower limits in production profiles below which the Government would not demand reductions.
But the case for provisions for some compensation, in certain circumstances where companies, through no fault of their own, are still made to reduce and still suffer losses, is continuing to be a matter of considerable anxiety in the industry. I trust that the Government are still considering that point. I am sorry that the Government have felt the need to alter licences retroactively, without first trying to obtain results through nego-
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tiation and agreement. I believe that these could well have been achieved.
On the question of platforms, perhaps I could remind your Lordships that in those early days, I, as a Minister, had some interesting and unique decisions to take. As Secretary of State for Scotland and a planning Minister, I had to take decisions for the first time on applications for planning permission for structures and projects which had never before been applied for in this country. Those were the proposals for building production platforms, which are enormous and which occupy sites on the shore. The areas selected by the companies at the beginning were fortunately sensible ones; I think they were guided to sensible places. But, none the less, they had to be in areas of great scenic beauty. However it was possible to take decisions in a matter of a few days, very urgently, for Nigg and Ardersier, and later Ardyne Point, without inquiries. If there had been inquiries there would have been up to a year's delay, possibly more. Work was started immediately. Of course, those decisions were precedents and were unique, but I am glad to say that they have all been vindicated and there have not since been complaints from those areas.
But there have been considerable delays elsewhere owing to planning procedures, and your Lordships will know that we considered that these could be streamlined. The Offshore Petroleum Development (Scotland) Bill, which the noble Lord, Lord Hughes, piloted through this House, has not so far been needed in order to acquire sites compulsorily. In answer to a Question from me, he reported that since the beginning of the offshore oil industry in this country, there has so far not been any significant delay in acquiring sites for platform building, because the owners of the land have been willing sellers. So that Bill was really unnecessary, except for one or two small points, like the Sea Designation Order which has been made. My guess is that, despite the time spent in this House in a congested Parliamentary programme, it will prove to be unnecessary in the coming years as well.
In replies to my questions, and in a Statement last week that I mentioned, the Secretary of State for Energy has acknowledged that there is a disturbing

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lack of orders for platforms. I remind your Lordships that each platform can mean £30 million to £60 million of business for this country. In addition, there can be the orders for the modules with the machinery and equipment, which are installed on top of the platforms, and which are likely to go to the country which gets the platform orders.
The Government say, rightly, in this Motion that Britain's offshore operations are urgent. However, if they had wished to discourage and delay them, they could hardly have done it more successfully. If they wish to restore confidence and the former tempo, they should drop their proposal for a British National Oil Corporation and the related proposals. I suggest that if they were to bury their Bill in the North Sea they would get more oil out of it.

TEXTILE, CLOTHING AND FOOTWEAR INDUSTRIES
3.57 p.m.
The MINISTER of STATE, DEPARTMENT of INDUSTRY (Lord Beswick): My Lords, if it is to the convenience of the House I shall repeat a Statement being made by my right honourable friend in another place. It is as follows:
"With permission, I would like to make a further statement about help to the textile, clothing and footwear industries.
"Firstly, we have decided to provide up to £20 million under Section 8 of the Industry Act 1972 to raise productivity in the clothing industry, through help for modernisation and re-equipment. It will be available to all sectors. This is a medium to longterm measure which will help the whole textile industry, which depends on the clothing industry for a significant proportion of its domestic sales. Details will be announced shortly, after final discussions with the Clothing EDC.
"Secondly, we are ready to explore with other sectors, the scope and need for schemes under the Industry Act, which are suited to their particular circumstances, provided the financial resources can be found. Discussions
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have already begun with the footwear and jersey fabric industries.
"Thirdly, public purchasing Government Departments are being asked to ensure that they get their requirements of textiles, clothing and footwear from British manufacturers and that they use British materials. I hope that other purchasers in the public sector will, so far as possible within present constraints, be guided by the same principle. It would be against our interests as an exporting nation to violate the international rules about discrimination. Nor can the Exchequer be expected to accept grossly unfavourable terms for domestic products.
"Fourthly, we stand ready to invoke the safeguards provided in the GATT Multi-Fibre Arrangement, where imports of textiles or clothing cause or threaten disruption. Consistently with the MFA, the European Commission is negotiating bilateral arrangements, covering the Community as a whole, with the principal supplier countries, to prolong, and in some cases extend, the existing restraints on the more sensitive products. The Community have just completed negotiations on these lines with Hong Kong.
"Extended restraints on Taiwan will be published shortly. If other negotiations cannot be brought to a speedy conclusion, we would be entitled to propose that the Community use the provisions in the MFA which allow importing countries to take their own safeguards.
"In the case of footwear, Poland, Roumania and Czechoslovakia have undertaken that their exports to the United Kingdom of men's leather footwear will be at a level between 5 and 10 per cent. below that of comparable exports in 1974. We are keeping the position on footwear under careful review.
"To consider action in good time, we must know about potentially disruptive imports. The Government's fifth measure is accordingly to apply to all clothing and textile imports from non-EEC sources the surveillance licensing which is already in force for some manmade fibres, yarns and fabrics. These are not import controls; licences will

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be issued on demand. This extended surveillance will take effect from 1st September. The administrative arrangements will be announced as soon as possible.
"Sixth, anti-dumping powers. An industry which thinks it has the makings of a case for use of these powers should not hesitate to come immediately to the Department of Trade, whom they will find very ready to give advice and help and to take vigorous action where dumped imports cause or threaten material injury. Cases have to be properly investigated; but where there is a good case and an imminent threat of injury we have powers to take provisional action for up to six months.
"Finally, the ceilings on duty-free imports from Portugal will be properly applied. Honourable Members will know that customs duties have been reimposed from 15th July on woven outergarments.
"The immediate difficulties of these industries spring primarily from the worldwide decline in demand for their products. Our aim is to assist a constructive response to change and to avoid change at a pace which causes undue social hardship. The range of measures I have announced shows the Government's determination to see textile, clothing and footwear industries which are profitable and competitive so as to provide secure and well-paid jobs."
My Lords, that is the end of the Statement.
4.2 p.m.
Lord ABERDARE: My Lords, I thank the noble Lord, Lord Beswick, for repeating that Statement. I welcome the fact that the Government have taken some further action to help the textile, clothing and footwear industries. No one has been more insistent in asking for help for these industries than my noble friend Lord Barnby, and I am sure that he will be gratified to know that the Government are taking this action. I am not qualified to comment on the different kinds of proposals in this Statement, but may I ask, in general, whether the industries concerned are satisfied that these measures are sufficient to help them through their present difficulties? May I ask in particular
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whether his announcement about public purchasing, the fact that Government Departments are being asked to find their requirements of textiles from British manufacturers and to use British materials, is consonant with the EEC Treaties.
Lord WADE: My Lords, on behalf of my colleagues on the Liberal Benches, I should like to join in thanking the noble Lord for repeating the Statement. It is quite a lengthy Statement but we have been waiting for it for a long time. At the outset, I would agree with the words at the end of the Statement:
"The difficulties of these industries spring primarily from the worldwide decline in demand for their products."
Obviously, the best solution would be an increase in worldwide demand; but that is not going to happen overnight.
May I ask three questions? First., I welcome the proposal to raise productivity, but would the noble Lord agree that it is going to take some time for that to take effect and that it would not necessarily help a firm in danger of early closure? Secondly, there is a reference to dumping. I think it is generally understood, and has been long understood, that anti-dumping is an exception to the general rule about increasing international trade and in that event definite measures must be taken. What I should like to know is what evidence has been collected or is being collected of actual dumping; because if there is actual dumping it seems to me that these proposals, including surveillance licensing, would not necessarily suffice. Thirdly I notice a reference to GATT and the European Commission, but I think there is a point that may not have been covered by the Statement. As I understand it, in the EEC where there is an increase in imports from non-EEC countries adversely affecting a particular member country, it is permissible to ask the EEC to instruct the Commission to work out a project to ensure that imports are more evenly spread among the EEC countries. I should like to know whether Her Majesty's Government have taken any steps along those lines.
Lord BESWICK: My Lords, may I thank noble Lords for what they have said about the Statement. I join with the noble Lord, Lord Aberdare, when he pays tribute to the energy shown in

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this matter by the noble Lord, Lord Barnby. I was asked about the EEC and whether they would agree. So far as restrictions are concerned, they have been worked out with the EEC. So far as the clothing scheme is concerned, they have been consulted and we have every reason to believe that they will agree. I was asked by the noble Lord, Lord Wade, whether it was not true that the scheme under Section 8 would not take effect immediately. As I said in the Statement, this would be a medium to long-term measure. Everyone must accept that to re-equip and modernise must be of benefit in the longer term.
I was asked about surveillance licensing and whether it is a fact that the case must be proved so far as dumping is concerned. That is true: but the surveillance licence would not necessarily result in anti-dumping measures. That is not the purpose of it. The purpose is to enable us to get information about the volume of imports; and on that information we could ask for restrictions to be exercised through the EEC. I was asked whether there was information about dumping. I did not refer to any evidence we now have; but I said that if those industries who consider they are victims of dumping would bring information, action would be taken if the case were proved. The difficulty is that many think they are being penalised or suffering from dumping, but when the case is examined the evidence is not sufficient to justify the kind of action asked for.
I was asked by the noble Lord, Lord Wade, whether it was a fact that, through the EEC, action could be taken to share the burden of excessive imports. That is precisely what is being done in the case of the Hong Kong agreement which was concluded this morning; it is an exercise in burden sharing.
Lord ABERDARE: My Lords, I am sorry, but the noble Lord has not answered either of my questions. I asked whether the industries concerned were broadly satisfied and, specifically, whether the instruction to Government Departments to buy British was consonant with our EEC obligations.
Lord BESWICK: My Lords, so far as the EEC reference is concerned, I am afraid that I put that against another
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question. The Statement was carefully worded so far as buying British goods was concerned. If we bought British goods that were clearly over-priced in relation to available goods from abroad there would be difficulties. If the noble Lord will read the Statement, I think, he will find that I have covered that. He asked whether the schemes would be welcome to the industries. I have every reason to believe that they will. So far as the clothing scheme is concerned I am certain that the firms will expect to have had more money; but for the rest they will be satisfied.
Lord BARNBY: My Lords, in the past I have frequently pressed the Deputy-Leader on these matters. I am sure I can rejoice to be able to feel that he has given some gratification to the industry. It is progress; and particularly on the one point on which continual pressure was made, that of surveillance. But while it is an encouragement, it falls far short of what the industry so badly needs—immediate short-term help. Under that head they had pressed for the 20 per cent. surcharge across the board. I now take it that is not acceptable to the Government. Turning to the imports, which the noble Lord said would be subject to surveillance, will that apply to garments of knitted fabrics as well as those of woven fabrics? The noble Lord said that some progress had been made under the Multi-Fibre Agreement regarding Taiwan. Is it to be understood that will be shortly extended also to other East Asiatic points like South Korea, Singapore and so on?
Regarding the point made by the noble Lord, Lord Wade—which I took to mean the anxieties and difficulties which are being caused by the importation of apparel made up in the EEC which have an origin further to the East—that seems to fall under the question as to the effect on the EEC, asked by my noble friend the Deputy Leader of the Opposition. The grant given to the garment industry will be helpful; but that is in a separate category from the pressures that now exist. Surveillance does not necessarily meet the immediate problem of employment and the hazard of firms shutting down, but it puts into the hands of the Government the opportunity of taking further action under licensing. I understand that is what the Government have in mind; while they have not granted the surcharge, they have agreed to practise

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the surveillance, giving the opportunity of prompt action on the near range instead of the long range to which the other parts of the Statement referred.
4.13 p.m.
Lord BESWICK: My Lords, it is the fact that there are negotiations in progress now with some of the Far Eastern countries. I mentioned a Statement would be expected shortly about Taiwan. The Statement about Hong Kong will be made within the next few days. Negotiations are also in progress between the EEC, South Korea, Mexico, Brazil, Colombia, Singapore, Malaysia, and Portugal on behalf of Macao. As a result of those, it is expected that most of the existing United Kingdom measures on woven cotton and on some synthetic textiles will be retained with some new ones on synthetic yarns, fabrics and knitted products. I will let the noble Lord know later about woven garments.
Lord RHODES: My Lords, we welcome this Statement by the Government. The Government were harshly criticised by sections of the trade when they said that the Government had written them off. This is not true. I understand the implications of this because of the international obligations that we have under GATT. We should not lose sight of the fact that we are in a difficulty as members of the EEC, in that it takes so long to get nine Governments to agree to a proposal. The Minister mentioned two countries where agreements have been entered into by us. He mentioned others with whom negotiations are taking place. When these problems arose, and the impact of cheap textiles from the Far East, in particular, and from Portugal was felt, the Americans dealt with this in a month. They made arrangements with all these countries in a month prior to 1st January this year. We have now taken seven months to come to terms with these exporting countries. I should like the Minister to tell us which countries have made these arrangements, not just the ones that are under negotiation.
I welcome the Statement on surveillance. If surveillance is extended, it will go some way towards relief. It must be imposed at once. But that is a long way down the list. The decision to give £20 million to the clothing industry is another
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example of the Government stepping in and having to do something as a result of public pressure. It may be a long time before any benefit comes through, and firms may have gone out of business by then. Number two on the list referred to exploring other means—anybody can do that. Public purchasing is something else which may take a long time. This is another example of our slackness in allowing our currency to be eroded. I made a lengthy journey through Lancashire last Friday and saw mill after mill where they were meeting competition. The price of the finished fabric is no more than what they are paying at some of those mills for the raw material that they are using. Who can compete with that? It means that there is despair in some places. I am sure that the measures which have been announced will be welcome; but there is enough anti-dumping evidence if it is properly marshalled.
Lord BESWICK: My Lords, my noble friend asked me what had been done by this Government and others. There are now quantitative restrictions on imports of spun cotton yarn, woven cotton textiles and made-ups from most low cost sources, and on woven polyester cotton products from Hong Kong, South Korea, Taiwan, Colombia and Thailand. In the case of Hong Kong and Taiwan, restrictions are now being extended to most knitted and woven textiles and clothing of all fibres. Most textiles from Japan and the State trading countries are also restricted. In December this Government also imposed restraints on imports of cotton yarn from Turkey and Greece. As my noble friend says, much has been done, and I can now also say to the noble Lord, Lord Barnby, that surveillance licensing will include both woven and knitted clothing.
Baroness HORNSBY-SMITH: My Lords, I also welcome the Minister's Statement. I agree with the noble Lord, Lord Rhodes, that the £20 million is of less importance at this crucial moment of time than is the surveillance and efforts against dumping. There are many factories working part-time, not because they are short of capacity or machinery, but because dumped goods are taking

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some of the markets from them. I particularly welcome the Government's emphasis on buying British for Government orders because this is a very wide field, including the whole of the Services, the Armed Forces, the police, the hospital services and all the care services. This policy could make a very real difference to certain sections of the textile industry.
Regarding surveillance, may I ask the Minister whether consideration has been given to reviewing the very great difficulty that exists, under the present terms and formulae, in establishing what constitutes "dumping" from a controlled economy country? It is practically impossible in such cases to establish the same commercial price analyses as are carried out in other countries where there is private enterprise and competition and where overall prices are not centrally set by the State. Is the noble Lord aware that the Australian Government amended their dumping regulations precisely to meet the circumstances of dumping from controlled economy countries, where these commercial comparisons of prices are not possible?
Lord BESWICK: My Lords, I thank the noble Baroness for what she has said about the policy with regard to public purchasing. In addition to the fact that such purchases cover a wide area, I should like to think that the lead given by the Government and public authorities might well be followed by private individuals in their own purchases. It is, after all, the sum total of private purchases which constitutes the kind of trouble that we are currently facing. If we can bring home to people the fact that there is a need in our present economic situation to consider first and foremost the purchasing of British goods, that could help.
The noble Baroness drew attention to the difficulties involved in deciding what constitutes dumping from countries with a closed economy. The difficulties to which she referred are precisely those which make it difficult for me to outline the methods used for deciding what is or is not being dumped. I have already mentioned the restrictions that exist regarding certain of the countries concerned, and it is probably fair to say that this is a matter which has been decided so far in relation to an increase-
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ing trend of imports. It is difficult to prove dumping in their cases.
Lord BARNBY: My Lords, sums have been mentioned by the noble Lord. May ask him to bear in mind that even 20 per cent. of Government industry and 15 per cent. for the whole of the wool textile industry are derisory amounts compared with those given to other industries, whose exports are not so very much larger but are subject to what is being discussed today in the Bill before your Lordships?
Lord HALE: My Lords—
Baroness SUMMERSKILL: my Lords, am I right in believing that so many of these problems arise from the fact that these garments are produced by women in the East, whose labour is exploited? There is gross underpayment of these women, and this is a matter which should be raised in this year, when women in this country are to receive equal pay. I should like to know whether the discussions have ranged widely enough to cover this important fact of the under-payment of workers who produce the goods we have been talking about.
Lord BESWICK: My Lords, the noble Baroness raised this point earlier. It is a very real point and perhaps it is something which could be raised under the auspices of, for example, the International Labour Office. But, so far as I am aware, it has not arisen in the EEC negotiations on restrictions in this immediate case.
Lord HALE: My Lords, could my noble friend—
Baroness SUMMERSKILL: My Lords, might I just ask, arising out of that answer—
Several noble Lords: Order!
Baroness WARD of NORTH TYNESIDE: My Lords, surely the noble Baroness can continue her speech?
Lord SHEPHERD: My Lords, your Lordships are always tolerant of noble Lords who have particular interests, past or present, in these matters. I would only say to the House that we have now been concerned with this Statement for 27 minutes. We have intervened in a very important debate, and one needs to be

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fair not only to those who wish to take part in discussion on a Statement but also to those who wish to take part in a debate. I really should have thought that we ought to be moving on—but "fair do's". Perhaps we might allow my noble friend Lady Summerskill to put a very short supplementary point and also allow my noble friend—I hope he is still my noble friend—Lord Hale to put a short question. After that, I think we should return to the debate.
Baroness SUMMERSKILL: My Lords, I just wanted to put a short supplementary question. Having seen these women working in the Far East, I should like to ask my noble friend whether dumping is not directly due to the fact that these goods are the product of this sweated labour. Surely, until some other international authority takes action—and perhaps Britain might take some steps in this direction—we shall continue to have dumping in this country and in all European countries.
Lord BESWICK: My Lords, the accepted definition of "dumping" is when goods are sold in a foreign country at a price below that at which they are sold in the home country. Although my noble friend referred to the employment of female labour, it is not entirely due to that, I am afraid. However, this is something about which I will make further inquiries to find out what is being done under other auspices.
Lord HALE: My Lords, is my noble friend aware that this is the most important Statement I have heard in relation to the cotton textile industry for a very long time indeed? Will he recall that it embodies suggestions I have pressed upon Labour Governments for 25 years, including the utilisation of the purchasing power of Government institutions, such as the Army, the Navy and so on? While I accept what the noble Lord, Lord Rhodes, says, although this is not a magic wand it at once creates confidence. Is it not a demonstration of the fact that within the Common Market we can take unilateral action which we could not take effectively before we were in the Common Market? Would the noble Lord confirm that at the meeting of the Common Market Ministers, fixed for 20th November, the British Government will give the fullest support to further
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attempts to limit unfair competition within the Common Market area?
Lord BESWICK: Yes, my Lords. I give that undertaking. We shall do whatever is possible, as representing the United Kingdom, in the Common Market deliberations. I am happy to think that we have given some satisfaction to my noble friend with this Statement, because I know how deeply he feels about the industries concerned, many of whose interests he represented for many years in another place.

BRITISH NATIONAL OIL CORPORATION
4.28 p.m.
Debate resumed.
Viscount THURSO: My Lords, may I take your Lordships' thoughts back to oil. While perhaps not unrestrainedly welcoming the method of debate on this subject, as did the noble Lord, Lord Campbell of Croy, I am very grateful to the noble Lord, Lord Balogh, for his assurance that the affairs of North Sea and Continental Shelf oil are in the hands of a professional. Some of us were rather afraid that it would be put into the hands of a prophet, and we are therefore extremely glad to know that there will be a restraining professional hand upon the arm of the prophet, restraining him from excesses of prophetic zeal.
We on these Benches are surprised at this curious device of debating a Motion to take note of a decision which is in the process of passing through another place in the form of a Bill. We ask ourselves: why is this being done? What is the precedent for this curious procedure? What advantage do the Government hope to gain by taking the sense of your Lordships' House in this way when, before any decision can be valid or in any way binding, the Bill will have to complete its passage through another place and, in an amended form, come to your Lordships' House for full debate in all its stages? Can it be because there is such a pile-up of Parliamentary work that Her Majesty's Government are in some way hoping to regard this debate as a substitute for a Second Reading, or as a means of shortening a Second Reading debate? If so, this cannot be so far as we on these Benches are concerned.

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If and when the Bill, having duly passed through all its stages in another place, comes to your Lordships' House, we certainly reserve our right to consider it in the form in which it then reaches this House and to give it full consideration in a Second Reading debate.
There is, of course, a more sinister rumour going about, which I hope Her Majesty's Government will be able to dispel and to deny, which is that there is a list of applicants for posts in the BNCC. It is suggested that, if we speak kindly about BNOC today, this will be taken as an indication that it is safe to go ahead and appoint people. I should be horrified if there were substance in this rumour, and I hope that we shall have a categorical denial that Her Majesty's Government have in any way "jumped the gun". There is much in these proposals which we on these Benches do not like. There is much which we consider foolish and spendthrift. There is much which we consider doctrinaire. There is even some which we consider utterly repugnant.
My Lords, we heartily dislike the retrospective nature of some of these proposals. Are the Government trying to earn again for this country the soubriquet of "Perfidious Albion"? Are they trying to show the world that we are just a bunch of mean-minded contract breakers?—because that is what is implied by certain aspects of these proposals. If these proposals are carried in their present form power is being given to break contracts freely entered into, without good reason. This strikes at the very roots of commercial ethics and, indeed, at the basis of civilisation itself. Those companies and countries which have adventured their resources in helping us to explore and develop our sector of the North Sea did so because, above all, they believed that Great Britain's word was her bond. The North Sea, as we are learning every day, is no easy plum ripe for the plucking. Pipe layers break down; divers die; some promising fields belie their promise. And all the time costs mount as we work at the limits of known technology. Why add to that the uncertainty of whether a contract is worth the paper it is written on? What further oil will that extract from the murky depths of the sea, or
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what much-needed capital will that attract to help us search for, develop and exploit our dormant assets?
Much the most important problem facing the country today is inflation. That is the cause and the core of the crisis which threatens our jobs, our standard of living, and indeed our whole way of life. We have already mortgaged much of the return from North-Sea oil in our efforts to stay solvent. It is freely admitted that we look to the return from North Sea oil to help get us back on to our feet. But where are we to find the money to finance this doctrinaire exercise adumbrated in these measures we are discussing—from the Treasury? Then, why is the Treasury not be allowed to handle the revenue? Surely the revenue should be brought back into the Treasury because the Treasury will have to make the initial investment.
Has anyone considered what a short-term windfall BNOC will be to companies at present operating in the North Sea? They are suddenly to get back half their money and acquire a partner who will be committed to helping to find the vast amounts of money which the North Sea oil fields will greedily swallow as developments proceed. Estimates show that, to develop 18 billion barrels of oil by 1982, investment in the region of £84,000 million will be required. It is this magnitude of expenditure in which BNOC will be involving itself as to 51 per cent. Why do we involve ourselves at all? Why not attract the investment by giving firm, reliable leases, letting oil companies know where they stand, and then cream off the nation's share by royalties and by taxation?
For better or for worse, we are committed to seeking a certain level of return from the North Sea, but thereafter we must see to it that we try to conserve this asset and put it so far as we can to an optimum level of use. In so far as it is the Government's policy to do so, I applaud the Government But in the Bill which is being considered in another place these matters are being left far too much in the hands of the Secretary of State and his Department, without nearly enough accountability to Parliament. Nor, so far as I can see, is there any provision for giving Scotland's promised Assembly any say or control in these matters. This is a grave flaw.

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This is a bad Bill for Scotland. There was an opportunity here to recognise Scotland's special role and the special risks which Scotland runs in the winning of North Sea oil. There is an obligation on Her Majesty's Government to see that the oil boom towns of today do not become the oil ghost towns of tomorrow. As I have said before in your Lordships' House, we should be working now for the wider development of the North-East of Scotland and of the Highlands, consolidating that development in these areas into a sound and broadly based economy which will be able to continue to flourish when the oil flow trickles to a stop Oil revenues should provide the money for this. It has always been Liberal policy that one should generate from the oil revenues a direct return to Scotland. The Secretary of State for Energy should be working now on a policy which will both maximise the life and usefulness of our oil fields and merge smoothly into the atomic age which is yet to come.
Therefore, my Lords, as the Government are asking us what we think of their policy, I would say that I do not greatly differ from my right honourable friend Mr. Grimond or the views which he has expressed in another place. While being not totally unsympathetic with Her Majesty's Government's purpose, I remain highly critical of the Bill which they have proposed and which they are moving in another place. Like my right honourable friend, I find it too big, too vague, too bureaucratic; and wonder why they do not drop the Bill in favour of trying to achieve their objectives through existing legislation, thereby saving themselves valuable political time and, even more, valuable money which they cannot afford to spend in this hour of crisis.
4.38 p.m.
Lord TREVELYAN: My Lords, I personally agree with the noble Lord, Lord Campbell of Croy, in congratulating the noble Lord, Lord Balogh, on initiating this debate, because after hearing our views it will be easier for the Government to make changes in the more regrettable features of the Bill. I must first declare my interest as a director of the British Petroleum Company, though, of course, in accordance with the usual conduct of your Lordships' House, I speak for myself alone. It would be wholly inappropriate for me to comment in
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anyway upon the matter relating to the chairman of the British Petroleum Company mentioned by the noble Lord, Lord Balogh. My concern is to consider the effect on the country's interests of the Government's aims as revealed in the Bill now being considered in another place, and in the manner of the creation of the British National Oil Corporation. I am concerned not with what the noble Lord, Lord Balogh, has called the controversies of the past, but with the necessities of the future. I have tried to consider the subject, so far as I understand its difficulties and complications, from a purely practical point of view and to avoid an emotive approach.
We all want to develop North Sea oil quickly and efficiently. Besides this, as I understand it, the Government have expressed three general aims of oil policy: first, to secure a proper financial return to the nation from North Sea oil, which is amply secured by the petroleum revenue tax and corporation tax. The Government have been ready to improve the Oil Taxation Bill in the light of their consultations with the industry, though some concern is still felt, which has also been expressed today in your Lordships' House, over its effect on the development of marginal fields.
Secondly, they seek, very properly, to ensure that the licensees do not act in such a way as seriously to prejudice the public interest. For this purpose, the Minister clearly requires some way of providing himself with information about the licensees' operations and of ensuring that his control of those operations is effective where such control is generally required in the public interest and is not unfair to the licensees. These functions would surely be best discharged by a separate regulatory commission such as exists in some other countries, rather than by the creation of a hybrid corporation, at the same time a commercial enterprise though exempt from the normal constraints of a commercial company, and so constituted as to appear to be placed in the position of monitoring its partners' actions on behalf of the Government.
Thirdly, for reasons which are at the least debatable, they seek to secure a public stake in North Sea oil. This is, it appears, to be achieved by direct financial participation by the State in the

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companies' North Sea operations and will be subject to the Government's explicit undertakings that negotiations with the existing licensees will be really free and not conducted under duress, and that those licensees will not suffer financial disadvantages as a result of the Government's participation. In this matter, it is of the greatest importance that the Government do not, in effect, undertake retrospective legislation which will discourage the licensees from undertaking all the risks and difficulties which are inherent in the exploration and development of North Sea oil.
They must also be fully aware of the dangers that action tending to hamper overseas companies through unilateral Governmental action, particularly if it is retrospective in effect, will create strong pressure for retaliatory action against British companies operating abroad. That is a very sensitive and important point. I believe that the Government have recognised the importance of these points in stressing the genuinely voluntary nature of negotiations in respect of participation in existing licences. Unfortunately, the same cannot as yet be said with full conviction of their attitude in respect of the sweeping new powers taken to direct and control all aspects of licensees' operations.
British national interests require that the climate in which companies operate in the North Sea should be such as to encourage investment and to ensure a rapid and complete development of the North Sea oilfields, subject to the proper measures of conservation of these great national resources. Already there are signs that companies and their sources of finance do not see they way clear until they know and can assess the effect of British legislation upon their enterprises.
As a result of the Government's consultations with industry and the deliberations of the Committee on the Bill in another place, some improvements have been made, but they have not gone nearly far enough. I should like to give some examples of matters which still require some modifications in the Government's proposals. For this purpose I assume, without endorsing, the present framework of the Bill, including the creation of the British National Oil Corporation, though
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I fear that as at present conceived it will be misshapen from birth.
I think it would strike anyone looking at this question for the first time that the nature of the Corporation has not been clearly thought out. It is to be commercial and not commercial; it is to act under its own commercial judgment and on the Minister's instructions. What is surely very clear is that the way it is to be constituted is a sovereign recipe for creating continuing confusion of purpose between the Government and the operating companies. The difficulties to be expected stem largely from the Corporation's exemption from the petroleum revenue tax, which has been referred to already in this debate, which will give it a different régime and a different commercial outlook from its partners.
Some concessions have been made. Assurances have been given—though they are not yet expressed in the Bill itself—that it will be required to act commercially when in partnership with private sector companies and when operating downstream and to transfer crude oil to its downstream subsidiaries at market price. However, it is to me inconceivable that the Corporation should be exempt from the tax and at the same time act continually as if it were paying the tax. The processes of decision-making are bound to be distorted by the differences in the economic background between the partners. These may, for instance, arise in decisions on the delineation of oil bearing structures, or in the hire or purchase of major items of equipment. The Corporation will not care: the commercial companies will care very much. The Corporation may be required to act non-commercially when not in partnership, if the Minister considers it necessary to develop a non-commercial field in the national interest. Surely in this case, too, it would be much preferable that the Corporation should act always as a commercial company, receiving a subsidy where the national interest requires it to make a loss, and that its position under the Bill should reflect that.
I have also great doubts about the retention by the Minister in a National Oil Account of the very large sums which will be earned by the Corporation as a result of its exemption from petroleum revenue tax. I am not much comforted

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by the assurance of a non-commercial audit which will be subject to Parliamentary scrutiny, or by the arrangement that the Minister should transfer funds, which he considers surplus in his National Oil Account to the Consolidated Fund. I doubt whether it is a happy idea to create a huge financial oil empire in the hands of a Department outside the Treasury. And where will the Government find the expert oil men to run the Corporation? As a non-executive director of the British Petroleum Company, I have watched with admiration how its exceedingly able and experienced managers conduct most complex and difficult operations in the international oil business, which is possible only as a result of the Government's wise policy of leaving the company to act commercially. It will be very difficult for the Government to find people of the right calibre and experience to manage the hybrid and confused creature which the British National Oil Corporation, as provided for in Part I of the Bill, seems likely to be.
Let me leave the Corporation and turn to the Government's relations with the licensees. Two principles should govern these relations; that the licensee should be able to act commerically, and that disputes with the Government should be settled by arbitration. Considerable improvements have been made in the Bill, although the basic objections in respect of retroactivity remain. The new clause on depletion policy is a distinct step in the right direction; disputes over the calculation of the amount of conveying and treating costs required for royalty purposes are to be arbitrable; a criterion of commerciality has been inserted into the provisions for forced exploration. However, there are many points which require further thought. For instance, the criterion of commerciality should relate also to compulsory development of new finds; revocation of a licence for non-development should be strictly related to the particular area in dispute, and not to the total licence area, as apparently at present contemplated; it should be admitted that there can be sound technical or commercial reasons for temporary deferment of development; a new partner, imposed on the owners of a pipeline, should pay them not only the cost of his intrusion, but an
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equitable share of the total costs of the line. I am not sure whether that was understood by the noble Lord, Lord Balogh, in what he said about the owners having to be fully reimbursed.
These and other such points will have to be dealt with in Committee in your Lordships' House, if they have not been dealt with satisfactorily in the Report stage in another place. Without further substantial improvements in respect of the kind of matters I have mentioned, I fear that the Bill will cause everyone a great deal of trouble and fail to serve the purpose of us all—the national interest. Surely it would be best for the Government, in consultation with the industry in general, to think further before your Lordships get down to detailed discussion in Committee in the autumn—if it is to be the autumn. Can the Minister promise this?
4.50 p.m.
Lord LEE of NEWTON: My Lords, as one who had the honour to be the Minister of Power at a time when the North Sea became so exciting to all of us, the thought of independence in energy supplies within a few years from now is extremely exciting; indeed, when one looks at the development we have seen in OPEC and their bearing upon our own economic position, the prospect becomes even more exciting. We still know that before we can become independent our supplies could be in danger as we see the takeover in the Middle East of Aramco and the imminent nationalisation by Kuwait of the BP and Gulf Oil: then these supply questions could affect us greatly. We all know that the sheer volume of finance that is necessary for exploration simply demands the presence of organisations possessed of adequate resources to continue the search, despite setbacks through the drilling of dry holes costing huge amounts.
I have listened to the speeches from both the Tory and the Liberal Benches and I fail to understand what it is they want us to do. Here we are, a great industrial nation—indeed, the first of the great industrial nations. We have now found these great oil and gas supplies on our shores, and it seems that because we have never before had experience of getting gas and oil the proposition we get from the Opposition Benches is that we

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never should attempt to master the know-how in order that we can exploit our own resources.
Lord CAMPBELL of CROY: My Lords, if I may—
Lord LEE of NEWTON: My Lords, it is no use the noble Lord, Lord Campbell of Croy, saying anything to the contrary; I listened very attentatively to him and that is precisely what he said.
Lord CAMPBELL of CROY: My Lords, I am most grateful to the noble Lord for giving way. He must have missed the part of my speech in which I said that we in Britain should increasingly play a part in the industrial engineering effort and in the supplies and services.
Lord LEE of NEWTON: How do we do this, my Lords? In those early days to which I referred, the only British company with the know-how was BP. True, we have certain interests in Shell, but the only completely British company with any know-how at all in the getting of offshore hydrocarbons was BP. I was more than happy when it first found gas and it became a great commercial success. Indeed, I remember going out to the old Sea Gem which was then doing the drilling but which unfortunately, afterwards, foundered with loss of life. I talked to the men on it. They had all worked with BP in the Gulf, and they described the Gulf in comparison with the North Sea as "a piece of cake". They were working right up against the extremes of technological know-how which even BP and its employees had never encountered. Of course it is essential that if we are to get a mastery of our own resources there must be a time when a breakthrough comes to enable a far greater British participation to take place.
One of the problems in my day was that the previous Conservative Government had put up the first checkerboard of squares and had received applications for squares. I followed, incidentally, with the second. When the noble Lord, Lord Campbell of Croy, tells us that the oil era began four years ago, I must point out that in those days we had no shortage of applicants from the oil companies and, if I may be facetious, if the Scottish Office did not know there was oil there these chaps knew long, long ago. I am
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speaking of 9 or 10 years ago. They were under no illusion when they tendered for squares in the North Sea that they were by no means confining themselves to gas. All the symptoms were present, and indeed we in the Ministry of Power were absolutely convinced 10 years ago that there were huge deposits of oil under the North Sea.
I recall so well the frustration we felt at that time. We were receiving applications. Naturally, BP had their applications in and they were very welcome, as were Shell; but a number of the applications we were receiving from British companies quite frankly had nothing to do with finding gas or oil. They were simply to hold the squares and bump up the price. I was glad that my noble friend Lord Balogh mentioned that there is to be legislation to stop that kind of thing. I will not mention names at this stage but I can recall stopping it myself, many years ago. Therefore, unless there are British companies which can get gas and oil, it is not enough to say that one can increase the British contribution by giving more squares and facilities to British companies. This is what the question is all about. Therefore to me it seems slightly obscene that a great industrial nation like ours, with the gas and oil that we now have, can be satisfied to leave the exploitation of great resources mainly to foreign companies.
The noble Viscount, Lord Thurso, spoke rather as though there were something dishonourable about what the Government are suggesting. On reflection, I think he would agree that there is nothing dishonourable in our attempt to provide the vehicles which will enable us to take part in searches for our own raw materials, and if he wishes to look back on the whole industrial history—and I say this with no slur on anybody—of the way our own industries have conducted themselves as distinct from the way in which certain American companies have conducted themselves, we have nothing with which to reproach ourselves.
Viscount THURSO: My Lords, may I point out to the noble Lord that the only thing I said was dishonourable was to break a contract that had been entered into. I do not care whose language it is in; it is dishonourable to break a contract.
Lord LEE of NEWTON: My Lords, I am not arguing about the degree of honour or dishonour. One could time and again quote instances in the United States of America where British firms had practically got contracts as the lowest single tender and then they were refused by the American Government. I do not want to continue on that line because it looks as though one is hitting at the Americans, and I am not. I am merely answering the point made by the noble Viscount.
I was saying that one's own problems in those early days, when we knew that BP had struck a commercial proposition and that there would be others to follow, was how we could increase the British stake in it without merely giving squares to British firms who were not interested in getting gas or oil. I say quite frankly that had I had the opportunity I would have created something like the British National Oil Corporation which is now to be created. For one thing, one can never have sufficient resources. I how to those who are more technical than I am in regard to oil matters, but I think the ratio they work on is that they find one gets about nine dry holes to one wet one, and the colossal cost of £1 million a hole means that a company really must have enormous resources if it is going to stay in the exploitation business at all.
We had the advantage then of having the Gas Council which we made, as it were, the anchor man for the whole of the gas which was discovered. They were working well in getting themselves prepared for the receipt of gas. I had always hoped that there would be a partnership with BP, but before my time they went into partnership with Amoco, and BP went on alone. I had the difficulty, if that is the right word, of getting the first agreement as to price between BP and the Gas Council. One made it a rather high price, first, as a carrot to others, and, secondly, in order that my friend Sir Maurice Bridgeman, the chairman of BP, could order piping and get it into the North Sea during the summer months, in order to get the gas out far sooner than the experts predicted. I am glad to say we did it.
My Lords, I mentioned the fact that I visited Sea Gem about that time. I recall that then you had to go in a helicopter; you were pushed inside a
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Mae West, you had earplugs, and Heaven knows what. When my helicopter touched down after a very bumpy session, I raised my thumb to some Press men there—and the shares in BP went up half a crown in after-hour dealings. I often wonder what would have happened if I had turned my thumb down because I felt a bit seasick. Probably BP would have gone out of existence. That shows how silly it was that we should be financing an enormous organisation of this type by that kind of nonsense.
I managed to get Amoco to agree to the Gas Council having a bigger share in their partnership than had been the case previously. They were very happy to accept this, and at the same time wanted to find other public organisations which could take part. Not without some difficulty, I induced the National Coal Board to take an interest in it. We arranged shares for them with other American companies and, of course, they have made a very good profit out of it. Surely, no matter what our domestic policies are, none of us is opposed to the nationalised industries making a profit out of this kind of venture. In doing so, one increases the stake of British firms very substantially indeed.
My Lords, one had to get legislation through Parliament to enable the National Coal Board to take part in the search for gas and oil in the North Sea. We managed to do that. The point I am trying to make is that, on the British scene, there are no companies other than BP and part of British Shell with the necessary know-how, or really able financially, to take an adequate part in the great task of bringing independence on energy matters to this nation, unless we create them to do it. If noble Lords in any part of the House can show me another combination of companies which can do it, with the exception of that proposed by Her Majesty's Government, then I will apologise for what I have said.
But as I see it, the Government are now asking that the great resources we have shall come within our own capacity to produce. These resources may as well not be present in the North Sea unless we can get the right to exploit them. Therefore, I do not understand the attitude of either the Tories or the Liberals in these matters. We have been discussing the Industry Bill for the last two or three

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days. We have been discussing how we can get new life into British industry, how we can create new ventures in order to surmount the worldwide turmoil being produced by the recession. We cannot do it merely by going on building on old and decadent industries; we have too many now, as the first industrial nation in the world. Our task is to create the new industries of the scientific revolution. We have the means at our disposal. For Heaven's sake, let us produce the machinery that will achieve them!
5.5 p.m.
The Earl of LAUDERDALE: My Lords, we hear the former Minister of Power too seldom in this House. I, for one, was very glad to see his name on the list of speakers, and to listen to him in full flight. He would not expect me to agree with everything he has said, but I think he will recall, having been in charge, as I remember, of the second round of licensing, that that was one which was curiously unsuccessful relative to others before and since. This was partly—not only, but partly—because of a strong incentive in that round for the prospective licencees to show a measure of public sector participation. It was not the only reason, but one of them.
My Lords, when the noble Lord, Lord Lee of Newton, asks, "What would the other side do? What would the Opposition do?", I can think of nothing better than the speech we heard just now from the noble Viscount, Lord Thurso. Surely, we want to create a climate of business confidence in which private enterprise companies can and will invest. As a matter of fact, one of the consequences of the recent development of exploration in the North Sea has been that British oilmen, trained by American and other companies all over the world, have been returning. They have been returning under the aegis of foreign companies, mainly American but also French and Dutch, in the hope that they would find the opportunity to work here in British companies. New British companies have been formed and have taken part in the new consortia. They have been forming themselves together to learn to "sponge up" the know-how available through the very ready co-operation of American experts. If the noble Lord asks, "What else would you do?", I say: drop the
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Bill, secure the same purposes of control, control over take-out, control over depletion, by the exercise of taxation and licensing powers; but whatever you do, do not attempt to create a grand new oil company by interrupting what is already going on: and do not imagine that the men in Whitehall know best.
My entry into this debate is reluctant and, I may say, begins on a note of sadness and personal disappointment. I must tread warily. I do not want to intrude upon the private griefs or struggles of conscience of the noble Lord, Lord Balogh, for whom, as he knows, I have very great personal respect and affection. But it will be within his recollection, and certainly that of others, that in February 1974 he was quoted as saying:
"The Civil Service has in no way shown itself competent to supervise the admirably-run multi-nationals."
He went on:
"I shudder to think what might he the result if they took over the running of the operation "
A little later, in the Banker, to which he has always been an interesting contributor, he added:
"I hope the Labour Party's programme will be speedily and drastically reconsidered."
As the acclaimed author of that Party's earliest, most extravagant proposals, I hoped, indeed I thought, there were signs of genuine, if slow and agonising, conversion so we could finish up by making an honest woman of him! Yet here he is today, inciting us to luxury and indulgence, to the crime of dishonouring solemn contracts. It reminds me of a sign outside a London church which said, "If you are tired of sin, come in here"; and someone had written underneath, "If you are not, phone 219 3142".
My Lords, the noble Lord spoke of the new situation. What is new about it? Inflation. What is new about the context of this debate? Inflation. What is new about the crowds of people who queue up to come and lock at your Lordships, or at our friends down the corridor in the other place? It is a sense of crisis; it is inflation. This was crystalised, in some respects quite well, in the White Paper The Attack on Inflation. The White Paper called for production; it called for investment in production; it called for a switch to opportunities of assisting the balance of payments. It all reminds me

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of Westbrook Pegler's phrase, "Here is the era of wonderful nonsense."
This Bill promises to increase, not to diminish, inflation, and it promises to do so in three ways. It offers the Department of Energy some £900 million of fresh borrowing powers. Fancy increasing borrowing powers when the Chancellor of the Exchequer is struggling hard to cut down the borrowing requirement! Not only does it propose in effect to increase the borrowing requirement; fancy imagining that you can buy 51 per cent. of the oil industry, expected to produce in the early 1980s 100 million tonnes of oil, for £900 million! If the calculation is based on a capital cost per barrel a day at peak production, of about 8,000 dollars, you get a figure for 51 per cent. of that capacity of about £3,600 million. Let noble Lords say, as some will, that this is not going to be paid for in cash, but is going to be provided by way of guarantees for loans that the oil companies, needy beggars that they are, need to raise on the market and from their banks: but those would still be contingent liabilities for the Government and in themselves inflationary.
Then the point about the BNOCs exemption from petroleum revenue tax has already, of course, been adequately explored by others, but surely there are several consequences. One is that the Exchequer's own revenues are diminished correspondingly, and the second is that if the BNOC is that much more competitive in the market than the private enterprise company, surely that is going to have the effect of cutting the revenue that it earns, and therefore the royalties and the PRT it pays to the Treasury, and that in turn will indirectly have an inflationary effect. Then again, this Bill as it stands, contains the proposal to set about the retrospective renegotiation of contracts. If that does not discourage foreign oil investment in Britain at a time when the OPEC countries' hot money is a matter of great anxiety to our balance of payments, I do not know what will, nor can I imagine anything more inflationary on that side.
Lord BALOGH: My Lords, the noble Earl will forgive me if we resume our little private dialogue across the table. The noble Earl just complained that our borrowing power for developing the oilfields
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is inflationary. Yet two minutes ago he also complained that our horrible steps are decreasing the willingness of the oil companies to borrow and spend. If—as I do not agree at all—the oil companies are decreasing their activities, either our activity would be a good thing, because it would speed up development rather than retard it, or not, but he cannot have it both ways. He cannot say, just like that, that it is sinful for us to borrow the same amount of money for the same purpose, which is so very virtuous on the part of the oil companies. I have detected the whole afternoon, a tendency for both sides of the Opposition to laud whatever the foreign companies are doing and to deprecate the British behaviour. I must confess I am shocked.
The Earl of LAUDERDALE: My Lords, I hoped that I would bring my noble friend to his feet before long; I thought almost certainly that I would. I also felt quite certain that by exposing my economic flank to an economist, I should be shot down in flames. But is there not a difference between the Government borrowing, which in effect means printing money, and private enterprise raising capital on the market? I may be wrong, but I got only a Third in Modern Greats, and had the noble Lord conducted my viva voce examination, I should not have got even a Fourth.
Lord BALOGH: My Lords, if the noble Earl has admitted his deficiencies in public economics, not private economics, I will not insist.
The Earl of LAUDERDALE: My Lords, I am greatly obliged for my noble friend's indulgence. May I go on now to a matter to which he referred obliquely; namely, the oilfield situation. There are three negative factors at large. The first two are worldwide. There is the recession, which is worldwide, and there is inflation, which is worldwide in varying degrees, though it hits some countries worse than others; we are very badly hit. But there is a third factor. I believe, and I hear it again and again from those within the industry whose judgment I respect, that the recession, and the effects of the recession and of inflation, upon the oil industry, are enormously enhanced—if that is the word; their damage is enormously increased by the new but major fiscal

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disincentives, matched by Britain's virtual suicide in its reputation for probity in this business of trying to renegotiate retrospectively. My Lords, voluntary negotiations? It reminds me of the first day I appeared on parade at school and I heard—this was about volunteers for the school cadet corps—"Fall out those who will not volunteer". That is what we were told to do. I have heard it put differently in another context: All that is not compulsory is forbidden.
I was much interested a day or two ago to receive from the United States a copy of the Oil and Gas Journal of 30th June; its arrival in this country was in fact delayed by a strike. This is treated in the industry as a serious publication: it is not a propagandist publication. The article from which I am quoting was put together by the news editor after an interview with my noble friend's colleague in his Department, Mr. John Smith. I quote only two extracts; but these are serious extracts from a serious, reputable journal:
"The economics of prospective North Sea oil production are crumbling at an alarming pace under the weight of soaring costs, added taxes and slowly declining world crude prices."
How important that last factor is, I do not know. The quotation goes on:
"'Don't blame oil for the slowdown in the North Sea', says an executive of one large firm, 'It is government that is causing it; it has been throwing up roadblock after roadblock. Oilmen can fight the foul weather and sea conditions, the geology, and technology problems, but damned if we can handle government and the uncertainties it keeps on causing'."
My Lords, the situation in the North Sea has already been described by others. But let us sec where we are: Something like 27 rigs at the moment, as against 31 last March, and a forecast some two years ago that this year would see around 40. The SEDCO 702 rig, which was specially designed for use in the North Sea, has in fact now gone to Petrobraz, the Brazilian State Oil Company, on contract for three years. That rig, specially designed for North Sea operations, has been lost to them. At least one British consortium, with which I have personal but not professional or business contacts, which contracted for three rigs for the North Sea, ordered in Scandinavia, is now urgently seeking foreign participation, because the North Sea demand for those
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rigs is not to hand and grave financial difficulties are at hand. There are empty platform construction sites. Portavadie has no order. There are four others with planning permission in Scotland which have no orders either. Ardyne Point has no new orders.
What is happening elsewhere? Men's judgment sways on that side fortune leads. While we create difficulties for the oil companies, others are not slow to attract them. Denmark has just issued 46 licences off Greenland, and there are all our old friends taking up licences over there—BP, Mobil, Gulf, Chevron, Amoco, Total, Utlramar, all names we have been familiar with over here preparing to be as busy as bees off Greenland. Fire has issued licences. France has started issuing licences off Brittany. These are attracting attention just when we are making it harder for those who wanted to come and work in the North Sea.
All the North Sea companies are reappraising their investment programmes, and I can think of one in particular, Occidental, who were the operating company in the consortium finding the Piper and Claymore fields. They have said quite openly that so far as the Claymore field is concerned their parent company in the United States will have to balance the alternatives as between investment in producing in the North Sea under these fiscal disincentives, and putting that investment into United States coal. Perhaps the Minister when he winds up will be able to tell us something in answer to this question. Have any of the operators sought royalty remissions in respect of the oilfields which they have found? I am thinking primarily of Claymore and Hutton.
The British National Oil Corporation is to be the Department of Energy's tamed beast: no nonsense with figures like Dick Marsh of British Rail who will stand up to the Government, and who is quite prepared to tell the public what he thinks about Government interference: no nonsense with men of the calibre of Sir Monty Finniston of the British Steel Corporation, ever ready to do the same. No, my Lords, this BNOC is to be directly subject to the Secretary of State with only the most limited recourse to Parliament. The company is to be completely integrated in Whitehall. It will be wholly

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controlled and at least partially staffed with persons from the Department of Energy whom some of us meet—who are splendid and kindly people but whom we have come to identify as "so-called experts", which is their own term for themselves.
One reason why the BNOC is to be a much tighter proposition than Statoil in Norway is because Statoil is showing considerable independence and has even had an effect in moulding Government policy there. That is not what is proposed here. We cannot allow that kind of thing if we are targeting for 1984. And, of course, the Government have been curiously silent of late about the lessons to be learned from another prototype which has been cited so often; that is, Petro-Canada. Government experience there has been much mellowed by participation—mellowed as one is by marriage; indeed, so mellowed that the latest budget has cut the allocation to Petro-Canada and has created great new fiscal incentives for the oil companies.
My Lords, it is common parlance in the oil business that the costs of exploration and production in the North Sea scale up exponentially with the depth of water. I believe that this country's difficulties threaten to scale up exponentially as the Government flounder in ever greater confusion in the deepening waters of policy.
The noble Lord, Lord Balogh, showed great optimism about the 1980s. But at the current decelerating rate of exploration in the North Sea, and the current advance of competitive opportunities elsewhere, success could well be delayed to manana. And as they say in the North-West of Scotland, manana, that puts a real rush on you.
5.25 p.m.
Lord RITCHIE-CALDER: My Lords, I welcome the proposal by the Government to establish the British National Oil Corporation, and nothing I have heard from the two Opposition Benches has qualified that approval. I regard it as undertaking a commitment, which I believe we have—and I think many of your Lordships will seriously share—not only to create a profit-making concern but to be the trustees of the Continental Shelf and to secure the interests of the people and, I hope, of posterity.
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I must confess that, like Mr. Justice Douglas of the U.S. Supreme Court, I have felt the national jurisdiction of the coastal State should end at the low-water mark. If we had got down to that years ago, we should be making more sense today. The oceans beyond that—the seven-tenths of the earth's surface—should be a common heritage of all mankind, and its wealth should be the common property of all people, including the landlocked peoples as well. That simplistic, if, I maintain, morally justified approach was irreversibly changed by President Truman's doctrine that the Continental Shelf of the United States was the submerged extension of the land of the Federal Republic. That doctrine was avidly adopted by the coastal States in the Third Law of the Sea Conference in 1964, which extended sovereignty over the Shelf to a depth of 200 metres. Practically the entire North Sea is Continental Shelf by that definition, and the property claimed by the countries around it. But I hope that Britain, in incorporating the ocean bed and deriving the economic benefits, will resolutely regard herself as the steward of the oceans which are not confined or fenced off in any sense by the definition of the "North Sea", and ensure the adequate protection of the ocean environment which reckless exploitation could irreparably destroy.
The White Paper on UK Offshore Oil and Gas Policy refers to Scotland and the regions elsewhere, within which the older Industrial Revolution industries were developed and which have suffered from the decline of those industries. I divide the world into three kinds of countries: highly-developed, underdeveloped and dis-developed. My own country, and the noble Earl's, Lord Lauderdale's country, Scotland, I classify as dis-developed. In the first Industrial Revolution, throughout the nineteenth century and the first quarter of this century, Scotland gave of its all. Scotland is like an exhausted mother after having 20 children, or like an undernourished mother who gives the calcium from her own skeleton to nourish her suckling infant. With all my reservations about the "common heritage", I find a poetic justice in the metaphor of the oil in the North Sea being siphoned into the derelict coalmines of Scotland.

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But we know from bitter experience, and the whole experience of the dis-developed countries, the reckless use of our natural resources and the destruction of amenities and gracious living. I have, like many others, grave misgivings about the effects of the new developments and the new industries which we are generating. We have already had the battles over the siting of platform construction, of shore-based installations, of pipelines and refineries, and so on. We have seen in a very brief spell—and I have listened this afternoon with great interest to what people are saying about what has happened or has not happened in the last four years—the bench-marks of all kinds of problems which we will ignore at our peril. We have seen in that brief spell how some of those developments are subject to expediency, how workers have migrated to centres of platform construction and have found that the needs—whatever the noble Earl's justification or criticism may be—have changed and orders have been curtailed.
There is no question that my noble friend the Minister will not disagree that the North Sea potential is not unlimited. We have a foreseeable future and a limited future, and the question of what is to happen after the depletion of that great capital resource which we have been handed is a matter which we should now be considering. One can foresee ghost towns of the oil boom and the scars of oil development. I hope—and, indeed, we should insist on this—that the British National Oil Corporation and the Scottish and Welsh Development Agencies will be charged with the responsibility for seeing that the effects with which I am concerned are minimised and the damage restored. I do not know how that can be done, except by a publicly responsible body. I want to see it take part in all the activities.
In the oil bonanza between now and the 1980s, about which we are talking, this should be foreseen. I should like to see that part of all these profits for which we are calculating will from the start, and inalienably, go into a rehabilitation fund. I believe that we should be providing for the effective restoration of the damage which in the interim we will be creating. The restoration of the slag heaps in our country, however much we landscape them and so on, is putting a burden on
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another generation for the sins of the previous one. This is something which we should foresee and should provide for.
There is no question in my mind that one of the great lessons which is quoted here as a discouraging lesson, where there has been some drag on the development of the North Sea, means that we are learning the hard way. It is not a question of how much money or how many people are at risk. There is a great deal more at risk than either money or people. With all due deference to the oil companies, technology is not yet at the stage where we can be guaranteed against the kind of thing which I foresee. Therefore, I hope that in terms of the British National Oil Corporation, and all the other provisions which we will write into the law in the shape of the protection of these resources, we will see that the risks are not exaggerated by past inexperience. We are trying on a macro-scale things which have not even been established on a micro-scale. We are doing it adventurously, but it has enormous potential risk. I know of no way in which you can guarantee that sonic oil well or some pipeline will not be disrupted. I hope that the Government are writing adequate provisions into all pipeline activities.
I know that there are all kinds of backstops. But I was at Santa Barbara, California, when we had the oil spill and beyond all doubt it was the sheer reckless avarice of the oil companies which produced that situation. They were doing something which they were not entitled by law to do, something of which they had no practical experience, and they were doing it against the scientific knowledge about that channel. Who is to be the master and the supervisor of this kind of risk? Like everyone here, I hope that the product of the North Sea and the Celtic Sea will come to our rescue in our economic embarrassment. The one thing which I say with all the force I can muster is that this must not be done by risk to either this generation or the next. The risk to this generation I saw in a most grotesque form in the Santa Barbara incident. We cannot see the shores of Wales or Scotland or elsewhere being polluted in the way that happened at that time. No amount of recovery redeems that original trauma. This is something that we have to consider.

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We talk disrespectfully—as do many of my noble friends and Members opposite who have been concerned with Government—about the bureaucrats, but the bureaucrat at one remove from political pressure is our steward. With all our stupidity we have some kind of limitation of what we call glorious enterprise, but which is, in fact, brashness, in taking risks beyond the technical or scientific knowledge at our disposal. There is only one way to do it—as has been pointed out other countries have done it—and that is to build in safeguards. You may call it restraint or discouragement or disincentive, but I call it necessary precaution; and one of the necessary precautions is to ensure that what is produced from all these resources is in some way directed to the people themselves and to their greater benefit, and not to the destruction of the amenities which we must try to safeguard for posterity.
This is an expendable resource. We will have the empty oilfields of the North Sea just as we have the empty pits. We are talking now about an environment which is highly vulnerable. People are largely unaware of the vulnerability of the oceans. The oceans are obviously our last resource. More than that, the oceans are a factor which control the future of mankind, climatically and otherwise. If we are reckless in allowing our present stupidity or our greed and our avarice to create conditions which will destroy the eco-system of the sea, we are asking for trouble and asking for the condemnation of all future generations.
5.38 p.m.
Lord ORR-EWING: My Lords, I am always pleased to follow the noble Lord, Lord Richie-Calder. I succeeded him as chairman of the Metrication Board and I was pleased to hear him quoting depths of 200 metres, as correctly he should, and I am glad to be speaking after him. I must confess that I thought he slightly overpainted the exhaustion of Scotland. I have a minor connection with Aberdeen and I go up sometimes to ski there. I find in industry their engineering expertise and drive is tremendous and the youth, energy and enthusiasm of their young people in recreation, in climbing and skiing, quite outstanding. Nor did I really find that their rugger team was very effete when they beat the Welsh this
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year and chased the English up and down the field.
Lord RITCHIE-CALDER: If the noble Lord will forgive me I was talking not about my people the noble Lord's opinion of whom I share. I was talking about our national resources.
Lord ORR-EWING: My Lords, I think that the national resources of Scotland are built into the people and their courage and brains and education of which they are quite justly proud. I hope that the noble Lord, Lord Ritchie-Calder, will not mind my also saying that I hope that he, as a scientist, and trained as one, like myself think it is slightly irresponsible to talk of a bonanza from the North Sea oil between now and 1980. There will be very much more money and effort going out between now and 1980 than there is money coming back. Maybe later on there will be a bonanza, and I will develop this theory later in my speech.
Equally, I am of course as enthusiastic as he is to see the environment protected. But one must look back and realise that one can overdo this; for example, the Alaskan pipeline was held up for almost a decade because it was thought that the elks would not be able to jump it, as a result of which the Western world is in a deeper economic crisis because oil is not coming from that area, and BP are now busy building the pipeline at probably ten times the cost that would have been incurred many years ago. In other words, there is no point in keeping every blade of our environment correct if we are to live only on the begging bowls which we will need if we cannot feed half our population. We must, therefore, find a balance between the environment and the need for new and prosperous industry.
I was interested in the way in which the noble Lord, Lord Balogh, gave numbers of reasons in a very thoughtful speech for the position we have now reached, as did my noble friend Lord Lauderdale, who is temporarily absent because he is reading his speech prior to it appearing in the Official Report—not that it will need correcting. The noble Lord, Lord Balogh, must fully appreciate what my Front Bench has been emphasising—how important it is for this country to get on with this challenge and get on with the game of getting the oil flowing from the North Sea. I thought the noble Lord

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was going a little far—indeed, I might describe it as effrontery—when he said, "Our labours are bearing fruit for the nation". My instincts—I will quote the sources from which they derive—are that the manifestations of the Labour Government are not bearing fruit at the moment; they are sowing uncertainty, not only in this country but among investors overseas and among people who can bring their expertise to this oil development, and thus they are delaying and this delay is desperately expensive.
The noble Lord may have read the article in last Sunday's Sunday Times which was headed:
"North Sea Oil—the time for excuses is over."
I did not get that message from the noble Lord's speech today. It said in the course of that article:
"Today's main stumbling block for many bankers and oil companies is the problem of agreement with the Government over the 51 per cent. State participation."
The noble Lord mentioned that some companies had come to an agreement, but there are still a great many companies and consortia which have not come to such an agreement.
I still feel—my noble friend Lord Lauderdale expressed this sentiment, too—that the Government seem dedicated in this, as in so many other fields, to driving on with this proposal when there really is no need, and I can only believe that it is being done because, even today, they are continuing to appease the Left Wing's demand for nationalisation. In the White Paper it was called "full public ownership", but in the Manifesto it was called "nationalisation". It is now called "participation". One always seems to go round the words as they begin to get a bad connotation, like the Social Contract, which was very much eulogised and written up in two General Elections and which has now become a "voluntary incomes policy". No one talks about the Mark 2 Social Contract. They always seem to be able to find a new name for it, but I cannot help feeling that nationalisation and 51 per cent. represent nothing different; the control is there and it is nationalisation, and in my view it is a mistake.
Ed Monteith, the banker and oil engineer, and President of the International
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Energy Bank, said recently that the date for United Kingdom self-sufficiency is slipping; it was hoped to be 1980—though I noticed in the course of his speech that the noble Lord, Lord Balogh, referred not to 1980 but to "the 1980s"; and he has now forecast that it will be somewhere between 1981 and 1985. The cost of this slippage is considerable. Do I note a puzzled frown on the face of the noble Lord, Lord Balogh? If so, he will find all these figures quoted in the Sunday Times. He may care to look up the details; I am sure that his advisers will supply him with a copy of the article. The article goes on to explain, and I think this is right, why the consortia have lost some of their drive and enthusiasm. It is because of the continuous political and financial uncertainties which now prevail.
I agree wholeheartedly with so many other speakers who have said that while inflation in the United Kingdom, which is now running at a rate of 26 per cent. per annum, is escalating prices and making all the work cost very much more, the result is that all these developments are taking longer and longer to come to fruition. Despite this, the Government seem hell bent on going on trying to catch somebody who is making more profit than, accordingly to their interpretation, should be made. I entirely agree with the view of my noble friend Lord Campbell of Croy that the excess profits duty seems the simplest solution. It was Mr. Lever, with all his knowledge as a Minister attached to the Treasury, who said:
"The British people's fair share of the profits will be secured by taxation and existing royalties".—[Official Report, Commons, 19/2/75; c. 1338.]
It is that solution, and I abide by that Minister's judgment and knowledge, and I only wish that this Government would stick to it. We are told that 51 per cent. is not nationalisation, but surely noble Lords will agree that, according to the City Codes, several of which have been mentioned while we were debating the Industry Bill—
Lord BALOGH: My Lords, perhaps the noble Lord will allow me to intervene at this stage, to correct an impression he might have given when he was referring to my use of the term "1980s." I said that throughout the 1980s we should be capable of producing 100 million to

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150 million tons a year. I said that at the beginning of my speech. Later I said that enough oil had now been discovered to take us to self-sufficiency in 1980 and beyond. It is important to have this clear.
Lord ORR-EWING: My Lords, I am glad that the noble Lord has taken this opportunity to clarify the position and I apologise to him; it is sometimes difficult to hear every word, especially the difference between "1980" and "1980s". That probably explains my error. However, that still does not detract from my accusation that other people—and the noble Lord classed himself as the main professional in his Department—with great knowledge of the subject are now saying—and I will quote one of them:
"Unless some problems are solved fast, I can see the date when Britain becomes self-sufficient in oil slipping back from the Government target of 1980 to anywhere between 1980 and 1985."
Those are the words of Ed Monteith, the banker, so it was his estimate I was quoting, and I am glad to have the view of the noble Lord, Lord Balogh, that it has not slipped.
I notice that the Manifesto promised nationalisation, and at that time the noble Lord, Lord Balogh, wrote an article in The Banker of March 1974—I expect he wrote the article before he became Minister; the delay was probably accounted for by the fact that it took some time to print—in which he said firmly:
"I do hope that the Labour Party's programme in this field will be speedily and drastically reconsidered."
I am sure that the noble Lord has done his best to persuade the Cabinet and others of his colleagues of the rightness of his views—and, of course, of the rightness of our views—in this direction.
Lord BALOGH: My Lords, I hope that the noble Lord will allow me to correct him. I wanted an oil company. What I did not want was the sort of interference which the board as proposed by Mr. Patrick Jenkin would have caused.
Lord ORR-EWING: My Lords, I am delighted to have that point made clear, too, because I fear that the noble Lord is going to have great difficulty in swallowing this Bill, which I think gives no independence at all under the new régime which is being proposed. I will come to
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that later in my speech. First, let me deal with the Bill—The Petroleum and Submarine Pipeline Bill—which runs to 148 pages. It is extremely complicated and it goes much further than even the Industry Bill in giving powers to the Government of the day to do almost anything; and those of us who are worried about Mr. Wedgwood Benn and his particular policies, and about those who are allied with him, deplore the fact that he has moved from one Ministry to another and has taken charge of this Bill.
With the Secretary of State's permission—and the Treasury's permission where money is concerned—but not with Parliamentary approval or affirmation, the Government may explore for and produce oil, not just in United Kingdom waters or on the Continental Shelf, but anywhere in the world. They may set up refineries and marketing outlets; they may borrow or lend money—again not with the acquiescence of Parliament. Unlike all other nationalised industries, the BNOC is to be integrated, it is explained, as part of Whitehall. It is not to pay some company taxes. It is not to pay petroleum revenue tax. It is not to pay stamp duty. It is to use the £600 million—or £900 million if extended by Order—as the Secretary of State thinks fit. My Lords, this is a passport to complete freedom, without any sort of Parliamentary control.
We were told by the noble Lord, Lord Beswick, when considering the Industry Bill—which we shall be dealing with again tomorrow—that the National Enterprise Board would acquire only when firms wanted voluntarily to have Government participation. He offered us two minor exceptions. It was a voluntary, and not a compulsory, takeover. But this Bill goes much further than that. We have also been reassured, on the other Bill, that there was to be fair competition. But how can we possibly have fair competition from this new organisation which is to be set up, and which is to be a partner and a competitor? It is to have 51 per cent. in all these companies and it is allowed to go into competition with the same oil consortia. Therefore there is no pretence of fair competition in this Bill.
There is a figure of £600 million to start with, which can go up, by Order, to £900 million. But is this enough? The present estimate is that £8,700

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million is needed for the development of existing reserves. The Brown Book, published by the Department of Energy, and the assessment of the Banker—a very responsible paper—estimate that by 1977 £3,000 million is needed; and 51 per cent. of that is £1,500 million. Therefore are the Government being realistic in allotting £600 million initially? Will £600 million buy 51 per cent. of these immense undertakings'? My submission is that they just want to get it through; it sounds a reasonable figure, and once it is through and on the Statute Book they will "up" the price.
Frankly, I think that this Bill is not in a digested state. It is full of loopholes. I was glad to hear the noble Lord refer to one or two Amendments made during the Committee stage in another place. I hope that we shall have proper time to consider this Bill, and that it is not to be steamrollered through this House in the hot days of August when many people have commitments to their families or to package holidays, which they cannot break. We want proper consideration of the Bill, because it is of extreme importance, and at present it is ill-digested and ill-considered, and has not yet even appeared for our consideration.
I shall not embarrass the noble Lord. I was going to produce the same quotation about the Civil Service as that used by the noble Earl, Lord Lauderdale. The noble Lord referred, a little ungraciously I thought, to all the people who were advising us, as amateurs. I am the greatest admirer of the Civil Service. Anyone who has been a Minister for seven years knows how well and how conscientiously we are served. But I always have worried that it is the manpower which will wreck all these nationalisation proposals. I do not believe that the expertise and trained and experienced manpower is there for recruiting on the scale which the noble Lord believes he needs.
Finally, our task now is to sow confidence, not just in this country but all over the world, for people who have the expertise we need to carry on with the development of the North Sea. I personally believe we should stop these long, lengthy negotiations, this threatened nationalisation, this setting up of all these corporations. We should exercise control
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over depletion, as my noble friend has said, through the excess profits levy and taxes of that sort, so that we give the maximum initiative to those companies which are doing their best to develop our mineral wealth.
5.54 p.m.
Lord STRATHCONA and MOUNT ROYAL: My Lords, the noble Lord, Lord Balogh, has this afternoon been attempting the daunting task of convincing the House and the country at large that the Government's intention—they call it a proposal, but it is really an intention—to establish the BNOC and related proposals will help to,
"meet the urgent need for efficient and continuing development of the United Kingdom's petroleum resources."
The noble Lord will not be surprised—he will have realised that he has not succeeded in convincing very many of us on this side of the House. Unfortunately, we believe that the Government have contributed to delays which have already taken place, they are contributing to delays, and the contribution to those delays should be diminished. We also believe that part of the reason is that Government interference has increased, is increasing, and should be diminished.
On previous occasions the noble Lord has talked about reacting when he is provoked. I intend to try very hard not to provoke him; I have no wish to do so. But it is fair to say that we feel that the far-reaching proposals made in this Bill to restructure the industry represent an initiative by the Government which is provoking us. I have previously said in this House that I regard this issue as far too important for it to be a desirable field for political confrontation. The noble Lord agreed that getting these decisions right was admittedly extremely difficult, and that it was perhaps a task of the most fundamental importance to this country. It is unfortunate that this is a highly technical field which sometimes does not command a great deal of support by noble Lords in this House because of its nature. But there is no doubt that the rapid exploitation of the North Sea offers us our one, and perhaps our only, hope of rectifying the alarming deficit in our balance of trade, and the means of emancipating ourselves from the potential impact of external political

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pressures which can be exercised through threats to the continuity of energy supplies which are vital to the life of the country.
The noble Lord moved his Motion, if I may say, in his most emollient and persuasive style. My whole training and my instinct, when faced with a disagreement, is to try to establish the facts and to seek the common ground. I can never remember who produced the famous quotation,
"Comment is free, but facts are sacred."
Was it Voltaire? I think it may have been.
Several Noble Lords: C. P. Scott.
Lord STRATHCONA and MOUNT ROYAL: Thank you, my Lords. I am dismayed, in considering our debate this afternoon, to find that the common ground is perhaps no bigger than the famous man's hand. But I am even more dismayed at the thread of unreality on the side of the Government which seems to me to have permeated the whole debate. Before we get down to discussion of the BNOC I should like to look for a moment at the background against which we are judging it. I see two particularly disturbing features in the Government's attitude. The first is the almost pathological mistrust of the oil companies, which always seems to burst forth whenever we have questions or debates on this subject.
The noble Lord on one occasion referred to dealings with the oil companies as being "bargaining in the souks." This attitude between a responsible Government and a responsible industry is bad enough in itself, but it leads to something even worse. When the industry claims that the pace of development has slowed, it is dismissed by Ministers as,
"normal propaganda which an industry threatened with new taxes might be expected to emit."
That is a quotation from Mr. John Smith, the Minister in another place; not, I hasten to add, from the noble Lord who joined us this afternoon. This is what he is quoted as saying in a recent article in newspapers which have already been quoted from here this afternoon.
The great danger about this attitude is that it enables the Government to turn either a blind eye or a deaf ear to the evidence adduced by the people working
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in the industry. There is nothing more dangerous than to have the experience which one of my relatives had, when the doctors start saying, "There is nothing wrong with this person, it is all in the mind. Any physical symptoms of which they may be complaining are purely mental." Then you can excuse anything. The danger is that once the Government start believing that any facts adduced by the oil companies are a smoke screen to strengthen their bargaining position, we are getting into a dangerous situation indeed. It is difficult enough to get any hard evidence.
Here I must allude to the extraordinary circumstances which I find obtain in this game. The benign countenance of the noble Lord, Lord Balogh, seems to belie a strange effect that we find. He seems to have all the great oil companies cowed into total submission. They are terrified to make any attributable comments about what they really believe for fear that this will prejudice their position in the negotiations which are going on with his Ministry about participation. When you look at that smiling face it is extraordinary that he should have this effect on these high-powered people. But I assure noble Lords that that is the reality we face.
My Lords, I hope the Government do not expect to be taken seriously when they answer the sort of allegations we are making about the slowing down by saying that there is more activity now in the North Sea than there was a year ago. Of course there is! Here you are dealing with an industry at the point of take-off, at the point of rapid expansion, on a very massive scale. We are discussing commitments which were made years ahead for enormous investments. The question is this. Are we now forging ahead as fast as we had planned two years ago and what is the situation going to look like in two years' time? Above all, what happens in the 'eighties when perhaps the really big fields have already passed their peak?
I am sure that the noble Lord and his Ministry are well aware of the genuine feelings of the oil companies. We have talked about various quotations from the newspapers. There are very many cuttings from which you could quote. There is no doubt at all that there is a general feeling that the pace of development in

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the North Sea has checked. Here is the Daily Telegraph:
"Ten of 14 North Sea fields originally declared commercial have now sunk into the marginal category. Orders for drilling and production platforms have slowed down and so have orders for other equipment."
The Oil and Gas Journal says:
"The day rate weakness for rigs stems from a developing surplus of heavy semis. The exploratory pace in the sea is holding up well; but it is not and apparently will not increase much as was expected some time back. Off the United Kingdom only about 30 mobile rigs were at work early this year as against 32 earlier. This compares with some estimates in late '73 of 55 by mid-1975 and more than 80 by 1950. In April as many as 7 semi rigs were reported looking for work and a number of rigs are leaving the North Sea for other theatres."
This was alluded to by several noble Lords. I recently heard a case of a large semi-submersible where the partners in the operating company have declined to go ahead drilling the step out wells from next June. The operators of that rig have contacted 35 or 40 other operators and not one of those companies is planning a further drilling programme beyond that to which they are already committed for the next 18 months. I do not think that it should be necessary for us to labour this point and produce other examples.
There is no doubt at all that the threats of forced participation and the swingeing taxation when this Government came in 18 months ago were already casting a baleful shadow ahead of the actuality. We were talking about—and do not let us forget this—the production of oil which is inherently something of the order of 50 times as expensive as Middle East crude. The concept of participation and the potential regulatory and, in many cases, retrospective controls which it is proposed to introduce have had a disastrous effect on the banking system's recognised way of raising finance for oil in the ground.
I am not trying to develop a case for saying that the whole of the decline in the pace of development is the responsibility of the Government—far from it! I would accept, and I think most noble Lords here would accept, that rapid escalation in costs has been the principal problem. What I would claim is that it has been aggravated by the nature
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of PRT and the method of its application, and the threat of the unknown nature of particpation. So as far as the petroleum revenue tax is concerned several noble Lords this afternoon have said that they would have preferred the excess profits tax approach. Why invest in betting on a horse when you can simply cream off some of the winnings?—as someone expressed it to me.
It is worth repeating that one of the other fears is that the tax is favourable enough for the big fields or, (shall we say?) the mammoth fields like Ninian, Forties, Brent and perhaps Piper. The danger is that these 1,000-million barrel fields may have distorted the Government's perspective on this picture. It is worth remembering that there are probably only 15 fields of this sort in the USA. The great preponderance of the output in that country has always come from fields in the 50-million to 300-million barrel range. Here the economies begin to look very much less attractive.
It is all very well for the Minister to say to the oil companies, "Rely on us! We do not want to sec you not making profits. We have power to forgo the royalties if you can explain that you are losing money." But what industry being invited to invest on the scale that the oil industry is trying to invest can accept relying on the whims of politicians? When the particular politician turns out to be the present Secretary of State for Energy, I can only think that if the Government thought that this was to reassure the oil companies I am reminded of what we used to say when we were complaining how unwise it was to send homosexuals to prison. We used to say that it was like sending an alcoholic to a brewery. That certainly seems to me to be about the logic of putting Mr. Benn into the Ministry of Energy to reassure the industry.
We will get an opportunity later to comment at length on the BNOC, the Bill for which, as many have said, has still to have its Report stage in the Commons. The Bill has been greatly improved, and many of its worst features were mitigated when it was so brutally guillotined before a number of Amendments had been considered, which means that we shall have a lot of work to do on it when we get to the Committee stage.

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Nevertheless, we can see a clear pattern which shows this proposal to be both deplorable and damaging. I will quote two examples, to which reference has already been made. To make retrospective unilateral changes in a contract is regrettable; but such changes can sometimes be made bearable by negotiation and compensation. Given the scale of investment in the type of operations with which we are dealing in the North Sea, even a minor cut back in production plans can play havoc with the economics of the operation. If compensation is not to be paid for steps which both alter the economics and the capital value of a licence, it is bound to prejudice the future confidence of the industry. If the Government change the rules in the middle of the game on this occasion, what guarantee have we that they will not change them if it suits them later on? We have said all along that we believe the control functions could be fully and adequately discharged by an independent regulatory commission. This was advanced most persuasively by the noble Lord whose name for the moment escapes me—
Several noble Lords: Lord Trevelyan!
Lord STRATHCONA and MOUNT ROYAL:—who should have been sitting on these Benches when he made his speech. He said the BNOC would be mis-shapen from birth. It was Mr. Baxendell of Shell who said publicly on one occasion that he could not see that BNOC could do anything else but cause delay to the industry. Surely this is borne out when we talk of the people in BNOC learning their business by association with the oil companies. Do they not imagine that is to be a distraction for the people who are trying to get on with the job? The Whitehall machine, with all its many good points, is not exactly noted for its speed of decision.
We have also talked about the financial aspects of participation. I have been totally unable to discover what is meant by this enigmatic "no-loss/no-gain" formula, and the Government are very coy about explaining in detail what it is they mean by it. My impression is that it will not put any money into the industry, which would make it more understandable if this was of assistance to some of the smaller companies which are bound to find it difficult to raise finance,
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particularly in view of the kind of uncertainties which have been largely created by the Government. This kind of uncertainty is highly corrosive of confidence in an international industry of this sort. The noble Lord, Lord Balogh, talking about participation, said that the Government are willing to pay for it. I hope this means that they are willing to put up their share of the capital. If that is the situation, where is the money to come from?
BNOC is a curious animal indeed. It will have a potentially unfair advantage over commercial companies, in that it will not pay PRT and other taxes. Yet, on the other side, apparently its revenues are all to be syphoned off into the national oil account, which would seem to restrict very greatly its financial freedom of action. It begins to sound like some privileged eunuch rushing around in the harem trying to force a lot of reluctant brides into marriage. That is no way to produce a healthy family. The noble Lord, Lord Campbell of Croy, and the noble Viscount, Lord Thurso, referred to the apparent contradiction of having the BNOC, on the one hand, as a partner whose objectives are bound to be totally different because of the financial set up proposed for the company, and yet, at the same time, having the company as a competitor. Will it be a fair competitor? That was a point made by my noble friend Lord Orr-Ewing.
I said at the outset that I had tried to find a common cause with the noble Lord. Towards the end of my speech, I can at least thank him for the three important concessions which have been made during the long discussions which have taken place in the other House. They have at least removed some of the warts from this mis-shapen child. I hone we can still turn the BNOC into something more like the kind of animal we should have liked to see.
My Lords, I am sorry if I have made a gloomy and critical speech; I do so unwillingly and with great sadness. I sincerely believe that it would be perfectly possible to establish a fundamentally bipartisan approach to many of the major issues affecting the exploitation of our petroleum resources. But the more I study the question, the more convinced I become that the Government have allowed political pressures, happily mostly from outside this

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House, to warp the judgment of the wiser statesmen in the Administration. I believe that the attitudes and actions of some of the Ministers in the Department of Energy over the past 18 months have undermined the confidence of industry and that the long-term development has already possibly been put back as much as two years. BNOC will be bipartisan, inequitable and impractical and will slow the process further. I very much fear that, in agreeing to this Motion this evening, this House will do little to enhance its reputation for sanity, good sense, and sound judgment.
Lord STRANGE: My Lords, as a Cross-Bencher I am allowed to say one word at the end of the debate. I do not know whether that is altogether customary, but in this debate it is. I have listened with great respect to the philosophy which has been expounded. I am too stupid to understand it; it is a form of "Malice in Blunderland"! I trust this Bill will not go any further than it possibly can to make us the laughing stock of Europe.
6.20 p.m.
The MINISTER of STATE, SCOTTISH OFFICE (Lord Hughes): My Lords, if the last comment was slightly away from the ordinary traditions of the House, I can assure the noble Lord, Lord Strange, that there is no danger of his desires being fulfilled. I should like to begin by referring to some of the things which have been said by the noble Lord, Lord Strathcona and Mount Royal. Almost in his opening words, he said that my noble friend Lord Balogh had not succeeded in convincing noble Lords opposite by the speech which he had made. I do not think I am in any way misinterpreting the intentions of my noble friend when I say he is not one regularly to attempt the impossible. What he sought to do was to explain the Government's views on these matters; and if one is explaining views of this kind to people who hold fundamentally different views, it is folly to believe that even someone as convincing or as benevolent in appearance as my noble friend can lure them away from points of view which they have no desire to abandon.
The noble Lord, Lord Strathcona, said—although he could not identify the
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author and then got help from all parts of the House—that "comment is free but fact is sacred". I wish that he had followed it instead of just quoting it, because some of the things he said in condemnation of the Government's attitude assumed to be facts things which were not only comment but, in some cases, wholly irrelevant and untrue comment. He attributed the Government's actions on these matters to what he said was their "almost pathological distrust of the oil companies". I think that is as exaggerated a view of the Government's relations with the oil companies as if I were to say that noble Lords on the Benches opposite regard the oil companies as a collection of benevolent philanthropists, interested only in the wellbeing of this country. The second statement would be as far from the truth as the first one. The way in which both of us work, I think, is that despite starting off with a different idea of the best way to do things, we are attempting to arrive at the same end, of getting the best results for our people from the exploitation of the oil in the North Sea, and such other fields as may be discovered.
I should like to refer briefly to the contributions made by my noble friends Lord Lee of Newton and Lord Ritchie-Calder. I thought that, as a former Minister of Power, my noble friend Lord Lee did a service in taking us back a little further into the origins of this matter. I thought it was particularly useful that he was able to say to us that he would have liked to be able in earlier days to do what the Government now propose to do in the matter of the British National Oil Corporation. To my noble friend Lord Ritchie-Calder, I would say that in the Scottish Office in particular, and in the Government in general, we are well aware of the dangers which the exploitation of oil can create in areas of natural beauty and we are very much seized of the need to preserve national resources and natural beauty and to protect the environment. When he reads of some of the things which are being done and realises what powers are being taken in this Bill, allied to the powers which already exist, he will see that considerable safeguards are being sought regarding the matters to which he referred.
I turn now to comments which have been made from the other side of the House. First, following the example of

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the noble Lord, Lord Strathcona, in seeking to find common ground—though I must say he did not strain himself unduly in the search—the noble Lord, Lord Campbell of Croy, said that extraction should proceed as fast as possible until 1980. That we accept. That is a common objective which has not been departed from, and I was rather glad that my noble friend was able to reassure the noble Lord, Lord Orr-Ewing, that 1980 had not suddenly become, in the Government's view, "the 1980s". I think that the noble Lord, in recollecting what my noble friend had said, perhaps confused the reference to a continuous production of from 100 million to 150 million tons per annum in the 1980s with his reference to "reaching self-sufficiency in 1980". So on that, at least, we agree as to what the first major target is.
I do not wish to follow the noble Lord, Lord Campbell, once again on the merits of the way in which he would have done the business, on his planning ideas and on the way that we did it earlier in the year. I do not think I should be serving your Lordships particularly well by arguing the reasons why we see the BNOC as a better way of dealing with things than noble Lords opposite would have chosen. We must accept that in matters of this kind we are never going to agree. But there are some points which have been raised by a number of your Lordships, and the first of these was raised by the noble Lord, Lord Campbell of Croy. This concerned the long delay which he attributed to the Government in coming forward with their proposals and the effect that this was having on operations.
I should like to follow my noble friend Lord Lee of Newton in going back a little. The previous Government started a review of the licensing policies after the last licensing round in March 1972. When they left Office in March 1974, two years later, they had announced no conclusions whatsoever. Therefore, there were two years of uncertainty, because of the absence of information from the then Government of what they proposed to do. May I contrast that with the "delay" of the present Government? We had produced our White Paper on North Sea policies within four months of taking Office; and we have now passed the Oil Taxation Act and introduced the
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Petroleum Bill, together with Bills to set up the Scottish and Welsh Development Agencies, all within a period of 17 months. So even if this is delay—and, obviously, if one expects results overnight it is—in comparison with people who produced nothing at all in two years, it is certainly not regarded as a justifiable criticism so far as we are concerned.
Lord CAMPBELL of CROY: My Lords, would the noble Lord give way at this point? The point is that the Party opposite introduced completely new proposals with threats to the operations that were going on, and it was that which caused the uncertainty; whereas at least all the operations were able to carry on at full speed under the previous Administration.
Lord HUGHES: My Lords, if the noble Lord, Lord Campbell of Croy, is arguing that to do nothing for two years and to give no indication at the end of two years that anything is going to happen—
Lord CAMPBELL of CROY: That was all that was required.
Lord HUGHES: My Lords, it must have been the assumption that the oil companies might have made then, that the Conservative Government were not going to do anything at any time which was going to give them cause for any concern. But that aspect was not borne out by some later things which were said by Mr. Jenkin, and which have been repeated recently. I shall return to that point at a later stage. The noble Earl, Lord Lauderdale, as usual gave us a most entertaining speech, not diminished in any way by the fact that his economics teacher demolished the greater part of his argument. One thing the noble Earl shares with my noble friend, though for a different reason—in his case because of the magnificence of his phraseology—is the fact that one appreciates both speeches better when one reads them the following day than at the time one is listening to them.
But he was one of those who raised seriously the question of the level of activity and the reference to the number of rigs, the reference to the number of platforms, and so on. Let us look at the evidence to support the contention that activity is declining. First there are

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mobile drilling rigs. Last year an average of 24½ rigs were operating at any one time—I am not suggesting there was half a rig going about, but that is the figure it works out at. The Government's forecast was 25. This year the average so far has been just below 30. The Government forecast was 30.
The Earl of LAUDERDALE: My Lords, I am much obliged to the noble Lord for giving way. Is it not the case that two years ago the Gcvernment anticipated a much larger number of rigs operating in the British section of the North Sea, something like 40, and in the last nine months of this year—whatever the average in operation, which is of course a clever economic cheat—the fact is that the number of rigs in the North Sea has declined in the British sector and risen in the Norwegian?
Lord HUGHES: My Lords, perhaps the noble Earl would do better if he let me finish. It was said that the number three weeks ago was 26. That is correct. Today it is 29. That does not mean there has been a sudden tremendous increase in activity, or that there was a sudden fall in activities three weeks ago. The number fluctuates. That is why the only relevant factor to take into account is the average in use over a period. That average is almost identical with the forecast.
The noble Earl may be perfectly correct in saying that two years ago it was something else. But everyone has emphasised the terribly difficult nature of these operations. As my noble friend Lord Balogh has said, there is nothing less fruitful than making long-term predictions in this field. He might have added that the risk is only diminished when one makes short-term predictions. So I cannot attach any particular importance to the number quoted at any given time. Last year's estimate forecast of the numbers and this year's estimate of the numbers are closely matched up by what are there. I would hope that this is the way in which we can continue. As we see the situation reasonably near ahead, we can say what we expect it to be and then be disappointed if it fails. In these two years that has not been the situation.
On platforms, the fact is that the technology has advance since the forecasts
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of last year. The Government expect to make a Statement very shortly and I will not anticipate trat. But what has hoppened is that the companies have changed their views about the number of platforms for discovery—this note must have been written to Lord Beswick; I interpret it for Lord Beswick not because it was written in Gaelic but because I also am a bad writer and I can read other people's bad writing—which are required to extract all the oil. I think that noble Lords opposite would not wish to see the companies adding more to these huge and costly structures than is necessary to meet developments and production platforms. Sometimes I shall be quoting information which I have been given. I can assure your Lordships that I did not invent it, and did not know it until it was given to me. One part of the information was given to me by my noble friend Lord Balogh. It is that one will now drill 36 wells as against 24 contemplated a comparatively short time ago. So a given number of platforms will do 50 per cent. more drilling than was contemplated that short time ago.
The Earl of LAUDERDALE: My Lords, I am again much obliged to the noble Lord for giving way. I hope his explanation is in fact accurate. The 36-well, capacity was one that was well established by designers 18 months ago. I was wondering whether he would tell us that the figure had gone up from 36 to 42. I do not want to make trouble on a silly point, but if it is really his point that the capacity of platforms has increased designwise in the past year to a significant extent, that is a very interesting and instructive explanation for the shortfall in platform orders.
Lord HUGHES: My Lords, my nobh.: friend has classified himself as the expert on this matter. Who am I to disagree with him? I think this is the last of the points of the noble Earl, Lord Lauderdale, to which I wish to refer—just in case he wants to jump up again, we will have all his interventions at the one time. He referred to the fact that companies were going to Greenland, and gave this as an indication that the Government are frightening them away from our part of the North Sea. But Denmark has offered very tough berms for Greenland, with 50 per cent. Government participation and a

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total Government take of 80 per cent. The terms are in fact tougher than ours, in an area even more risky than that in which they are operating in our part of the North Sea. So if what we are doing in this sphere is pandering to the Left Wing of our Party, they had better not read some of the statistics I am giving your Lordships, otherwise they will say that what we are doing is pandering to noble Lords opposite.
The Earl of LAUDERDALE: My Lords, I am so grateful to the noble Lords; this is the last time I shall jump up. I have a bit of a slipped disc and am in some discomfort. But surely the point is that the new Danish licences, though tougher as licences for exploration, have not threatened anything like the taxation levels for production that we have imposed in the North Sea. That is the critical distinction.
Lord HUGHES: My Lords, there is always difficulty in quoting other people's statistics, but it seems to me that if there is to be a Government take of 80 per cent., that will be the take of what comes out; it is not pie in the sky. I do not see how the noble Earl can say that that is more attractive to the companies than what we are offering.
A number of points were raised by various noble Lords and I should like to take them now because we have other business to do. I think this is the point at which I should refer to the remarks of the noble Viscount, Lord Thurso. I always look forward to his remarks because he is almost as unpredictable as the North Sea itself. That is, perhaps, reasonable because he is the one in your Lordships' House nearest to it. I never know before he rises whether he is to be an ally with me against the Tory Front Bench, or to be with them and against me. He could have stood very comfortably at that Bench when he made his speech today. If he does not watch himself, he will be receiving the same invitation from the noble Lord, Lord Strathcona and Mount Royal, as the noble Lord. Lord Trevelyan, received when he was temporarily out of the House. I would tell Lord Trevelyan that Lord Strathcona said he was sitting in the wrong place and ought to be on these Benches. I do not disagree with that comment at all.
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The noble Viscount, Lord Thurso, asked why we were taking this procedure. Because of the stage we have reached in the Session, it was felt that this was a procedure which would enable us to have a longer Second Reading debate on the Bill than otherwise would be the circumstance. It becomes an extra. But having said that, I must say that it will not deprive the House of the opportunity of speaking on the Second Reading of the Bill. What I would hope is that no noble Lord, this Bench included, will find it necessary on Second Reading to say all over again the things which we have said today. At least, if the procedure does not do anything to cut down the number of speeches on the next occasion, it ought at any rate to cut down their length. There is nothing sinister about it. A number of points were raised by various speakers. The first point is the rate of depletion.
For the first time the Bill gives power to the nation to control the rate of depletion of one of its most vital natural resources. This is essential, but at the same time we recognise the industry's legitimate need for a degree of certainty about the exercise of this control, particularly in the context of financing development. Accordingly, I wish to say that the Secretary of State for Energy, Mr. Varley, announced on 6th December that, first, no delays would be imposed on the development of finds made up to the end of 1975 and that there would be full consultation before any delay was imposed on developments of finds made after that date; secondly, no cuts would be made in production from finds made before the end of 1975 until 1982 or four years after the start of production, whichever is the later; thirdly, no cuts would be made in production from finds made after 1975 under existing licences until 150 per cent. of the investment had been recovered.
By an Amendment for the depletion power in the Bill, the Government have now provided that a licensee will know from the time he begins to develop the field the maximum extent of the cut-back which he can at any time be required to make. We come now to the arguments about the exemption of the BNOC from petroleum revenue tax.
Lord ORR-EWING: My Lords, I do not disagree in any way with those reservations; in fact, they are entirely helpful to the spirit of co-operation. But would it not be better to write those reservations into the Bill rather than have them as part of a Government Statement? Governments and Ministers change, and Government Statements can more easily be changed than if they are written into the Bill. Perhaps the noble Lord will consider the matter. I do not ask for an immediate answer.
Lord HUGHES: My Lords, it is not a matter for me, but I will certainly draw my right honourable friend's attention to it. May I remind the noble Lord that he has already complained about the length of the Bill. On the subject of the petroleum revenue tax, the BNOC will not be in quite the same position as a conventional nationalised industry. Through the operation of the national oil account, all its revenues will be payable gross to the Government. Nor is petroleum revenue tax a tax of general application. It is a tax which is confined to the upstream operations of the oil industry and has the specific purpose of securing for the nation a greater "take" from the exploitation of our offshore petroleum resources. In these circumstances, it makes no sense at all to switch the Government "take" from one pocket to another of the same suit. The money which the BNOC pays in petroleum revenue tax will come direct to the Government from the national oil account.
Noble Lords may say, "In that case, why is the Corporation to pay corporation tax?" The taxes are quite different. Corporation tax is a tax of general application to all aspects of the oil business and to industry in general. It is not a new tax, and there is no need to isolate the Corporation from corporation tax. Apart from anything else, corporation tax is payable in the ordinary way on those parts of its activities to which the petroleum revenue tax has no reference whatsoever.
I come to the question of retrospection and the suggestion that there may be compensation. It is regrettable that powers have had to be taken unilaterally to alter existing licences, but this stems from the unfortunate but manifest inadequacy of the existing terms. This is not an example of retrospective legislation in
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the commonly accepted sense. Nothing in the Bill makes anything illegal which at the time it was done was legal. The new controls apply to existing licences, but only in respect of future actions carried out under them. It is objected that the new terms could have a serious effect on profitability and so diminish the value of the licences and that compensation should therefore be paid. This would be a very dangerous doctrine for the Government to accept.
In administering the controls, the Government will have regard to their effects on licensees, but the case for compensation does not stand up, even if some diminution of profit is sustained. Governments of all Parties frequently legislate in ways which result in financial burdens being placed on sections of the community. In these cases no question of compensation arises. Taxation is the obvious example, but there are many others: exchange control rules, legislation on safety, legislation on planning, legislation on advertising standards. These are all decisions which Governments may make which diminish the profitability of the companies that have to adhere to the new legislation. But when we do so we never include in the legislation any provision for compensating people for the lower profit which they may earn as a result of having to comply with the new conditions.
The subject of participation was also raised. I cannot understand why noble Lords opposite are always looking for sinister reasons for language. The noble Lord, Lord Orr-Ewing, gave the various ways in which he assumed that we were proceeding from nationalisation through something else and finishing up with participation—that it was all a plot hatched out by the people in Newham as part of the activities to get out Mr. Prentice. But if participation is such a nasty Left-Wing device, why did Mr. Jenkin say that the Conservative Government were considering having a degree of participation? If that is correct, the only difference between us is not that there is participation, but the level at which participation should take place.
If the Government take 25 per cent., that is good Conservative philosophy. If the Government take 35 per cent., it is still good Conservative philosophy. If the Government take 49 per cent., we may

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get some support from the Conservative Benches. We may get the support of Mrs. Thatcher, but we may get the support of somebody else of older vintage. But as soon as we pass the 50 per cent. mark, this is the point at which they dig in their heels and it becomes nasty. I am glad that my interpretation of Conservative philosophy is better than my knowledge of the economics of the noble Lord, Lord Balogh, but I know that I would rather have his economics than Conservative philosophy any day.
I have covered most of the points, and have given myself a time limit of 30 minutes.
Lord CAMPBELL of CROY: My Lords, I hope—
Lord HUGHES: My Lords, the noble Lord is going to beat me!
Lord CAMPBELL of CROY: My Lords, I hope that the noble Lord will not leave to the next debate which he mentioned his answer to my question as to whether lie could confirm the report in a recent edition of the Economist that the post of chairman of the British National Oil Corporation had been offered to a large number of people who had refused it.
Lord HUGHES: My Lords, as my noble friend Lord Beswick said earlier this afternoon, it is no part of a Minister's duty to confirm or deny rumours in the Press. The noble Lord, Lord Campbell of Croy, put that question. On the other hand, the noble Lord, Lord Orr-Ewing, informed us that there is a queue of people waiting for appointment and asked whether they were all lined up and were—
Lord ORR-EWING: My Lords, I asked where these great experts and professionals were to come from. I was regretting the fact that in addition to all the operating companies there were not sufficient people with this knowledge to form an entirely new Civil Service. I made the reverse point.
Lord HUGHES: My Lord, if the noble thinks that, he had better make certain that that is the way Hansard have reported it because that is not what he said. You are allowed to take out a "not" if it is not supposed to be there, or you can put it in if it has
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been omitted. Anyway, the one must be ignored in exactly the same way as the other. In due course all will be revealed.
My Lords, I come to my final point. The noble Lord, Lord Orr-Ewing, expressed the hope that this Bill was not going to be steam-rollered through in the hot days of August. I hope, if anything else is wrong in his forecast, it is not his weather forecast. I cannot say exactly when this will be done, but I can assure the noble Lord that we do not at present anticipate that the Bill wilt be taken through all its stages before we rise for the Summer Recess. In fact, I may be in grave difficulties with my noble friend Lord Balogh, who was too afraid to anticipate. But the Government frequently attempt the difficult; we do not launch ourselves, on the eve of the Summer Recess, into the impossible.
On Question, Motion agreed to.

McDERMOTT SCOTLAND ORDER CONFIRMATION BILL
Brought from the Commons; read P and (pursuant to the Private Legislation Procedure (Scotland) Act 1936) deemed to have been read 2a and reported from the Committee.

SOCIAL SECURITY PENSIONS BILL
6.53 p.m.
Baroness LLEWELYN-DAVIES of HASTOE: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Social Security Pensions Bill has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament, for the purposes of the Bill.
Lord WELLS-PESTELL: My Lords, I beg to move that this Bill be now read a third time.
Moved, That the Bill be now read 3a.—(Lord Wells-Pestell.)
On Question, Bill read 3a, with the Amendments.
Clause 34 [Annual rate of earner's pension]:
Lord WELLS-PESTELL Lord WELLS-PESTELL move Amendment No. 1:
Page 25, line 10, at end insert—
("(3A) The earner's pension need not be in accordance with subsection (2) above in case

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of his service in the relevant employment being terminated before he attains the scheme's normal pension age and when—

(a) he has completed in that employment less than five years' qualifying service for the purposes of Schedule 16 to the Social Security Act 1973 (preservation); or

(b) he is under the age of 26 on termination of that employment")

The noble Lord said: My Lords, this is an Amendment to make it clear that, apart from the guaranteed minimum pension, a pension under this Bill need be preserved only if there is an entitlement to short service benefits under the preservation arrangements in the 1973 Act. A guaranteed minimum pension would still have to be preserved unless it had been extinguished by payment of a State premium. This is, in a sense, a technical Amendment. I beg to move.
On Question, Amendment agreed to.
Clause 35 [Earner's guaranteed minimum]:
6.55 p.m.
Lord BYERS Lord BYERS moved Amendment No.
Page 28, line 3, at end insert—
("or
(c) such fixed compound rate for each relevant year after that year as may be in force at the time when contracted-out service is terminated and which is, in the opinion of the Government actuary.—

(i) equal in value to an increase of 5 per cent. plus the further increase secured by the premium calculated in accordance with section 44; and

(ii)consistent with other assumptions made as to increases in earnings.").

The noble Lord said: My Lords, I must say at the outset that I am extremely disappointed at the Government's refusal to close completely the open-ended commitment on early leavers by substituting a straight 8 per cent. revaluation for the 5 per cent., plus a premium. I believe that this is likely to constitute the biggest single stumbling block to contracting out. Even at this stage I had hoped that the Government might change their minds, but I assume that they are not going to do so. Therefore, I have tabled this Amendment as an alternative.
This Amendment seeks to give employers an extra option in respect of their early leavers. This option would allow them to revalue the contracted-out pension of early leavers at whatever fixed rate applies when a person leaves their
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service. In return for the scheme undertaking this liability they would be exempted from paying a premium. I do not put this forward as anything better than the straight 8 per cent. proposal because I think that is what employers and industry still wish to have, but I think it is better than leaving the Bill unamended.
I have put forward this Amendment after very careful study of the points made on this issue by the noble Lord, Lord Wells-Pestell, on previous stages of the Bill, and I hope and believe that I have met most, if not all, of the objections which he put forward. First, he objected that a fixed rate of 8 per cent. would impose a cost on the State scheme where increases in earnings actually exceeded 8 per cent. But the premium payable to the State must assume a certain rate of increase in earnings, and all this Amendment is seeking to achieve is the same cost but charged in a different way. I am saying that the rate of increase assumed for calculating the premium should also be assumed for the purpose of deciding what fixed rate of increase the scheme should have to undertake. If my Amendment is accepted the size of the burden will be the same, but it is a burden that will be preserved in the scheme instead of being brought back into the State scheme.
The second objection raised by the noble Lord, Lord Wells-Pestell, was that a fixed rate might result in schemes with low turnover subsidising schemes with high turnover. This is not so with my Amendment: each scheme will bear its fair share of the burden, and indeed each member of the scheme will give rise to, an identifiable burden. I think this Amendment bears out a point made in another place by Mr. Kenneth Clarke. I do not think anyone is trying to avoid paying the proper price for early leavers, but what is needed is some fixed assessment of that price, as Mr. Clarke made clear in the other place.
I hope therefore that this Amendment will receive a sympathetic hearing. In saying that I speak as one who wishes to see as many people as possible in good occupational schemes. I speak as one who believes that the open-ended commitment still remaining in the Bill is the biggest single obstacle to contracting out, and it may well deter employers

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from doing so. It is the employer who has to make the contracting in or out decision; it is a decision which today has to be made against an unstable and inflationary economic background, and I believe we ought to do what we can to make it that much easier to make a decision to contract out. I beg to move.
6.59 p.m.
Lord ABERDARE: My Lords, I wish to support what has been said by the noble Lord, Lord Byers, and to urge the Government with all the force at my command to accept this Amendment. The Government have said from the beginning that they want partnership with the occupational pension schemes and, indeed, I am sure they would be the first to acknowledge that this is of vital importance when one simply thinks of the fact that a third of the total savings of this country come from funded pension schemes, and when one realises the tremendous need at this moment for investment. As the noble Lord, Lord Byers, has said, it is vital to give employers, and those who counsel them on their pension arrangements, confidence in the Government's proposals in this Bill. They are not at the moment confident and—to repeat what I said at the Committee stage of this Bill—they are gloomy. The noble Lord questioned whether I was right; I have checked again and they are gloomy. That is not too strong a word, and I am speaking of the people with whom I have been in contact, the National Association of Pension Funds, the CIB, the Society of Pension Consultants, the Life Offices Association and the Association of Consulting Actuaries. As the noble Lord has said, the one reason for this gloom is the concept of the limited revaluation premium in Clause 45, which will make it extremely difficult to recommend employers to contract out of the State scheme.
Throughout the stages of this Bill, we have spoken about the open-ended commitment. If a premium is to be paid to the State at some future unknown date every time someone leaves his employer before pensionable age, and if the basis on which that premium is calculated can be changed, then there is an open-ended commitment on a pension scheme, and a situation could arise which might even bankrupt an employer. I know that the
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noble Lord opposite has done his best, and that the Government have done their best, to try to lessen that threat by various means—by inserting a period of notice, and by ensuring that the actuarial tables do not assume a negative yield on investments. But the fact is that the open-ended commitment still remains. I am afraid there will still be many employers who are suspicious that future Governments will change the terms adversely against them. Already they have seen what has happened with the Boyd-Carpenter scheme, as I mentioned at Committee stage, where those who were not contracted out will now receive, as a result of this Bill, preferential treatment compared with those 5 million people who were contracted out. There is still a feeling of intense resentment at the action of the Government, and it has raised further doubts about the wisdom of contracting out.
But there is another grave objection to this proposal of a premium, and I would ask the noble Lord to consider this very carefully. The objection is that the usual form of pension scheme is not designed to pay out capital sums at odd intervals. As the noble Lord knows very well, a normal pension scheme is built up on the basis of State contributions so invested as to produce a requisite pension at the appropriate time on reaching retirement age. It is a through-flow of contributions coming in at one end, remaining in the scheme, and then flowing out at the other end as pensions. In that plan, there is no place for a sudden demand for capital in the middle of the cycle.
My Lords, in effect, what it would mean is that the whole scheme would have to be reconsidered. Investment plans would have to be changed in order to take care of this contingency. In factual terms, I should have thought it would mean that more money would have to be kept on short-term call to provide for this contingency, in order to pay out capital sums every time an early leaver went and a premium had to be paid. This would necessarily mean a lesser income for the fund as a whole and higher administrative expenses. In other words, this form of provision to secure the right of those who leave would result in a worsening of the situation for those who stay with the scheme. You would have to make special

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provision for capital sums to be paid out at any time, and therefore the scheme as a whole is less able to earn money on a long-term basis. Those who stay with the scheme suffer at the expense of the early leaver.
It is for these reasons that I so much hope that the noble Lord will accept this Amendment. The Amendment avoids the need for a premium payment and provides for the pension to be revalued fairly. Only recently, those in the pension field have had a further shock, because it is said that improved pensions will count against the £6 a week wage increase under the anti-inflationary proposals. This would be tragic at a time when employers are being urged to contract out, and to improve their schemes. It seems quite farcical to discourage improved pensions at this time, because they are essential savings out of current income and are exactly what is needed to reduce inflation. I very much fear that this Bill will fail in its efforts at a partnership with occupational schemes, unless this Amendment or something like it is accepted. I urge the noble Lord to have the foresight and wisdom to accept this Amendment, and thereby at least allow another place one more chance to look at this matter.
7.5 p.m.
Lord WELLS-PESTELL: My Lords, I find the noble Lords, Lord Byers and Lord Aberdare, very persuasive, but let me say right at the beginning this is a matter upon which unfortunately—and I say "unfortunately" advisedly—the Government cannot meet the requirements of this Amendment. One has to recognise that, rightly or wrongly, this is a sticking point. There is abundant evidence that the Government have gone as far as is humanly possible to meet the number of criticisms which noble Lords have made from their own knowledge and experience—and I do not think anybody would dispute that for a moment. But on this particular matter we just cannot meet the terms of the Amendment. My right honourable rabic friend the Minister of State considered this personally until a late hour last night. As the noble Lords, Lord Byers and Lord Aberdare, know, since the very beginning of the proceedings on this Bill the Minister of State has gone out of his
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way, quite rightly, to do what he could to meet the wishes of the industry.
My Lords, it is true to say that the idea of a premium originated within the pensions industry, and this objection was never raised by them. If I may say so, this matter has been raised only comparatively recently. This was their idea and their concept. The overall effect of this Amendment would be that the employer had three options: revaluation in line with earnings generally; revaluation at 5 per cent. or the actual increase in earnings, if less, plus a premium; and, now, revaluation at a fixed rate.
For a wide variety of reasons, we feel that would not be possible, but perhaps I need give only one or two. This is a change on which, so far as we are concerned, the views of all the pensions interests have not been heard. But while it is not possible to be confident that the full implications of this proposal have been foreseen, the Government consider that it would introduce considerable new complexity and uncertainty into the contracting out arrangements. The effect would be that an employer could choose between three options for revaluing the guaranteed minimum pension of an early leaver—the two options already to be found in Clause 35(7) plus the new option under this Amendment.
Furthermore, this new option would vary from time to time, so that a different rate of revaluation was in force for early leavers, depending on the year in which they left the scheme. The impact of the Amendment, therefore, would be that neither employers nor early leavers would know where they stood. We should have created uncertainty, not reduced it. The employer would have to be ready to revalue at different rates, or he would have different leavers with different rates of revaluation in the scheme. An earner could have a different guaranteed minimum pension revalued at different rates, sometimes with a premium paid as well, while the Department would be faced—and we must take this into account—with record-keeping tasks of monumental complexity, with all the extra cost and room for error that this implies.
My right honourable friend the Minister of State has continued this discussion with pensions interest on this issue ever since the Report stage in your Lordships' House. I have to tell your Lordships that he is far from satisfied that

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this Amendment would provide any improvement on what is already in the Bill. I can only say—and I know the noble Lord, Lord Byers, will take my word for this, as will the noble Lord, Lord Aberdare—that this has not been brushed aside lightly. A good deal of consideration extending over an appreciable period since we got the Amendment yesterday has been given to this. With some reluctance, I have to say that we cannot accept this Amendment, and I must ask your Lordships to accept that this is the considered view of the Government—notwithstanding anything that has been said—after very careful consideration.
Lord BYERS: My Lords, I am grateful to the noble Lord, Lord Wells-Pestell. I want to make it clear that this Amendment was meant to be helpful, because, whoever made the initial suggestion of a premium, we have discovered worry among employers particularly, and consultants to the pensions industry and the industry itself, about the open-ended compliment. I am very grateful to the Minister of State, Mr. Brian O'Malley, for having given personal consideration to this, which I know he did last night, and I am really very sorry that the Government cannot accept it.
But, my Lords, this reply simply does not stand up. I hope that the noble Lord will have another look at this, or at least get Mr. O'Malley to read what I have said and will say, when it is reported in Hansard. If you analyse that reply you find that the Government say, first, that it is adding a complexity to the Bill. It is adding a complexity, but only in the sense that a third alternative is given instead of two. I do not find that complex. Then the noble Lord says that it introduces uncertainty, and that the employer and the employee will not know where they stand and will not understand it. From the employer's point of view, it is easier to understand it, because instead of having to deal with a 5 per cent. revaluation plus a variable premium, he can opt for a definite fixed rate of valuation which he clearly understands. I appreciate the noble Lord's point that this rate will change from time to time, but so will the premium itself. That is exactly what will happen. This is far better for him than getting sporadic hills for varying amounts of premium from time to time, bills which he has to meet
414
in addition to the cost of the 5 per cent. revaluation.
As for the employee, my proposals make things far easier for him. Under the present scheme, the employer has to tell the employee that his reserve pension will be revalued every year by 5 per cent. and that he, the employer, is paying to the State a premium which will increase his pension by something, but he cannot tell him how much that will be. Under my Amendment there will he a definite fixed rate. It may be 8 per cent., 9 per cent., 10 per cent. or 11 per cent. He will at least know where he stands. My Amendment, therefore, is less complex and less uncertain.
As to record keeping, I think the noble Lord has been in politics as long as I have, and we all know this argument of administrative impossibility. Everything is administratively impossible until the Government decide that it is a good idea and they take it up, and suddenly it becomes administratively possible and that is the end of it. We have had all this business about delay in paying old age pensions, all sorts of cases where it was administratively impossible one year and perfectly easy the next. These three alternatives deal only with people who leave service after five or more years' service. The computer has to deal in any case with changes in the premium calculation, and it is easy to calculate a fixed rate equivalent to 5 per cent. plus premium. It should not be beyond the ingenuity of computer programmers to solve that. If this third alternative which I have proposed proves to be so complex, it will not be used by employers; they do not want complexity. But if it proves to be popular, it will show that it is not complex and there is a need for it. I feel that it really is important that we should take this opportunity to improve the Bill in this way, and I shall ask the House to divide on it.
The DEPUTY SPEAKER (Lord DOUGLAS of BARLOCH): Clause 35, page 28, line 3, the Amendment is to insert the words as printed on the Marshalled List. As many as are of that opinion will say, Content.
NOBLE LORDS: Content.
The DEPUTY-SPEAKER: To the contrary, Not-Content.
NOBLE LORDS: Not-Content.
The DEPUTY SPEAKER: The Contents have it. Amendment No. 3, Lord Wells-Pestell.
Lord WELLS-PESTELL: My Lords, I am sorry, but there were two of us on the Front Bench who said "Not-Content" a second time.

CONTENTS

Aberdare, L.

Elton, L.

Sandford, L.

Abinger, L.

Ferrers, E.

Sandys, L.

Amherst of Hackny, L.

Grey of Naunton, L.

Strang, L.

Auckland, L.

Hampton, L.

Strange, L.

Balfour, E.

Henley, L.

Strathcylde, L.

Banks, L.

Hives, L.

Stralhcona and Mount Royal, L.

Beaumont of Whitley, L.

Hornsby-Smith, B.

Belstead, L.

Kemsley, V.

Sudeley, L.

Boyle of Handsworth, L.

Killearn, L.

Terrington, L.

Bridgeman, V.

Lauderdale, E.

Thurlow, L.

Brougham and Vaux, L.

Long, V.

Thurso, V.

Byers, L,

Lyell, L.

Trefgarne, L.

Campbell of Croy, L.

Masham of Ilton, B.

Trevor, L.

Colville of Culross, V.

Orr-Ewing, L.

Vickers, B.

Colwyn, L.

Rankeillour, L.

Wade, L. [Teller.]

Denham. L.

Rochester, L.

Ward of North Tyneside, B.

Drumalbyn, L. Elles, B.

St. Aldwyn, E.

Wigoder, L. [Teller.]

NOT-CONTENTS

Bacon, B.

Houghton of Sowerby, L.

Phillips, B.

Balogh, L.

Hoy, L.

Pitt of Hampstead, L.

Bernstein, L.

Hughes, L.

Rhodes, L.

Blyton, L.

Jacques, L. [Teller.]

Ritchie-Calder, L.

Bowden, L.

Lee of Newton, L.

Slater, L.

Brown, L.

Llewelyn-Davies of Hastoe, B.

Strabolgi, L. [Teller.]

Champion, L.

Lovell-Davis, L.

Wallace of Coslany, L.

Davies of Leek, L.

Maelor, L.

Wells-Pestell, L.

Douglas of Barloch, L.

Melchett, L.

White, B.

Elwyn-Jones, L. (L. Chancellor.)

Paget of Northampton, L.

Willis, L.

Feather, L.

Peddie, L.

Wynne-Jones, L.

George-Brown, L.

Resolved in the affirmative, and Amendment agreed to accordingly.
Clause 40 [Financing and assurance of benefits]:
7.24 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 3:
Page 33, line 27, leave out from beginning to ("does") and insert ("under the scheme in respect of benefits attributable to any period of service after the rule has taken effect.
This").
The noble Lord said: My Lords, in view of the action of the noble Lord, Lord Byers, just now, I do not feel disposed to be very generous to his noble friend Lord Banks, but the fact is that during the Report stage the noble Lord referred to difficulties which trustees of occupational pension schemes might have in modifying their scheme rules to comply with the priority rule in what is now
The DEPUTY SPEAKER: My Lords, I am sorry. I did not hear them they were very faint. I will put the Question again.
7.15 p.m.
On Question, Whether the said Amendment (No. 2) shall be agreed to?
Their Lordships divided: Contents, 51; Not-Ccntents, 34.
Clause 40(3)(c). The Government have now been able to give further consideration to the difficulties mentioned by the noble Lord. Lord Banks. We concluded that it would be possible to resolve these difficulties by amending Clause 40(3) without in any way diminishing the central importance which we attach to the priority rule. Accordingly, we have decided to move this Amendment, the effect of which is that the items listed in Clause 40(3)(c) only need to have priority over benefits arising after the rule comes into force. I believe that I can commend the change we are proposing as a satisfactory solution to the matter raised by the noble Lord, Lord Banks. We hope that the noble Lord, Lord Banks, will feel that this goes a long way, if not the whole way, to meeting the point which he raised on Report stage and not at the 11th hour and 59th minute, and

417
we hope that it will meet what he had in mind. My Lords, I beg to move.
Lord BANKS: My Lords, I should like to welcome the Amendment. It goes a long way towards removing the anxieties which I expressed at Report stage. The latest difficulty, which I foresaw in connection with the clause as it stood, was concerned with the entitlement of those who were no longer active members of the scheme. The change in priorities was bound to affect them adversely, and it would be difficult to obtain their consent to any change. This would have put the Occupational Pensions Board in a difficult position when exercising their powers under Section 64 of the 1973 Act. By excluding entitlement built up before contracting out, that problem is solved. I should like to thank the noble Lord, Lord Wells-Pestell, for taking note of our objections and taking steps to meet them.
Clause 44 [Premium on termination of contracted-out scheme]:
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 4:
Page 38, line 2, leave out ("if the person liable for the premium so") and insert ("unless the person liable for the premium otherwise").
The noble Lord said: My Lords, in moving Amendment No. 4, perhaps your Lordships will allow me to mention Amendment No. 6 at the same time. These are technical Amendments to save employers from having to make an election to take advantage of the provision for guaranteed minimum pensions to be revalued by 12 per cent. a year for the last five years of contracting-out. As a result of these Amendments, the amount of the premiums under Clauses 43 and 45 will be calculated on the basis of the 12 per cent. revaluation for each of the last five years unless the employer elects otherwise. My Lords, I beg to move.
Clause 45 [Premium where guaranteed minimum pension excluded from full revaluation]:
Lord WELLS-PESTELL: My Lords, I beg to move Amendment No. 6, having spoken to it with Amendment No. 4.
Amendment moved—
Page 38, line 43, leave out ("if the employer so") and insert ("unless the employer otherwise").—(Lord Wells-Pestell.)
Clause 46 [Provisions as to actuarial tattles]:
7.30 p.m.
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 7:
Page 39, line 33, after ("embodying") insert ("whatever appeals to the Secretary of State to be").
The noble Lord said: My Lords, this Amendment is to make it clear that it is for the Secretary of State to decide what is the best practical estimate of the average cost for the purposes of Clause 45(2)(a). I beg to move.
Clause 62 [Other provisions about regulations and orders]:
Lord WELLS-PESTELL Lord WELLS-PESTELL moved Amendment No. 8:
Page 53, line 28, after ("5(6)") insert ("or (7)").
The noble Lord said: My Lords, this is also a drafting Amendment, consequential on an Amendment to Clause 19 at the Report stage in another place. In the Bill as published all regulations relating to treating contribution conditions as satisfied during periods of home responsibility were required to be subject to the Affirmative Resolution procedure. As a result of Amendments to Clause 19, this requirement does not now extend to all such regulations, but this Amendment will have the effect of restoring the former comprehensive provisions. I do not think there is need to say anything more. I beg to move.
7.33 p.m.
Lord WELLS-PESTELL: My Lords, I beg to move that this Bill do now pass. In doing so, I should like to express my gratitude to your Lordships and, if I may be permitted to do so, particularly to the noble Lords, Lord Byers, Lord Banks and Lord Aberdare. It is always invidious to select individual noble Lords, but the Government—and I say this with sincerity—are grateful to them for the contribution which they have made. I think it was said earlier that this Bill was non-political, and our only object was to send it away from this House in the best possible form.
I know that certain noble Lords, particularly the noble Lords, Lord Byers and

419
Lord Aberdare, in view of the Government's White Paper on the question of the limitation of increases, are concerned with occupational pension rights. I wondered whether I could say something tonight that would in some way be useful, but in fact I cannot do so. Discussions have been going on since Monday last. The Minister of State for Employment said that he hoped shortly to be able to give some guidance on the question of occupational pension rights, and in view of that I do not think I can say anything. Some noble Lords may have seen an Answer to a Question for a Written Answer in another place on 21st July, when Mr. Booth said that the question of occupational pension rights is still under consideration. I hope to be in a position to give some guidance on this matter very shortly.
In view of the situation, there is not a great deal more that I can say except to renew my thanks to noble Lords who, by virtue of their expertise, have been of considerable assistance to the Government. If I may be permitted to do so in your Lordships' House, I should also like to extend my grateful thanks to my officials who, as everybody knows, have been extremely valuable to one who has had the responsibility of handling this Bill in your Lordships' House. I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Wells-Pestell.)
7.35 p.m.
Lord ABERDARE: My Lords, I should like to reciprocate the very kind words of the noble Lord, Lord Wells-Pestell, and to say that nobody could have been more helpful in considering our points. A number of points have been taken by the noble Lord, and by the Department. Various conferences and conversations have taken place with those who represent pension interests, and we certainly have received every co-operation. May I also express my thanks to my noble friend Lord Sandys who has helped me throughout with this Bill. May I say, in conclusion, that this is a Bill of vital importance to the future of pensions in this country and, in particular, to the future of occupational pensions.
My Lords, we are very nearly there; we have very nearly got that partnership
420
which the noble Lord wants as much as we do. But we are not quite there. I hope most sincerely that the noble Lord will request his right honourable friend once again to be patient and to have one more look at this incredibly important Amendment which we have put into the Bill tonight. If he could just look with sympathy on that, I believe we might be there in the sense of a real partnership.
7.36 p.m.
Lord BYERS: My Lords, I should like to thank the noble Lord, Lord Wells-Pestell, and to reciprocate the thanks which lie expressed to us. He has done a very fine job on this Bill and, as usual, we all appreciate the very great courtesy which he has brought to bear on this particular measure. I should like to be associated with the tribute which he, quite rightly, paid to officials in the Department. I have seen them at work in another place as well as here, and I am sure they now look forward to a little rest.
My Lords, when the Government first announced plans for pensions great emphasis was laid on the need for a partnership, and they undertook to consult the various pensions interests. I should like to put on record that I think they have done this in a fine manner. The fact that the pensions industry is not totally satisfied with the Bill does not in any way deprecate the tremendous way in which particularly the Minister of State set himself out to consult everybody who had to be consulted.
I should like to make one other point. The frustration of everyone concerned with pensions at the chopping and changing which has occurred over the last 15 years led to a genuine desire for consensus on a basic pensions structure which would last. It was recognised that such a structure would need to encourage employers to contract out of the State scheme in favour of providing their employees with something better—certainly nothing worse. I must say that this desire for consensus was generally favoured in the pensions world, with a few dissenting voices here and there. I believe that the achievement of this consensus represents an historic milestone in pensions legislation. I think it is a great achievement for which much credit can be taken, and I only hope that the noble Lord will ask his right honourable friend not lightly to dismiss or try to remove the Amendment

421
which we passed in this House tonight—certainly not without putting something else of a similar character in its place. I endorse everything that the noble Lord, Lord Aberdare, has said. We are very nearly there, and it will be a marvellous achievement if we can make it.
On Question, Bill passed, and returned to the Commons.

STATUTORY CORPORATIONS (FINANCIAL PROVISIONS) BILL
7.40 p.m.
Lord BALOGH: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, that the House do now resolve itself into Committee.—(Lord Balogh.)
House in Committee accordingly.

The LORD DOUGLAS OF BARLOCH in the Chair.
Clauses 1 to 4 agreed to.
Viscount BRIDGEMAN moved the Amendment:
After Clause 4, insert the following new clause:
Grants to subsidiary companies of national bus company.
.—(1) If in the case of any subsidiary company of a national bus company, the Secretary of State is satisfied—

(a) that the transport services provided by the subsidiary company are unremuneralive, and

(b) that it is desirable for social reasons that the transport services should be maintained,

then the Secretary of State may with the consent of the Treasury make grants to the subsidiary company in respect of the maintenance of those services.
(2) The Secretary of State may attach to such grants such conditions as he thinks fit."
The noble Viscount said: I am in some difficulty, because I thought that my noble friend Lord Amory would be here to move this new clause, which does not appear to be on the Marshalled List. Am I in order in proceeding, therefore? I understand that my noble friend Lord Amory gave notice of this Amendment last night.
The DEPUTY CHAIRMAN of COMMITTEES (Lord Douglas of Barloch): The proposed new clause is in print.
Viscount BRIDGEMAN: I will explain briefly why my noble friend and I thought this new clause should be considered. With economies being made all round, we are reaching the point where grants paid by the Government to bus services are being reduced rapidly, and certainly I know that it is the opinion of the Association of County Councils that by the end of 1975–76 the position could become desperate with services being reduced on a large scale. I understand that the Government have made it clear that no more such grants will be available and that they will, in fact, be reduced. This grant is, I think, spent mainly on the larger bus companies, but those are not the ones whose fortunes I have in mind. Naturally, those bus companies which make the biggest losses will be the first to go under. But, equally, those which make the biggest losses are likely to be the ones on the rural routes, and with small populations from which to collect passengers it is those rural routes which are so important to the welfare of the countryside. The withdrawal of those services would have a serious effect on the provision of transport for children going to and from school.
Strangely enough, this resembles a problem about which I was speaking a few days ago, when I last addressed this House on the subject of colleges for adult education. There one finds the same position. One has economics which in themselves sound excellent and necessary, but when one looks into the matter one finds that their effects stultify Government policy in another direction. If this position goes on, as the county councils think it will, a great deal of damage will be done to rural transport and to the countryside which that rural transport serves, and once these buses go out of action I am certain they will not be replaced. It is to be hoped that the Government will see the problem in this light and will not adopt the usual practice, so common in Whitehall, of waiting for evidence that the horse has been stolen before they agree to do anything about locking the door.
This new clause has been drafted, because it is thought that at present grants can be made only to nationalised industries and not to bus services run by private enterprise, so that there is no

423
power for the Government to make a direct payment to private enterprise bus operators. That is why my noble friend tabled this Amendment. I wish that he had been here to move it, because he would have done so much better than I, and I should have preferred to be here supporting him. But in his absence, I beg to move.
Lord LYELL: I apologise on behalf of my noble friend Lord Gowrie, who would have been in his place to speak on this Amendment had he not been called away on urgent business. But he has asked me to comment on the subject. The proposed new clause seems eminently sensible and I have the same knowledge of country buses as my noble friend Lord Bridgeman, and particularly of the problems in Scotland. We appreciate that any Government have problems in these times when economies must he made, but I hope the Government will pay close attention to this Amendment, and will always wish to ensure that questions of cost are equated with those of social use. We all wish to prevent rural depopulation and the destruction of rural communities, and not everyone in the country districts has a car or means of automotive transport. We are to a great extent dependent on bus transport by the National Bus Company and possibly other select private operators. In the main, it is the National Bus Company which is concerned and that is why I support this Amendment.
Lord BALOGH: Having been pummelled by noble Lords opposite in a most devastating way for, as they have claimed, feeding inflation, I find it surprising that, wearing my other hat, I am accused of being a savage deflationary who is ruining the countryside and especially the rural areas which rely on bus transport. I fear that I must resist the Amendment, the effect of which is to undermine the new system of transport grants which was first introduced in the 1972 Local Government Act, by the Conservative Government, and, secondly, in the 1974 Act, which originated as a Tory measure but which we, for once, have taken over, and which Conservative noble Lords now want to destroy.
I did not know this, but your Lordships will, I am sure, know that the Government make a block grant, known as
424
the transport supplementary grant, to local authorities to support their expenditure underlying transport policies and programmes. The Amendment will run directly contrary to the whole philosophy of local responsibility for local transport—matters which at least go back to the 1968 Transport Act and which were reinforced in the 1972 and 1974 legislation. It is clearly local, not central Government, which is in a position to take sensible decisions in regard to retaining loss—making local services in the light of circumstances. The Amendment would run contrary to the policy declared in Attack on Inflation of reducing subsidies, which was, I think, one of the most fervent themes of the right honourable lady in another place. Therefore, I hope that I shall carry the Committee with me when I ask the noble Viscount, Lord Bridgeman, to withdraw the Amendment.
Viscount BRIDGEMAN: I do not wish to detain the Committee for long at this late hour, but I think that the noble Lord, Lord Balogh, has had a briefing which rather oversimplifies the position, and I cannot allow him to get away with everything he said. In the first place, of course it can be argued that everything that it is proposed to spend is against the policy on inflation. Noble Lords on this side of the Committee would, think, argue that although extra spending will, in theory, lead to more inflation, in practice it can be set off by not spending a lot of money which we on this side of the Committee think ought not to be spent, and the account will be squared and will go into the blue.
One cannot sit here and be told that it is an alteration in procedure and is contrary to policy; it is no such thing. I should have thought that the policy was to keep the buses on the roads where they are needed for the population. The question of grants is a matter not of policy but of procedure. Having said that and having got it on the record, and the hour being what it is, I shall accept the noble Lord's suggestion and beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Remaining clauses and Schedules agreed to.
House resumed: Bill reported without Amendment: Report received.
REGIONAL EMPLOYMENT PREMIUM (CONTINUATION OF PAYMENT) (WINSFORD) (AMENDMENT) ORDER 1975
7.55 p.m.
Lord JACQUES Lord JACQUES rose to move, That the draft Regional Employment Premium (Continuation of Payment) (Winsford) (Amendment) Order 1975, laid before the House on 14th July, be approved. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. This draft Order amends a 1974 Order with a similar title, which I introduced to the House on 17th July last year. I then explained that Winsford was eligible for development area benefits from 1966, contingent upon its taking two thirds of its extended population from Merseyside. From 1967 Regional Employment Premiums were paid and were included in the benefits to which Winsford was entitled. In 1972 Winsford was found not to be taking enough people from Merseyside, and it was decided that it should no longer enjoy the benefits of a development area, but only those of an intermediate area, which do not include Regional Employment Premiums.
However, firms which had established themselves by 1972 in the area in expectation of these benefits were allowed to continue to receive Regional Employment Premiums. These premiums were due to expire last year, but my right honourable friend the Chancellor of the Exchequer introduced legislation to continue them in being, and in July last doubled the rates. The Order which I introduced last year provided for the continuation of payments in respect of firms in Winsford in 1972 for a period of 12 months, expiring in September 1975. We thought it right to introduce a further Order permitting these payments to me made for a further 12 months' period, but this is without prejudice to any decision we may take on whether they should continue to be made for the future, or for the duration of the whole of this 12 months' period. I beg to move.
Moved, That the draft Regional Employment Premium (Continuation of Payment) (Winsford) (Amendment) Order 1975, laid before the House on 14th July, be approved.—(Lord Jacques.)
Lord LYELL: My Lords, we on this side of the House wish to welcome the statement and to thank the noble Lord, Lord Jacques, for the very lucid and full way in which he presented this Order. We are very gratified to see that the Regional Employment Premium is being continued and that the Government feel that the firms which moved in expectation of Winsford carrying out its supposed obligation of taking two-thirds of its increasing population from Merseyside—and thereby gaining full development area status—are able to take advantage of the Regional Employment Premium and development area status. We are also glad that the Government are keen to continue to support these firms and to allow them to take advantage of these incentives which the firms thought they were to receive at the time that they moved to Winsford.
There are two small questions which the noble Lord might be able to answer for us. First, can he give us the latest available figure for the cost of continuing the Regional Employment Premium in the Winsford area? I do not know whether this is a very substantial figure, but it would be interesting and illuminating to know it. Secondly, can the noble Lord give us any information as to the number of firms or concerns which are to be affected by the Order? These are relatively trivial points, but I should be very grateful if the noble Lord could give us some information on them. This is a praiseworthy gesture by the Government, to continue to keep their word so that firms may continue to manufacture and carry on their business in Winsford, in the light of developments which the firms saw before 1972 when they moved to Winsford.
Lord JACQUES: My Lords, I thank the noble Lord for the reception given to the Order. The cost is £800,000 a year. I regret that I am unable to state the number of firms involved, but I shall ensure that a letter is sent to the noble Lord giving that information.

MILFORD HAVEN CONSERVANCY BILL
Reported with Amendments.
House ajourned at eight o'clock.